Essay about Benefits of Nuclear Power

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According to the article, Saudi Arabia plans to switch to using nuclear power and solar power to substitute from using oil as the basis of producing electricity for the country, in hopes of reducing the overconsumption of oil in the country where the demand for electricity is rising at an alarming rate, thus shows market failure. Market failure occurs where markets do not work well or do not work at all it refers to the failure of the price mechanism to achieve optimum allocation of resources. In the short run there will be negative externalities while in the long run the country would benefit due to positive externalities. Positive externalities refer to activities external to the market that affect other people in a positive way. Negative externalities refer to activities external to the market that affect other people in a negative way. Long run is the period of time where all factors of production are variable. Short run is the period of time where at least one factor of production is fixed. The diagram below represents a positive externality graph for Saudi Arabia if the switch to nuclear and solar power for electricity.

Originally, the equilibrium point is where the MPB curve and the MSC curve meet at P1 and Q1. The MSC curve represents the supply curve while the MPB curve represents the private demand curve for the consumers. However the ideal equilibrium point would be where MSC meets with MSB (social demand) curve where it's the costs incurred to society at P2 and Q2. While P3 at Q1 represents the maximum price where society would benefit more to the consumers. Thus, according to the article, “Saudi Arabia’s demand for petroleum products – demand for energy – is rising at a high and very alarming rate” Al Sulaiman says, where the market is currently producing at Q1 and P1 it only takes into account the private benefit for the consumers, and with the drastic increase on demand for electricity, Saudi Arabia would look to benefit society since they own one-fifth of the worlds global reserves for oil. Therefore in terms of social efficiency, the optimal level of output for society would be where MSB = MSC. The excess of MSB over MPB from Q2 to Q1, there is a deadweight welfare loss to society as shown as the yellow triangle. Therefore, society as a whole would be better off at the new equilibrium point at P2 and Q2.
According to the article, Saudi Arabia aims to pursue renewable energy and nuclear power to help reduce the decreasing amount of crude and natural gas that generate Saudi Arabia’s current electricity. With the current situation, the Saudi Arabian government should seek to use nuclear and solar energy as a substitute of oil as the foundation for the country’s
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