How will the equilibrium price and quantity change, given the following developments in the market for...
How will the equilibrium price and quantity change, given the following developments in the market for residential solar panels. Treat changes in 13-15 as separate scenarios
- The Federal Reserve increases interest rates______
- Income tax credits on the purchase of solar panels are provided to households________
- A tariff is placed on imports of materials that are used in the manufacturing of solar panels_________
- The changes in 13 – 15 occur simultaneously. _______
Homework Answers
(13) Higher interest rate decreases investment and aggregate demand. So demand for solar panel will decrease, shifting demand curve to left.
Price will decrease and quantity will decrease.
(14) Income tax credit will increase demand for solar panels, shifting demand curve to right.
Price will increase and quantity will increase.
(15) Tariff on raw materials will increase the material cost, decreasing supply of solar panels, shifting supply curve to left.
Price will increase and quantity will decrease.
(16) If (13)-(15) occur at same time, both price and quantity will be uncertain, and will depend on relative magnitude in shift in demand and supply curves.
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How will the equilibrium price and
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