Suppose D 0 and S 0 are the initial demand and supply curves for solar electric

Question

Suppose D0 and S0 are the initial demand and supply curves for solar electric panels. P0* and Q0* are respectively the initial equilibrium price and initial equilibrium quantity in the market for solar panels. A new technology reduces the cost of producing solar panels. Using comparative statics, analyze how the equilibrium price and equilibrium quantity in the market for solar panels will change as a result of this new technology? comparative statics, analyze how the equilibrium price and equilibrium quantity in the market for solar panels will change as a result of this new technology.

Explanation / Answer

Now as the cost of production of solar panels is lower so it will infact decrease price of solar panels which will rsult in increase in demand. So there will be increase in equilibrium quantity and decrease in equilibrium price.

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