1. 4. Continuing on from the previous problem (in question 3), suppose that new innovations in energy efficiency reduce people’s need for electricity. e supply side of the market does not ange, but at ea price buyers now demand 3 million kilowa hours fewer than before. For example, at a price of 11 cents per kWh, buyers now demand only 6 kWh instead of 9 kWh.

a. On a new graph, draw supply and demand curves corresponding to prices of 16 cents per kWh or less, aer the innovations in efficiency. Also, for reference, mark the old equilibrium point from the previous exercise, labeling it E1.

b. If the price were to remain at the old equilibrium level (determined in part

(c) above), what sort of situation would result?

c. What is the new equilibrium price, with the new demand curve? e new equilibrium quantity? Give this point on your graph the label E2.

d. Has there been a ange in demand? Has a ange in the price (relative to the original situation) led to a ange in the quantity demanded?

e. Has there been a ange in supply? Has a ange in the price (relative to the original situation) led to a ange in the quantity supplied?