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Other than the market for energy itself, what is a market that might be affected by a cap and trade policy? Explain.
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- In the market you chose, which curve (supply or demand) would shift in response to the policy? Which shifter is affected? Will it increase or decrease?
- Draw a supply and demand graph. Shift the curve in the direction that you chose in the previous section. Find the new equilibrium. Did equilibrium price increase or decrease? Did equilibrium quantity increase or decrease?
- Explain whether your findings in #3 are what you expected.
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