Sulfur dioxide emissions allowances are available for purchase on the Chicago Mercantile Exchange, and several environmental groups have raised money to purchase these certificates, which they subsequently destroy. What would be the impact of these environmental groups purchasing and then destroying these cap-and-trade certificates on the price of these certificates in the market?

Question

Quizplus · Accepted Answer

By purchasing and then destroying sulfur dioxide emissions allowances, environmental groups reduce the supply of these certificates in the market. According to basic principles of supply and demand, a decrease in supply, with demand remaining constant, leads to an increase in price.

Sulfur Dioxide Emissions Allowances Are Available for Purchase on the Chicago