Answer :
Final answer:
The expiration of a subsidy for solar panel production will cause the supply curve to shift leftward, resulting in decreased supply and likely higher prices. This signifies that producers will find it more expensive to manufacture solar panels without government support. Thus, the correct answer is that the supply shifts from S to S'.
Explanation:
Impact of the Expiration of Solar Panel Subsidies
When a government subsidy for the production of solar panels expires, it reduces the incentive for producers to create these panels. As a result, the supply curve for solar panels will effectively shift leftward, indicating a decrease in supply. This is represented by shifting the supply from curve S to S' in the supply and demand graph.
Here are several key impacts:
- Change in Supply: The expiration of the subsidy increases production costs for manufacturers, leading to a shift in the supply curve.
- Higher Prices: With less supply, the equilibrium price of solar panels will typically increase.
- Electricity Prices: If solar panels become more expensive to produce, this can potentially lead to an increase in electricity prices, particularly if solar power becomes less competitive with fossil fuels.
In summary, the correct interpretation of the situation is that the expiration of the subsidy will cause the supply of solar panels to shift from S to S', reducing the available quantity and likely increasing prices.
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