Cost of extraction 10 How to solve

Choke price 100 1. Start at the final year

Interest rate 10.00% 2. Set demand and reso
Resource in the
beginning 153 3. Calculate price/unit
4. Calculate profit/unit
Resource
Year Price/unit Profit/unit Demand remaining 5. Move one year backw
0 6. Calculate profit/unit u
-1 7. Calculate price/unit
-2 8. Calculate demand
-3 9. Calculate how much o
-4 10. If resource runs out,
-5
-6
-7
-8

12.0 12.0
12

Demand 10.0
10 10.0
Resource

Demand
remaining 8.0
8 8.0
Price

6.0
6 6.0

4.0
4 4.0
2.0
2 2.0
0.0
0 60
0.0
-6 -5 -4 -3 -2 -1 0
-6 -5 -4 -3 -2 -1 0
Year Year
How to solve
1. Start at the final year
2. Set demand and resource remaining to 1

3. Calculate price/unit
4. Calculate profit/unit

5. Move one year backwards in time

6. Calculate profit/unit using Hotelling rule
7. Calculate price/unit
8. Calculate demand
9. Calculate how much of the resource is remaining
10. If resource runs out, finish. Else, go to step 5.

12.0

10.0
Demand

8.0

6.0

4.0

2.0

0.0
60 70 80 90 100 110 120
Price