\fSO2 Auction 2104 Price 170- 20000 40800 Quantity

The following figure shows the demand relationship for sulfur dioxide auctions. The vertical axis represents the willingness to pay for a permit, while the horizontal axis represents the quantity of permits individuals are willing and able to purchase at that price. Use this information to answer the following questions. A - Describe the law of demand. Does this relationship follow the law of demand? B - Generally, what is the likely effect if the price of permits increases? C - Assume that energy from coal burning plants is a substitute with renewable energy, and that sulfur dioxide is a pollutant caused from coal burning plants. What is the likely effect on the demand for sulfur dioxide permits if the price of renewable energy declines?