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P a a - bR Rt a/b R Figure 15.1 The non-renewable resource demand function for the two-period model.

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Presentation on theme: "P a a - bR Rt a/b R Figure 15.1 The non-renewable resource demand function for the two-period model."— Presentation transcript:

1 P a a - bR Rt a/b R Figure 15.1 The non-renewable resource demand function for the two-period model.

2 P K U(R) = shaded area Ke-aR R Quantity of resource extracted, R
R Quantity of resource extracted, R Figure 15.2 A resource demand curve, and the total utility from consuming a particular quantity of the resource.

3 Figure 15.3 Net price Pt PT =K P0 Pt 45° T R R0 Time t Rt Area =
Demand P0 Pt 45° T R R0 Time t Rt Area = = total resource stock T Time t

4 Figure 15.4 Net price Pt PT = PTM = K P0M P0 R R0 R0M T TM Time t T
Perfect competition PT = PTM = K Demand P0M Monopoly P0 R R0 R0M T TM Time t T Area = TM 45° Time t

5 P A C B K P0 Time T Figure 15.5 The effect of an increase in the interest rate on the optimal price of the non-renewable resource.

6 Figure 15.6 Net price Pt K P0 P0/ R R0/ R0 T/ T Time t T/ T 45° Time t
Demand P0 P0/ R R0/ R0 T/ T Time t T/ T 45° Time t

7 Figure 15.7 Net price Pt K P0 P0/ R R0/ R0 T T/ Time t T T/ 45° Time t
Demand P0 P0/ R R0/ R0 T T/ Time t T T/ 45° Time t

8 Figure 15.8 Pt t Net price path with no change in stocks
Net price path with frequent new discoveries t

9 Figure 15.9 Net price Pt K P0/ P0 R R0/ R0 T/ T Time t T/ T 45° Time t
D/ P0 D R R0/ R0 T/ T Time t T/ T 45° Time t

10 Figure 15.10 (a) Net price Pt K PB P0 P0/ R* R R0/ R0 T/ T Time t T/ T
Backstop price fall PB P0 P0/ D R* R R0/ R0 T/ T Time t T/ T 45° Time t

11 Figure 15.10 (b) Net price Pt K PB P0 P0/ R* R R0/ R0 T/ T Time t T/ 
Backstop price fall PB P0 P0/ D R* R R0/ R0 T/ T Time t T/ T 45° Time t

12 Resource price K T Figure 15.11(a) Time Original net price
New gross price Original gross price New net price cL cH T Figure 15.11(a) Time

13 Resource price K T T/ Figure 15.11(b) Time Original gross price
Original net price New gross price New net price T T/ Figure 15.11(b) Time

14 Figure 15.12 Net price Pt K P0/ P0 R R0 R0/ T T/ Time t T T/ 45°
Original gross price path K New gross price path P0/ P0 R R0 R0/ T T/ Time t T T/ 45° Time t

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