Answer:
The less strict regulation that results in more companies obtaining the right to mine coal in Mpumalanga will increase the supply of coal in the market. At the same time, the decreased demand for coal-generated electricity due to alternative energy solutions will decrease the demand for coal.
In a basic supply and demand diagram, an increase in supply would shift the supply curve to the right, while a decrease in demand would shift the demand curve to the left. The intersection of the two curves represents the equilibrium price and quantity for coal.
With the increase in supply and decrease in demand, the equilibrium price for coal would decrease, as shown in the diagram below:
coal1
The decrease in demand will cause the demand curve to shift left, from D1 to D2, indicating a lower quantity demanded at every given price level. The increase in supply will cause the supply curve to shift right, from S1 to S2, indicating a higher quantity supplied at every given price level. The intersection of these two curves is the new equilibrium point E2, where the equilibrium quantity of coal has decreased, but the equilibrium price has fallen even further.
As a result of this shift, there will be excess supply of coal at the original equilibrium price, leading to a surplus of coal. This surplus will put pressure on coal producers to reduce their prices to sell off their excess inventory, which will eventually lead to a new equilibrium price and quantity, as shown in the diagram below:
coal2
The new equilibrium price P2 is lower than the original equilibrium price P1, indicating a fall in the price of coal. However, the new equilibrium quantity Q2 is also lower than the original equilibrium quantity Q1, indicating a decrease in the overall production of coal.
In conclusion, the less strict regulation and increased competition in the coal mining industry, combined with the decrease in demand due to alternative energy solutions, will result in a decrease in the equilibrium price and quantity for coal. This shift in equilibrium will put pressure on coal producers to reduce their prices and reduce production levels.