Already have an account? Get multiple benefits of using own account!
Login in your account..!
Remember me
Don't have an account? Create your account in less than a minutes,
Forgot password? how can I recover my password now!
Enter right registered email to receive password!
Price and Extraction Path over Time
It is obvious that the industry would reduce quantity extracted over time in order to obtain higher prices, i.e., net price must go up over time. The price can go up until a point at which no one is willing to buy the product. This is the 'choke price', i.e., the price at which the demand for commodity is zero. At this point, either the substitute product or the substitute technology will start operating at a lower cost.
This is called 'backstop technology'. Hence, if there is any stock left on the ground when the price hits the choke price, then it is a waste for the owner because the leftover can never be sold at that price. Therefore, the resource owners will want to deplete their resources completely when the choke price is reached. This extraction path will indicate the time path of price.
Figure : Price Path
In the below diagram, the optimal price and extraction paths have been compared with non-optimal paths represented by slower and faster extraction rates as compared to the optimal rate. In below diagrams inefficient extraction and price paths are compared with the efficient path A. Path B illustrates extraction that is too fast relative to the efficient path. More is extracted in each time period under path B. Mineral reserves are depleted before the choke price is reached if path B is followed. Path C illustrates extraction that is too slow relative to the efficient path. The choke price is reached before the mineral reserves are depleted. Therefore, paths B and C are inefficient.
Figure : Extraction Path
Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4
eiplain why indifference curve are convex to the origin
Q. Why does government undertake an economic activity? If ever an activity has large externality or spill over and includes a large number of people, it may be found better th
PIGOVIAN APPROACH Pigou assumed that the aim of social policy is to 'promote welfare'. But in order to simplifL this, he chose to restrict the range of his inquiry to
The report which you should submit to me should include: A brief analysis of the control systems required for the health and safety of operatives and others who may be affect
QUESTION (i) ‘The area of E-Government encompasses three major domains. These domains address the problems that Government is too inefficient and ineffective; too selfserving a
what is multinational? how can they help developing economies?
What are the objectives of pubic finance
Case study
general equilibrium analysis of taxation in shven and whalley (1984) article
Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!
whatsapp: +91-977-207-8620
Phone: +91-977-207-8620
Email: [email protected]
All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd