Len Is Putting in a New Swimming Pool

question 103

Multiple Choice

Len is putting in a new swimming pool. He can either heat his pool with natural gas or with solar power. If he chooses solar power it will cost him more today, but he will recover these costs over the next 7 years in savings on his natural gas bill. The solar heater is expected to last 12 years. Len:

• A) will put in the solar heater regardless of the discount rate because the savings in natural gas outweigh the initial cost of the solar heater.
• B) is more likely to install the solar heater as the discount rate increases.
• C) is more likely to install the solar heater as the discount rate declines.
• D) will not put in the solar heater unless he is an environmentalist.

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Definitions:

Decrease in Demand

A downward shift in the demand curve, indicating that consumers are willing to purchase less of a good or service at each price point.

Resource Prices

Refers to the costs associated with inputs used in the production of goods or services, such as raw materials, labor, and capital.

Market Demand

The total quantity of a product or service that all consumers in a market are willing and able to purchase at various prices.

Increases

This term refers to a situation where a quantity or quality of something goes up or becomes more.