Use the following to answer question(s): Future Generations and Exhaustible Natural Resources

-(Exhibit: Future Generations and Exhaustible Natural Resources) Given the original price of P₁ and quantity of Q₁, if the interest rate rises, the supply curve will shift to ________ , the price will _______, and the quantity consumed will _______ .

Question

Use the following to answer question(s): Future Generations and Exhaustible Natural Resources
 
-(Exhibit: Future Generations and Exhaustible Natural Resources) Given the original price of P₁ and quantity of Q₁, if the interest rate rises, the supply curve will shift to ________ , the price will _______, and the quantity consumed will _______ .

Quizplus · Accepted Answer

When the interest rate rises, the supply curve shifts to the left (S₂) because producers will no longer be willing to supply as much of the exhaustible natural resource at the original price due to the increased opportunity cost of waiting to sell the resource in the future when it may be worth more. As supply decreases, the price will fall as well. With a lower price, consumers will demand more of the resource (quantity consumed will increase), but they will not demand enough to fully counterbalance the decrease in supply, resulting in a net decrease in quantity consumed.

Use the Following to Answer Question(s): Future Generations and Exhaustible