The government of a certain country wants to stimulate the use of solar panels.
ID: 1159489 • Letter: T
Question
The government of a certain country wants to stimulate the use of solar panels.
The more solar panels are installed, the less is the country contributing to global warming. To stimulate the use of solar panels, the government wants to subsidize the buying of consumers. The initial idea is to subsidize the suppliers of the solar panels per sold solar panel. A researcher is asked to analyze the effects. He uses the model below:
Qs = -200.000 + 2.000P
Qd = 400.000 – 1.000P
Qs = supply of numbers solar panels.
Qd = demand of numbers solar panels.
P = price per solar panel in euro’s.
The market is characterized as perfect competition.
The researcher notices that many consumers take the payback time into consideration before deciding to install solar panels.
The researcher studies the effect of a subsidy of € 60,-- per panel. He calculates that for each sold panel the following is actual:
A saving of 500 kWh per year on other energy source.
A productive lifetime of 10 years.
The market situation is shown in the figure:
Figure: market situation solar panels with and without subsidy
1. Calculate based on the figure and the data the amount of subsidy per additional saved kWh.
Price per solar panel440 400 360 320 280 240 in euro Demand Supply without subsidy Supply with subsidy 200+- 160 120 80 40 40 80 120 160 200 240 280 320 360 400 Number of solar panels (? 1000)Explanation / Answer
The amount of subsidy in the above figure is given by the vertical distance between supply curve with subsidy and supply curve without subsidy. Thus, the amount of subsidy per additional saved kWh = (200 - 160) + 20 = 40 + 20 = 60 units.
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