Question

Please answer the next five questions based upon the following separate scenarios:

A. HH Incomes increase

B. The Fed raises interest rates

C. Income tax credits provided to HH

D. Tariff placed on imports of materials used in constructing solar panels 21.

Which of the scenarios will result in an increase in the price of residential solar panels in Maine? ______________

22. Which of the scenarios will result in a decrease in the price of residential solar panels in Maine? ______________

23. Which of the scenarios will result in an increase in the quantity of residential solar panels in Maine? _______________

24. Which of the scenarios will result in a decrease in the quantity of residential solar panels in Maine? ________________

25. Which of the scenarios will result in an indeterminate effect on the price of residential solar panels in Maine? ______________

Answer 1

21. A decrease in the supply or an increase in the demand will increase in the price of residential solar panels in Maine. Demand increases when HH Incomes increase and supply decreases when Tariff is placed on imports of materials used in constructing solar panels.

22. There is a decrease in the price of residential solar panels in Maine when demand decreases or supply increases. Income tax credits provided to HH will increase the supply and so the price would fall.

23. There is an increase in the quantity of residential solar panels in Maine when demand increases and supply increases. This happens when HH Incomes increase and Income tax credits provided to HH.

24. There is a decrease in the quantity of residential solar panels in Maine when demand and supply both decrease. Tariff placed on imports of materials would decrease supply and so quantity decreases. The Fed raises interest rates which would also reduce the quantity.

25. When the Fed raises interest rates the demand should decrease as borrowing for installing solar panels would be expensive. At the same time firms would invest less. This decreases the supply of solar panels. Hence demand decreases and supply decreases so price change is ambiguous.