managerial economics assignment
Managerial Economics
Assignment 2 October 2nd 2013
1. Suppose we are examining the market for Photovoltaic Residential Solar Panels (PVRSP’s). Consumers (buyers) of these PVRSP’s use them to generate electricity for their homes. Sellers of PVRSP’s are profit-oriented businesses (firms). Please use the model of supply and demand to analyze various market scenarios for PVRSP’s. Make the standard assumptions about the Laws of Supply and Demand, and also about the “determinants of demand” and the “determinants of supply.” Treat each scenario as a separate event.
Interpret basic scenarios: Within the PVRSP market, correctly identify the correct function (either the supply of, or the demand for, PVRSP’s) and the appropriate direction of change (increase or decrease), for each situation below. Illustrate each answer with a simple graph. Then, in a short paragraph, explain why it is a supply-side or demand-side change, and why the predicted change is an increase or a decrease.
a. PVRSP Scenario 1. The number of users [consumers] of PVRSP’s increases, because of publicity and advertising programs that have increased the consciousness of consumers to make investments in “green” technologies. These new customers prefer products that have a “smaller carbon footprint.” In simple terms, there is an increased popularity among residential consumers for PVRSP’s, and greater numbers of residential consumers decide to enter the PVRSP market.
In this scenario, does the supply or the demand for PVRSP’s change? Why? What is the direction of change? Why?
Ans. Increase or decrease in the number of consumers will make the demand curve shift as the market is determined by the consumers. The demand for the product will also increase and vice versa if there is an increase in the number of buyers in the market. Therefore according to the given scenario, number of users for PVRSP’s increases due to the publicity and
Assignment 2 October 2nd 2013
1. Suppose we are examining the market for Photovoltaic Residential Solar Panels (PVRSP’s). Consumers (buyers) of these PVRSP’s use them to generate electricity for their homes. Sellers of PVRSP’s are profit-oriented businesses (firms). Please use the model of supply and demand to analyze various market scenarios for PVRSP’s. Make the standard assumptions about the Laws of Supply and Demand, and also about the “determinants of demand” and the “determinants of supply.” Treat each scenario as a separate event.
Interpret basic scenarios: Within the PVRSP market, correctly identify the correct function (either the supply of, or the demand for, PVRSP’s) and the appropriate direction of change (increase or decrease), for each situation below. Illustrate each answer with a simple graph. Then, in a short paragraph, explain why it is a supply-side or demand-side change, and why the predicted change is an increase or a decrease.
a. PVRSP Scenario 1. The number of users [consumers] of PVRSP’s increases, because of publicity and advertising programs that have increased the consciousness of consumers to make investments in “green” technologies. These new customers prefer products that have a “smaller carbon footprint.” In simple terms, there is an increased popularity among residential consumers for PVRSP’s, and greater numbers of residential consumers decide to enter the PVRSP market.
In this scenario, does the supply or the demand for PVRSP’s change? Why? What is the direction of change? Why?
Ans. Increase or decrease in the number of consumers will make the demand curve shift as the market is determined by the consumers. The demand for the product will also increase and vice versa if there is an increase in the number of buyers in the market. Therefore according to the given scenario, number of users for PVRSP’s increases due to the publicity and