MJC_H2_ECON_CSQ1

JC2 H2 E Prelim (a) Both a than oi (b) Artificia produc energy lower p destroy (c) (d) ECONOMICS  Case Stud Comp world re increas l prices Expla destr ally low e ction, increa y sources  profitability yed. With new l To wh energ PRELIM EXA dy H2 Q1 S pare chan d solar ene ing. (1)Exi ain why ‘ a oy incentiv energy pr ases supp  reduce y in altern the help o law on a fir T h m f T P p hat extent gy markets AMINATION _ Suggested ges in oil rgy capaci sting world artificially l ves to inve ices cau s ly and dec the dema ative tech of a diagr a rm like Tep The prop o have to b means. T h for the elec The firm’s Proposed profit, area will the ch s of differen _CASE STUDY d Answers prices fr o ity over the d solar en low energ st in altern sed by s u creases pri nd for alt e nologies a am, expla i pco. osed new uy all ele c his results ctricity whi s original new law a P2efg. hanges in o nt econom Y QUESTION om 1996 t o e same tim ergy capac y prices i native tech ubsidies. ces artifici N e a l out At cos mo ben dea hen Su ch e ernative en and incen t in the im p law woul d ctricity ge n in Tepco ch it distrib supernorm resulting oil prices im ies?  1_110911_ o 2010 a n me period. city is risi n ncrease w nologies’. Subsidies ally w market e ower pric e tput at Q2. Q2, the st of the ore than th nefit. The r adweight nce, resou bsidies m eaper t h nergy sour tives to in v act of the d mean t h nerated th incurring butes. mal profit in a sm a mpact the _MJC  nd existin g ng at a fa s waste an d reduce c equilibrium e P2 and . (1) additional unit prod u he margina re is a r e loss of urces are w make oil han alt e rces. (1) A vest in th propose d hat Tepc o hrough re n higher un is area aller supe r renewable g [2] ster rate d [6] cost of m lies at higher social uced is al social esulting ABC, wasted. much ernative As such, em are d [4] o would newable it costs P1acd. rnormal e [8]

JC2 H2 ECONOMICS PRELIM EXAMINATION _CASE STUDY QUESTION 1_110911_MJC  1. Rising prices of oil  increase demand for r enewable energy. Different economies have also adopted different policies for renewable energy ( extract) .  changes in oil prices will impac t renewable energy markets of different economies differently. 2. Increase prices of oil  Increase demand (DDDD’) for renewable energy  Increase pressure for prices and quantities to rise. 3. The XED value of oil and renewables may differ across economies. Countries who are better equipped to switch may have higher demand compared to those that do not (e.g. Extract 5: Japan whose grid is not suited for renewable energy). As such, the extent of shift of the demand for renewables will be more for the some countries (D1) compared to other countries like Japan (D2). The impact of increasing oil prices will be less for countries like Japan (less increase in prices, P1 and quantity traded,