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Homework answers / question archive / Typical consumer's monthly demand for kilowatt hours (kwh) of electricity is given by D(p) = 560
Typical consumer's monthly demand for kilowatt hours (kwh) of electricity is given by D(p) = 560.00 4100.00p. Due to advances in renewable energy that have reduced barriers to entry, the supply of electricity can be considered as a perfectly competitive market, with a horizontal supply curve at price $0.08 per kwh.
Part 1
What is the quantity consumed by a typical consumer in equilibrium?
Suppose that Congress wants to promote renewable energy and thus proposes a subsidy to consumers of $0.02 per kwh
What is the equilibrium quantity with the subsidy?
Part 2
What percentage of the gain from the subsidy goes to sellers?
What is the deadweight loss from the subsidy?
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