Among the factors that might lead to a divergence from the path of prices for a depletable resource predicted by the economic models are: (i) unexpected discoveries of new reserves; (ii) new technologies that reduce extraction costs.
A)i and ii
B)i but not ii
C)ii but not i
D)neither i nor ii

Question

Quizplus · Accepted Answer

Both unexpected discoveries of new reserves and new technologies that reduce extraction costs can lead to a divergence from the predicted path of prices for a depletable resource. The discovery of new reserves increases the available supply of the resource, shifting the supply curve to the right, while new technologies reduce the cost of extracting the resource, shifting the supply curve to the left. Both of these shifts in supply can cause changes in the equilibrium price and quantity of the resource, leading to a divergence from the predicted path.

Among the Factors That Might Lead to a Divergence from the Path