EBK ECONOMICS
5th Edition
ISBN: 8220106907184
Author: KRUGMAN
Publisher: YUZU
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Question
Chapter 26, Problem 10P
To determine
To determine: The total change in real GDP and the value of the multiplier.
Concept Introduction:
The formula to calculate change in GDP is:
Here,
is autonomous spending. - MPC is marginal propensity to consume.
Marginal Propensity to Consume (MPC): It is defined as the change which occurs in total consumption level due to change in income.
The formula to calculate MPC is:
Here,
is change in income. 
is change in consumption level. - MPC is marginal propensity to consume.
Multiplier: It is defined as the ratio of total change in gross domestic product due to change in the autonomous spending.
The formula to calculate multiplier is:
Here,
- MPC is marginal propensity to consume.
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1. Case 0) Baseline case
Table 1: Power Plant Capacity and Marginal Cost: Case 0
Plant #
Energy Source
Capacity (MW)
MC (S/MWh)
1
Coal
300
45
2
Oil
100
90
3
4
Natural Gas
Nuclear
500
50
600
0
(a) Calculate the capacity mix of this market by energy source.
(b) Draw a supply curve of this wholesale generation market.
Table 2 below shows the demand levels for selected hours of a representative day. We will
consider only these four hourly markets for our analysis. Note that the 6 PM demand is the
highest demand level of the day.
Table 2: Hourly Demand (selected hours)
Hour
Demand (MWh)
4 AM
500
10 AM
700
2 PM
800
6 PM
1000
(c) Find the market clearing prices and calculate how much electricity each power plant
generates in the hourly market (4AM, 10AM, 2PM, and 6PM).
(d) Find the average price of electricity (by taking a simple average of hourly prices; [P(4am)
+ P(10AM) + P(2PM) + P(6PM)]/4).
Don't used Ai solution
How human recource allocated in an economic?
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