In the Using the Theory section, we suggested that the solar panel industry, over the very long run, ultimately conforms to the constant-cost industry model. But it also experiences cost-lowering technological change over the long run.

a. With diagrams similar to those in Figure show what happens after an increase in demand for solar panels in the short run and the long run. But (unlike in the figure) assume solar panels are a constant cost industry, and there is also long-run technological change.

b. In the new, final long-run equilibrium, will the price of solar panels be higher or lower than it wasinitially?

High School Graduates College Graduates Hourly Wage (2008 Dollars) Hourly Wage (2008 Dollars) L1998 2008 1998 2008 25.03 $24.05 2008 $15.30 -- 1 L2008 1998 1998 Millions of Workers Millions of Workers L1 L2