Lecture
This lecture discusses the principles of market equilibrium, focusing on the demand and supply for electric vehicles (EVs). It begins by defining market equilibrium as the point where the quantity demanded equals the quantity supplied. The instructor presents the demand and supply equations for a normal good, illustrating how to determine market outcomes at various price points. The discussion includes the implications of price limits and shifts in demand due to government incentives. The instructor introduces the concept of the 'green paradox,' explaining how encouraging the purchase of EVs can inadvertently lead to increased demand for internal combustion engine (ICE) vehicles. The lecture further explores the dynamics between two buyer groups: those motivated to buy EVs and those less inclined. The impact of subsidies on demand functions is analyzed, highlighting how they can shift willingness to pay and affect market equilibrium. The instructor concludes by discussing the complexities of targeting subsidies effectively and the potential for crowding out buyers in the EV market.