Regulatory effect on equilibrium
Not what you're looking for?
Peak Period Computations
Consider an electricity market with a daytime (peak-period) inverse demand of P=160-Q, and a nighttime (off-peak) inverse demand P=80-Q, where P is the price of electricity and Q is units of electricity. The marginal cost of supplying electricity is: MC=Q. Right now the utilities face a regulated pricing regime - they are required to charge a price of 60 cents per unit of electricity, and provision whatever level of electricity consumers are willing to buy at this regulated price. Based on this information, answer the following questions. I think diagrams will be helpful.
All Peak Period Computations:
a) Now compute the consumer surplus effect of going from the regulated price to the peak price during the peak period.
b) compute the producer surplus effect of going from the regulated price to the peak price during the peak period.
c) Based on your answers in (a) and (b), compute the net efficiency effect of going from the regulated price to the peak price during the peak period.
d) Compute the change in consumption value for consumers of going from the regulated price to the peak price during the peak period.
e) Compute the change in economic cost for producers of going from the regulated price to the peak price during the peak period.
f) Based on your answer in (d) and (e) compute the net benefit of going from the regulated price to the peak price during the peak period.
g) How does your answer in (f) compare to your answer in (c)?
Purchase this Solution
Solution Summary
Regulatory effect on equilibrium is examined in the solution.
Solution Preview
Please see the attached files.
Consider an electricity market with a daytime (peak-period) inverse demand of P=160-Q, and a nighttime (off-peak) inverse demand P=80-Q, where P is the price of electricity and Q is units of electricity. The marginal cost of supplying electricity is: MC=Q. Right now the utilities face a regulated pricing regime - they are required to charge a price of 60 cents per unit of electricity, and provision whatever level of electricity consumers are willing to buy at this regulated price. Based on this information, answer the following questions. I think diagrams will be helpful.
All Peak Period ...
Purchase this Solution
Free BrainMass Quizzes
Basics of Economics
Quiz will help you to review some basics of microeconomics and macroeconomics which are often not understood.
Economic Issues and Concepts
This quiz provides a review of the basic microeconomic concepts. Students can test their understanding of major economic issues.
Economics, Basic Concepts, Demand-Supply-Equilibrium
The quiz tests the basic concepts of demand, supply, and equilibrium in a free market.
Elementary Microeconomics
This quiz reviews the basic concept of supply and demand analysis.
Pricing Strategies
Discussion about various pricing techniques of profit-seeking firms.