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Supply and Demand in a Regulated Market Imagine that politicians have decided that fuel prices are excessive for U.S. drivers and have passed a law that grants the power to regulate retail fuel prices to the U.S. Department of Energy. Post by Day 3 a 250- to 300-word statement that addresses the following:

How might supply and demand for fuel be affected by fuel prices that are set by the Department of Energy instead of by a free market?

Will the amounts of fuel demanded by consumers be met by the quantities supplied by a regulated market?

Does a regulated market result in better economic efficiency in production and consumption than a free market?

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Chika Ilonah
Chika IlonahLv10
28 Sep 2019

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Related questions

Imagine that politicians have decided that fuel prices are excessive for U.S. drivers and have passed a law that grants the power to regulate retail fuel prices to the U.S. Department of Energy. How might supply and demand for fuel be affected by fuel prices that are set by the Department of Energy instead of by a free market? Will the amounts of fuel demanded by consumers be met by the quantities supplied by a regulated market? Does a regulated market result in better economic efficiency in production and consumption than a free market?

In spite of inflation increasing most prices, the price of solar power declining. Also in contrast to fossil fuels, the cost of generating electricity from solar energy is driven by the infrastructure costs instead of the cost of the natural resource. Therefore the costs and prices are more stable, particularly for large-scale electricity generation.


Historically, solar technologies have had high upfront infrastructure costs but low operating costs. The SunShot program launched in 2011 by the U.S. Department of Energy (DOE) seeks to make solar energy economically competitive by 2020. To achieve this goal, the cost of solar power will have to be reduced by roughly 75% relative to 2010 prices. The U.S. DOE has reported that cumulative adoption of solar technologies has increased over tenfold since 2008. It is expected that achieving the price reduction set by the SunShot initiative could lead to solar representing 14% of the electricity demand in the U.S. by 2030 and 27% by 2050.


According to a study by the National Renewable Energy Laboratory and the Lawrence Berkeley National Laboratory, reported prices of both residential and commercial photovoltaic systems decreased on average from 6% to 12% annually between 1998 and 2014. At the end of 2014, photovoltaic prices ranged from $4.27/W for residential systems with a median installed capacity of 6kW to $2.08/W for utility-scale systems. Costs for utility scale systems are projected to fall $1.00/W to $1.75/W by 2020. It is expected that within the next two decades, the cost of solar technologies will be lower than the costs of conventional fossil fuel electricity technologies. These lower electricity prices can decrease inflation and contribute to increased economic activity and growth.

Interestingly, the deployment of solar technologies continues to increase despite the 2015 plunge in oil prices. Solar was the third most added electricity-generation capacity in 2015, after wind and natural gas. However, the share of solar compared to the total U.S. electricity capacity in 2015 was 2%, while its generation share was only 0.9%. So it remains to be seen if the goal of the SunShot initiative will be met.

1- Deflation decreases the general prices of goods and services and increases purchasing power. How does this differ from the declining price of solar technologies?

2- Currently, most electricity generation in the U.S. is from fossil fuels, including petroleum, coal, and natural gas. In what ways has the 2015 decline in oil prices affected the adoption of solar technologies?

3- Use Internet resources to compare the changes in the prices of renewable energy technologies including wind, solar, and geothermal over the last 5 years. Which of these three technologies has achieved the greatest cost decline during that period?

4- In addition to cost, what are other barriers to the adoption of photovoltaic systems?

1 an imperfect market, individual firms

A.are always able to set the price of their product.
B.are able to influence the price of their product.
C.have no influence over the price of their product.

D.take the market price as given.

1 Which of the following is NOT characteristic of a market economy?

Significant government intervention
Little or no government intervention
Buyers and sellers motivated by self-interest
Prices determined by demand and supply

2 In a competitive market, the price of the product is

independently set by each competing seller.
set by the market leader and then copied by other sellers.
jointly set after a meeting of all sellers in the market.
set by market supply and demand.

3 Which of the following firms participates in a competitive market?

A new car manufacturer, such as Ford, Honda, Toyota, or GMC
A software producer, such as Microsoft
A corn farmer
A local electric utility company

4 In an imperfect market, individual firms

are always able to set the price of their product.
are able to influence the price of their product.
have no influence over the price of their product.
take the market price as given.

5 Which of the following firms operates as a monopoly?

A car manufacturer
A local water utility
A corn farmer
A fish vendor at a neighborhood market

6 According to the law of demand, what is the relationship between price and quantity demanded?

Direct
No relationship
Inverse

7 Refer to the following graph. The demand curve slopes downward because
Click to view graphic. (Links to an external site.)

prices and quantity demanded move in opposite directions.
prices and quantity demanded move in the same direction.
prices and quantity demanded have no relationship.
prices and quantity demanded remain unchanged.

8 A change in which of the following will cause a change in the quantity demanded of coffee?

Consumer income
The price of green tea, a substitute for coffee
The number of coffee consumers
The price of coffee

9 Suppose that burgers and fries are complements in consumption. If the price of fries increases

overall demand for burgers will increase.
overall demand for burgers will decrease.
quantity demanded for burgers will increase.
quantity demanded for burgers will decrease.

10 Suppose that Coca Cola and Pepsi are substitutes in consumption. If the price of Coca Cola decreases, then

both the equilibrium price and the quantity of Pepsi demanded will decrease.
both the equilibrium price and the quantity of Pepsi demanded will increase.
the equilibrium price of Pepsi will increase and the quantity demanded of Pepsi will decrease.
the equilibrium price of Pepsi will decrease and the quantity demanded of Pepsi will increase.

11 According to the law of supply, what is the relationship between price and quantity supplied?

Direct
No relationship
Inverse
It depends on the change in price

12 Refer to the graph below. The supply curve is _______________ driven by the law of supply.
Click to view graphic. (Links to an external site.)

Downward sloping
Upward sloping
Perfectly vertical
Perfectly horizontal

13 A change in which of the following will cause a change in the quantity supplied of coffee?

The technology or the production process of making coffee
Anticipation of a change in the price of coffee
The wages of coffee bean pickers
The price of coffee

14 Which of the following will cause a rightward shift in the supply curve for tobacco?

A fall in the number of tobacco farmers in the market
An increase in taxes on tobacco
Removal of government subsidies to tobacco farmers
An improvement in the technology used in the production of tobacco

15 Flour is a factor of production of cupcakes. How will an increase in the price of flour affect the market for cupcakes?

Overall supply will increase
Overall supply will decrease
Quantity supplied will increase
Quantity supplied will decrease

16 Refer to the following image. When a market is in equilibrium, which of the following is true?
Click to view graphic. (Links to an external site.)

Quantity supplied exceeds quantity demanded
Quantity supplied is less than quantity demanded
Quantity supplied is equal to quantity demanded
There is no relationship between quantity supplied and quantity demanded

17 Refer to the following figure. At a price of $15, this market is experiencing a(n)
Click to view graphic. (Links to an external site.)

equilibrium.
shortage.
surplus.
none of the above are true.

18 Refer to the following figure. At a price of $5, this market is experiencing
Click to view graphic. (Links to an external site.)

equilibrium.
a shortage.
a surplus.
None of the above are true.

19 Suppose pasta salad is a normal good. If the price of pasta (a major ingredient in pasta salad) increases and income also increases, the

equilibrium quantity and equilibrium price of pasta salad will increase.
equilibrium quantity of pasta salad will decrease and the equilibrium price of pasta salad may either increase or decrease.
equilibrium quantity of pasta salad may either increase or decrease and the equilibrium price of pasta salad will increase.
equilibrium quantity and equilibrium price of pasta salad will both decrease.

20. What must happen to the market price in order for a shortage to be eliminated?

Price must fall.
Price must rise.
Price must stay the same.
Price may rise or fall depending on the size of the shortage.

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