Question

2. Suppose the federal government has enforced rice ceiling on natural gas. Bernie Sanders wins the election and decides that such government intervention is not need Using supply and demand diagrams, show the effect on the equilibrium price and quantity of removing the price ceiling on natural gas in: a. the market for natural gas. b. the market for heating oil. c. the market for electric furnaces. d. the natural gas oven market.

Answer 1

→ Market Supply curve Market Demand Do cuice Price Pe Price ceiling B. Quantity at Price ceiling O TE quantity of Natural Gas SE I Price at market equiliterium Quantity at maket equilibrium The removal of the puce ceeling her will increase the price of natural gas from P to Pel, it will also incuare quantity from de to BE. As there is no price ceiling there chill Lee no dead reeight loss. The consumer neuples will decreare and the producers nuphes will increare.

Natural gas keena a substitute till of heating oil. -- - 30 31 As prices of natural DD gas incuare the Quantity for pemand for heating oil. heating coil will chcreare, wehech will lead to the shift of the demand curre from to D . This meile end raise the price of heating oil from Po to P. and increase the quantity from Go to

Ruce so Electric finnace is a supertitute of natural gas. bernaces The incuare in the So price of natural al gas will lead to gudutity for electric the shift so of the demand curice from Do to D., which will increase the price from Po to P, and quantity from &o to si Gas once is coruplementary to natural gas. orien The eine in the price of natural gas will quantity of gas strat decrease the demand of gas overs I lifting the demand curice from Po to D, nenache will deckare the puce from Po to P, and decuare the quantity from do to a
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