The demand and supply of electricity between 2:00 PM and 3:00 PM on a typical summer...
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The demand and supply of electricity between 2:00 PM and 3:00 PM on a typical summer afternoon in Ontario is given in the table below. Price i. ii. iii. iv. Quantity Demanded (S/MWh) (MWh) 100 120 140 160 100,000 98,000 96,000 94,000 Quantity Supplied (MWh) 78,000 98,000 118,000 138,000 a. Derive the linear function that fits the demand data. b. Derive the linear supply function that fits the supply data. What is the equilibrium price and quantity of electricity? Suppose that, in an attempt to provide 'affordable' electricity to all housing, the regulatory authority imposes a ceiling of $110/Mwh on the price of electricity. d. How much electricity would be supplied at this price? How much electricity would be demanded at this price? What are the consequences? Assume that the regulator can impose rationing on consumers (e.g., by rotating brown-outs or black-outs) what is the change in consumer and producer surplus, relative to the previous market equilibrium, associated with the policy? (Calculate the dollar amount of the change in consumer surplus and the dollar amount of the change in producer surplus.) e. Suppose that the Government imposes a tax of $20/MWh. i. What price and quantity would prevail after the imposition of the tax? ii. What portion of the tax would be borne by buyers and sellers respectively. iii. Calculate the deadweight loss from the tax. Could the tax be justified despite the deadweight loss? iv. What tax revenue will be generated? The demand and supply of electricity between 2:00 PM and 3:00 PM on a typical summer afternoon in Ontario is given in the table below. Price i. ii. iii. iv. Quantity Demanded (S/MWh) (MWh) 100 120 140 160 100,000 98,000 96,000 94,000 Quantity Supplied (MWh) 78,000 98,000 118,000 138,000 a. Derive the linear function that fits the demand data. b. Derive the linear supply function that fits the supply data. What is the equilibrium price and quantity of electricity? Suppose that, in an attempt to provide 'affordable' electricity to all housing, the regulatory authority imposes a ceiling of $110/Mwh on the price of electricity. d. How much electricity would be supplied at this price? How much electricity would be demanded at this price? What are the consequences? Assume that the regulator can impose rationing on consumers (e.g., by rotating brown-outs or black-outs) what is the change in consumer and producer surplus, relative to the previous market equilibrium, associated with the policy? (Calculate the dollar amount of the change in consumer surplus and the dollar amount of the change in producer surplus.) e. Suppose that the Government imposes a tax of $20/MWh. i. What price and quantity would prevail after the imposition of the tax? ii. What portion of the tax would be borne by buyers and sellers respectively. iii. Calculate the deadweight loss from the tax. Could the tax be justified despite the deadweight loss? iv. What tax revenue will be generated?
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Macroeconomics Principles, Applications, and Tools
ISBN: 978-0132555234
7th Edition
Authors: Arthur O Sullivan, Steven M. Sheffrin, Stephen J. Perez
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