State Hotelling's Rule (or the Hotelling Principle) for

Solution

Solution: Hotelling's Rule (1931) states that the price of a non-renewable resource, minus the marginal cost of extraction (the net price, or scarcity rent/user cost), must grow at the rate of discount (r) for resource owners to be indifferent between extracting today and extracting tomorrow. The User Cost is the opportunity cost of using the resource today instead of saving it for future, more valuable use; its rising price reflects the increasing scarcity over time.