Problem
A local non-profit organization for renewable energy equity, Equal Energy, has two primary activities: solar education and funding capital costs of a new rooftop solar arrays for qualifying residents. Currently, they provide $10,000 for each rooftop solar array they fund. Equal Energy has a total budget of $1,000,000 per year, and they typically sponsor 75 rooftop solar projects a year. With this information, answer the following three questions:
I. Draw a budget constraint and indifference curve for Equal Energy, with solar education costs on the x-axis and solar array costs on the y-axis. You can assume that the current balance of activities maximizes the utility of the organization. Be sure to show the end points of the budget constraint, as well as the total spending on education and solar arrays.
II. The Department of Energy (DOE) has awarded Equal Energy a grant for $50,000 for solar education only. Thus, the money from the grant can only be used for solar education activity. Using the same graph from part a, draw the new budget constraint and indifference curve for Equal Energy with the new DOE grant money.
III. Using the information from part I and II, do you think Equal Energy will fund more solar array capital costs after they receive the DOE grant money? Why or why not?