How can government subsidies effectively address the issue of positive externalities in consumption?

Government subsidies can help encourage activities that create positive externalities, which are benefits enjoyed by others when someone consumes a good or service. For example, when people buy electric cars, they not only reduce their own carbon emissions but also contribute to cleaner air for everyone. By providing financial support or subsidies for electric cars, the government makes them more affordable, encouraging more people to buy them. This increased consumption leads to greater environmental benefits, which society as a whole enjoys. Thus, subsidies can effectively promote behaviors that have positive effects beyond the individual, helping to improve overall social welfare.