2nd Edition

ISBN: 9780357129128

Author: OpenStax

Publisher: CENGAGE L

Textbook Question

Chapter 3, Problem 41CTQ

We know that a change in the price of a product causes a movement along the demand curve. Suppose consumers believe that prices will be rising in the future. How will that affect demand for the product in the present? Can you show this graphically?

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Chapter 3, Problem 40CTQ

Chapter 3, Problem 42CTQ

Students have asked these similar questions

4. Case 3) Electricity demand increases due to increased EV adoption We will continue using the Case 2 supply curve (with the solar plant in operation) for this analysis. Suppose that electricity consumption from electric vehicles (EV) increases significantly. Consequently, electricity demand in the wholesale market increases at every hour. The new demand levels are shown in Table 5 below. The market operator has backup power plants (using natural gas) ready, with a total capacity of 300 MW and a MC of $100/MWh. Table 5: Hourly Demand (selected hours) Hour Demand (MWh) 4 AM 800 10 AM 1000 ... 2 PM 1100 ... 6 PM 1300 (a) Find the market clearing prices and calculate how much electricity each power plant generates in the hourly market (4AM, 10AM, 2PM, and 6PM). Is there a specific hourly market in which the market operator will need to dispatch backup generation? (b) Compare the Case 2 scenario with the Case 3 scenario in terms of CO2 emissions and average electricity price. Based on…

2. Case 1) NG price decreases Now, suppose that the price of natural gas decreased substantially, causing the marginal cost of the NG power plant to decrease to MC = $35/MWh. The demand is the same as in Case 0. (a) Draw a new supply curve that reflects the MC change of the NG power plant. (b) Find the market clearing prices and calculate how much electricity each power plant generates in the hourly market (4AM, 10AM, 2PM, and 6PM). (c) What happened to the coal power plant? (d) Do you think the market outcomes (like average price) and the total CO2 emissions have improved under this Case 1 scenario (use the emissions data provided in the lecture slides)?

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).