(NON-RENEWABLE RESOURCES) The demand and supply functions for oil for the current generation (in million barrels) is: Demand: Qd = 250 – 5P Supply: Qs = 5P a. Assume the current generation does not consider the future at all. Draw a supply and demand graph showing the equilibrium price (P) and quantity (Q) consumed by this generation showing clearly the numbers for P and Q. b. Assume that the next generation will have the same demand. Supply for both generations is only 250 million barrels. Interest rate (r) is 5%. Calculate the efficient allocation of resources between the two generations. c. Other things being equal, assume that the available oil supply is 200 million barrels. Calculate and graph the efficient allocation of resources been the two generations.
(NON-RENEWABLE RESOURCES)
The
Demand: Qd = 250 – 5P
Supply: Qs = 5P
a. Assume the current generation does not consider the future at all. Draw a supply and demand graph showing the
b. Assume that the next generation will have the same demand. Supply for both generations is only 250 million barrels. Interest rate (r) is 5%. Calculate the efficient allocation of resources between the two generations.
c. Other things being equal, assume that the available oil supply is 200 million barrels. Calculate and graph the efficient allocation of resources been the two generations.
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