Nonrenewable price problem

Nonrenewable price problem - t =0 price as a function of...

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Nonrenewable resource price: determinants Adopt the following notation and assumptions. Demand is given by ) ( ) ( t p e t q t , where <0 is the price elasticity and is the exogenous growth rate. The interest rate is denoted by unit cost is zero and the initial reserve of the resource is R 0 . To guarantee that a competitive equilibrium with positive extraction exists, assume 0  . a. Express the initial (
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Unformatted text preview: t =0) price as a function of the initial reserve and other parameters of the problem. Why is it necessary to assume ? b. Solve for the initial price using the following parameter values R 1000 0.08 0.06 -1.5 Using a range of values, examine the responsiveness of the initial price to the growth rate in demand....
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This note was uploaded on 12/26/2011 for the course ECON 260A taught by Professor Deacon during the Fall '10 term at UCSB.

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