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Rate of substitution between energy efficiencyand price

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Reference no: EM133224000

Peter is looking for a new solar panel. He is considering four differentmodels. The four solar panels have the same reliability, but they vary in Marked out of price and energy efficiency. The least expensive model is also the least energy-efficient, the most expensive model is the most efficient, and the other two are in between.

a) Explain the central question to be addressed in this decision,and identify the possible approaches that Jonathan can use to resolve it.

b) Define energy efficiency in a way that would be appropriate for thedecision.Do you need to consider risk? Explain.

c) How might Jonathan go about establishing a marginal rate ofsubstitution between energy efficiencyand price? Discuss.

Reference no: EM133224000

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