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Answer to Question #59729 in Microeconomics for Poppy

Question #59729
Explain, with the use of demand and supply diagrams, the effect of the following events on the market for solar panels:

(a) The price of solar panels has fallen to below the market equilibrium price.
(b) The price of electricity for an average household has increased by 50 percent.
(c) New technology has increased the productivity of solar panel producers.

QUESTION 2
Ceteris paribus, at the same time when demand for yoga services have increased the government has introduced strict regulations on yoga providers, resulting in the decrease in the number of yoga providers. Using demand and supply analysis what will be the impact on price and quantity in the market for yoga services.

Expert's answer
1. The market for solar panels:
(a) The price of solar panels has fallen to below the market equilibrium price - there will be a shortage of solar panels (quantity demanded will be higher than quantity demanded).

(b) The price of electricity for an average household has increased by 50 percent - the demand for solar panels will increase, so the equilibrium price and quantity of solar panels will increase too.
(c) New technology has increased the productivity of solar panel producers - the supply of solar panels will increase, so the equilibrium price will decrease and equilibrium quantity of solar panels will increase.

2. If after the increase in demand for yoga services the government introduces strict regulations on yoga providers, resulting in the decrease in the number of yoga providers, the supply of yoga will decrease, so the equilibrium price of yoga services will increase and the equilibrium quantity may increase, decrease or not change.

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