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
What are your thoughts on Putman’s “Bowling Alone,” the idea that there has been a decline in social capital in North America? Do you agree or disagree with the assertion? Support
Mr. X enters into a contract with Mr. Z under which Z agreed to build a customized telescope for X for $500. The value of the completed telescope to X will be $600. Expecting that
There is no doubt that the environment surrounding business organizations play an important role in influencing the decisions of those organizations and their strategic plans. That
Question 1: Briefly (three or four paragraphs) give reasons for your answer. (a) In studying the public sector, economists should use either positive or normative economics
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