Question

Consider the market for renewable energy in Australia. In a demand and supply diagram, illustrate the impact of each of the following economic events on the equilibrium price and quantity( show initial equilibrium as A and final as B). Identify the condition(s) of demand and supply and briefly explain the process of moving from the initial to final equilibrium.

QUESTION:

1. The Andrew's government completed 3 new solar and wind farms.

2.The Federal government increase subsidies and incentives to renewable energy companies and at the same time consumers prefer more renewable energy to fossil fuel energy.

3.Decrease in the number of households installing solar panels on their rooftops and at the same time it there is a boom in energy intensive manufacturing in Australia.

Answer 1

1) Government complete 3 new solar and wind farms

This means that the supply of renewable energy would increase shifting the supply curve to the right everything else remaining constant the price would reduce and quantity woul increase in the new equilibrium

The new equilibrium is at B which n moved from the original one at A.

2) the Federal government has increased subsidies and incentives to the companies and the consumers are shifting towards renewable energy

Subsidies and incentives would shift the supply curve to the right because the companies would be motivated to produce more. Also since the consumers are preferring renewable energy, the demand curve also shifts to right.

The proportion of shift in the curves would determine the change in price but the quantity would always increase so we are in determinant about the price in such an increase but the quantity increases the new equilibrium is B as shown in the graph

C) the number of households installing solar panels decreases and there is a boom in intensive manufacturing in Australia of renewable energy

This means that the demand curve would shift to left becaus of decrease in number of households installing solar panels where as the demand would increase because of many energy intensive manufacturing in Australia so this leads to indeterminate effect of whether the demand would increase or decrease depending on the intensity of the reduction or increase in the above cases

The new equilibrium could be on either side of the original one.

(You can comment for doubts)