The Case:
The Government of Pakistan is emphasizing on the consumption of indigenous and environmentally clean energy generation resources. Alternative Energy Development Board (AEDB) is established by the government, responsible for the growth of renewable energy sector; the advancement of alternative and renewable technologies is among one of the top priorities of the government. Several initiatives have been taken to create favorable environment for the sustainable growth of Alternative Renewable Energy (ARE) Sector in Pakistan in order to control and make potential use of indigenous renewable energy resources. Suppose the quantity demanded and quantity supplied functions for renewable energy resources are as given below:
Qd = 20,000 - 3P
Qs = 15,000 + 2P
Where ‘P’ is the price in rupees of a renewable energy resources, ‘Qd’ is quantity demanded for renewable energy resources, and ‘Qs’ is quantity supplied for renewable energy resources. Requirements:
a) Calculate the equilibrium price and equilibrium quantity of renewable energy resources.
b) Calculate price elasticity of supply using point elasticity method when renewable energy sector is in equilibrium. Also, interpret the result.
c) What will happen to the equilibrium quantity and equilibrium price of renewable energy resources if energy sector improves the technology? (Graph is not required)