(a) Consider the market for natural gas (g), Here's the supply function QS = 11 + 4Pg + 0.4Po and the demand function:QD = -8Pg + 3.0Po. ; where Pg and Po are the prices of natural gas and oil, respectively. If the price of oil is $5, what is the market price of natural gas? (b) Now, suppose the regulated price of gas is fixed at $4.5, ceteris paribus, will there be a surplus or shortage? (c) Calculate the amount of surplus/shortage.

(a) Consider the market for natural gas (g), Here's the supply function QS = 11 + 4Pg + 0.4Po and the demand function:QD = -8Pg + 3.0Po. ; where Pg and Po are the prices of natural gas and oil, respectively. If the price of oil is $5, what is the market price of natural gas? (b) Now, suppose the regulated price of gas is fixed at $4.5, ceteris paribus, will there be a surplus or shortage? (c) Calculate the amount of surplus/shortage.

Macroeconomics

13th Edition

ISBN:9781337617390

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter5: Supply, Demand, And Price: Applications

Section5.7: Application 7: Why Do Colleges Use Gpa,s Actss, And Sats, For Purposes Of Admission?

Problem 2ST

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