Assume again that we have a simple 2 period model of dynamically efficient extraction of a nonrenewable resource with a finite stock of 35 units. Constant marginal extraction costs remain at 8. And the interest rate is 8%. We now know that due to technological change, demand for the resource will decrease in period 2. Hence, there are now different demand functions for each period. In particular, inverse demand functions for the 2 periods are: P1= 20- 0.4q1 P2= 22- 0.4q2 What quantity should be extracted in each period? What is the optimal price of the resource in the 2 periods?

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