Answer to Question #275210 in Microeconomics for Mani

Question

a) Calculate the equilibrium price and equilibrium quantity of renewable energy

resources.

b) Calculate price elasticity of supply using point elasticity method when renewable

energy sector is in equilibrium. Also, interpret the result.

c) What will happen to the equilibrium quantity and equilibrium price of renewable

energy resources if energy sector improves the technology? (Graph is not

required)

Qd = 20,000 - 3P

Qs = 15,000 + 2P

Answer 1

a.

$Qd =Qs\\ 20,000 - 3P = 15,000 + 2P\\20 000-15 000=5p\\5000=5p\\p=5000\\Q=15 000+2(10 000)\\=35 000$

b.

$=\frac{Change \space in\space quantity\space demanded}{Change\space in\space price} \times \frac{Initial Price}{Initial quantity}\\=2 \times \frac{10 000}{35 000}\\=0.57, elastic$

c.

equilibrium price will reduce because technology will lower the production cost .

equilibrium quantity will rise.