gas price and economics

PRINCIPLES OF ECONOMICSPRESENTAT ION

Asif Mahmood Abbas - 41531047

TEAM MEMBER

Illustrate the effect of the cold spell on the demand for gas using a demand curve diagram.

QUESTION 1

EFFECT OF COLD SPELL ONPRICE OF GAS

EFFECT OF COLD SPELL ON

P R I C E O F G A S

Shift of a demand curve takes place when there is a change in any non-

price determinant of demand, resulting in a new demand curve.

Non-price determinants of demand are those things that will cause

demand to change even if prices remain the same.

So, any circumstance that affects the consumer's willingness or ability to buy the good or service in question

can be a non-price determinant of demand.

As a result of cold spell in UK the demand of gas jumps to 454 cubic meters from 449 cubic meters for the

same price.

Here weather is the factor that causes change in demand of gas.

Due to non-price determinant cold consumer demanding more gas at

same price.EFFECT OF COLD SPELL

ONP R I C E O F

G A S

In the graph demand curve will shift upward from D1 to D2.

Where price remain same for both Demand curve.

EFFECT OF COLD SPELL ON

P R I C E O F G A S

Illustrate the effect of the national grid instructing major gas users to reduce demand.

QUESTION 2

EFFECT OF NATIONAL GRID TOREDUCE GAS DEMAND

Due to excessive Demand govt. authority is in fear of Demand –

Supply mismatch, which will result in price rising moreover consumer will suffer as a result of this crisis.

To get rid of this problem national Grid instructed major gas users to

reduce their demand so that demand remain in the level of supply as National grid instruct suppliers to

supply more.EFFECT OF NATIONAL GRID TO

R E D U C E G A S D E M A N D

Demand and Supply in Balance

If supplier increase their supply and simultaneously major gas users

demand less due to authority instructions then then both supply

and demand will remain in a balance.

EFFECT OF NATIONAL GRID TOR E D U C E G A S

D E M A N D

Price change due to Demand and Supply change

Analysis two other factors that you think influence demand for gas.

QUESTION 3

FACTORS THAT INFLUENCEDDEMAND FOR GAS

Supplementary Goods

Here the supplementary product of gas is Coal so if the price of Coal remain cheap then consumer will care coal more than gas which will decrease demand of gas as a result demand curve will move downwards which will reduce price at the same time demand for coal will increase .

FACTORS THAT INFLUENCED

D E M A N D F O R G A S

Tax Increase

Another factor that can influence demand of gas is tax.

Higher Tax on gas price will result higher price and higher price will

discourage gas users and motivate them to choose coal.

That will reduce demand for gas.FACTORS THAT INFLUENCED

D E M A N D F O R G A S

Do you think demand for gas is price elastic or price inelastic?Explain your reasoning.

QUESTION 4

DEMAND FOR GAS IS PRICEELAST IC OR INELAST IC?

Price elasticity of demand (PED or ED) is a measure used in economics

to show the responsiveness, or elasticity, of the quantity demanded

of a good or service to a change in its price.

Price elasticity depends on several factors such as substitute goods, complementary goods, income, consumers responsiveness etc.

DEMAND FOR GAS IS PRICE

E L A S T I C O R I N E L A S T I C ?

Availability of substitute goods, the more and closer the substitutes

available, the higher the elasticity is likely to be, as people can easily

switch from one good to another if an even minor price change is made.

There is a strong substitution effect.

If no close substitutes are available, the substitution effect will be small

and the demand inelastic.



It can be said easily that gas is elastic but not perfectly elastic.

With little change in price, gas consumer with shift to coal.

So changes in price will change quantity demanded in gas quickly.DEMAND FOR

GAS IS PRICEE L A S T I C O R I N E L A S T I C ?

But if the generator company had gas as only option then it would be

inelastic as they left no options and had to buy gas in each price.



THANK YOUW E A R E O P E N F O R Q U E S T I O N S

gas price and economics

Business