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Questions For Case Study: A3: From $15,000 To $13,500

This document contains a student's responses to questions about a case study on the solar power industry. Key factors driving the industry included increased environmental concerns, government incentives, and utility power buyback schemes. The student calculated the price elasticities of demand for a drop in solar panel installation prices. From $15,000 to $13,500 the elasticity was -4, and from $13,500 to $12,000 the elasticity was -2.57. The student observed that revenues increased more with the larger price drop and more elastic demand.

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Rizwan Khan
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4K views

Questions For Case Study: A3: From $15,000 To $13,500

This document contains a student's responses to questions about a case study on the solar power industry. Key factors driving the industry included increased environmental concerns, government incentives, and utility power buyback schemes. The student calculated the price elasticities of demand for a drop in solar panel installation prices. From $15,000 to $13,500 the elasticity was -4, and from $13,500 to $12,000 the elasticity was -2.57. The student observed that revenues increased more with the larger price drop and more elastic demand.

Uploaded by

Rizwan Khan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Student Name:        RIZWAN       Student ID: 11333 

Questions for Case Study: A3


1. What were some key factors driving the solar power industry, as described in the case?

The solar power market was divided into two segments: photovoltaic units (solar panels) and concentrated solar
thermal. At that time, the solar panel component was significantly larger than the thermal segment. Solar
panels directly transformed sunlight into electrical power. The sun produced enough energy daily to supply
10,000 times current worldwide electrical needs. The global solar-energy industry was expected to reach
revenues of $422 billion by 2022 from a baseline of $86 billion in 2015.2 The growth of this market was
driven by increased environmental pollution concerns, government incentives, and utility
power buyback schemes. The solar panel side of this market also consisted of two segments: solar
panel manufacturers and solar panel installers. Some of the major players in solar panel
manufacturing were located in China and Canada. The solar installation segment of the market was
highly fragmented.

2. What are the price demand elasticities for a change in price from $15,000 to $13,500 and from $13,500 to
$12,000 for a typical solar panel installation?
 
 

From $15,000 to $13,500 

 
 

(420  300)
 100
300 40%
  Ed  4
(13500  15000)  10%
 100
15000

 
Page 1 of 2 
 
Student Name:        RIZWAN       Student ID: 11333 
 

From $13,500 to $12,000 

(540  420)
 100
420 28.57%
  Ed  2.57  
(12000  13500)  11.11%
 100
13500

3. What is the impact on revenues based on the elasticities calculated in question 2 and the new price points?

Observation Sheet

Point  Price  Price  Demand  Qty  Total  Increased  Elasticity 


P1  P2  Decrease  Q1  Q2  Demand  Revenue  in 
increase   Revenues 

A  $15,000        300       $4,500,000       


A to B  $15,000  $13,500  10.00%  300 420 40.00% $5,670,000  26.00% ‐4 
B to C  $13,500  $12,000  11.11%  420 540 28.57% $6,480,000  14.29% ‐2.57 

Comments

1- Initial revenue was $4.5 million on price $15,000 on Point A

2- On Point A to B, Price decreased from $15,000 to 13,500 around 10% which caused to increase in
demand by 40% & revenue was increased by 26% , Elasticity of demand calculated 4 on this point ,
RSP has increased revenue on this point hence proved that a firm can enhance revenue via reduction of
price if product is elastic

3- On point B to C RSB has decreased further 11.11% in price of Regulues Solar panel Installation but
this time RSB could have increased just 28.57% demand & enhanced 14.29% in revenue which are
less than from Point A to B.

4- Elasticity of Pont A to B is greater than point B to C so if product is more elastic, revenue can be
generated more.

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