Answer to Question #116978 in Macroeconomics for Muhammd

Question

A market for electricity is in equilibrium in bangladesh at a point where both supply and demand curves intersect each other. If the following events ( price factors or non price factor of demand or supply) take place into the market of electricity then how it will effect equilibrium point, equilibrium price and equilibrium quantity of electricity in bangaldesh. Use graphical representation for each case seperately to answer your question. Label and interpret each daigram

1.govt. of bangladesh has imposed ban on installation of solar pannels

Answer 1

A ban on installation of solar panels leads to the decrease in the quantity of the electricity production. The quantity supplied shifts from Q0 to Q1 (new equilibrium quantity). The supply of the electricity produced falls and the supply curve moves from S0 to S1. Curve S1 intersects demand curve in the new point (E1), where the new market equilibrium establishes. The decrease in supply together with the constant demand leads to the increase of the equilibrium price from P0 to P1.