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The inverse aggregate demand for energy is given by pt = 15 - wt, where wt = zt Yt, zt is supply of the backstop,
The inverse aggregate demand for energy is given by pt = 15 - wt, where wt = zt Yt, zt is supply of the backstop, and Yt is supply of a non-renewable resource. z and y are perfect substitutes. Marginal extraction cost of y is constant at C = 2, and the initial stock is x0 > 0. Can there be an initial phase during which the non-renewable resource supplies the entire market, if the (total) production cost of the backstop is given by c(zt) = ((zt)^3)/3?
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