Environmental macroeconomics is necessary to form a dynamic general equilibrium of all trade processes and market relations. This paper considers the production of environmental goods (electric cars) based on Niu et al. (2022).
Equilibrium Price and Quantity of Goods
The U.S. has an increased supply and demand for electric vehicles. Over 1 million products have been sold as of 2021 (Electric Vehicles Initiative, 2022). An equilibrium price can be derived at the point at which the supply and demand prices meet. For electric vehicles, it will decrease as the market is interested in green products (Niu et al., 2022). The quantity of the product will increase to the maximum limit until the excess begins to harm producers.
The Difference between an Effective Price Ceiling and an Effective Price Floor
The price ceiling allows a product to be in a specific price category and shapes compliance with the circulation rules. There is the need to keep manufacturers from stealing from consumers (Electric Vehicles Initiative, 2022). The effective price floor represents the lower limit, after which the product will depreciate. It must not be higher than the equilibrium price because demand will be inappropriately lower than supply. There is a price ceiling for electric cars because it is necessary to develop access to environmentally friendly products.
Benefit From Additional Consumer Surplus
Electric car manufacturers are more likely to benefit from additional consumer surplus. Manufacturers can invest in new technologies and choose more environmentally friendly materials (Niu et al., 2022). Resources will be devoted to producing new products, advertising, and promotion. Consumer surpluses will be used to promote the product and unlock its potential. The instability of the equilibrium price may serve as a barrier to benefiting.
Market Equilibrium
Market equilibrium is condition when producers and consumers are satisfied with the relationship state. It is precarious for electric cars because demand is increasing, and supply is becoming profitable. The market price will be at the same level as the middle-class cars. The number of goods will be limited by the market conditions of the past period with the gradual addition of goods in case of increased demand.
Relevance to Reality
The current political conditions in the environmental economy are unstable; the reality of the described situation is proven. Innovative environmental solutions in electric cars can be relevant even at a high price because they correspond to the policy. The market volatility does not make it easy to set the price, focusing on a price ceiling. The reality of the equilibrium price of electric cars remains an unpredictable market factor.
References
Electric Vehicles Initiative (2022). Global EV outlook 2022.
Niu, M., Zhang, S., Zhang, N., Wen, Z., Xu, M., & Yang, Y. (2022). Progress in the research of environmental macroeconomics. Sustainability, 14.