D: Qd=.02-18.p+69.p0 S Qs=15.90+.72p+.05po Where Q is the quantity of natural gas Tcf and p is the price of natural gass in dollars per mcf and po is the price of oil. A) Given that the average price of a barrel of oil is $50 solve for equilibrium . B) The government decides to impose a price control of 3000 per mcf. Caclcuate the impact this would have on the quanity demanded of natural gas, the quanity supplied of natural gass and the amound exchanged in the market. Is there a surplus, equlibrum or shortage under the controlled price ?

D: Qd=.02-18.p+69.p0

S Qs=15.90+.72p+.05po

Where Q is the quantity of natural gas Tcf and p is the price of natural gass in dollars per mcf and po is the price of oil.

A) Given that the average price of a barrel of oil is $50 solve for equilibrium .

B) The government decides to impose a price control of 3000 per mcf. Caclcuate the impact this would have on the quanity demanded of natural gas, the quanity supplied of natural gass and the amound exchanged in the market.

Is there a surplus, equlibrum or shortage under the controlled price ?

 

 

 

Answer:

a)

Equate p0 = 50 in both demand and supply equations

D: Qd=.02-18.p+69.(50) = 3450.02-18p

S Qs=15.90+.72p+.05(50) = 18.4+0.72p

In order to find equilibrium, equate Qd = Qs

Solving this gives,

3450.02-18p = 18.4+0.72p

3431.62 = 18.72p

p* = $183.31

q* = 150.4

b)

At p = $3000 (way much higher than the market equilibrium price),

Qd = 3450.02-18(3000) = -50549.98

Qs = 18.4+0.72(3000) = 2118.4

Since Qs > Qd, then there will be a surplus of gas at this price

Surplus = Qs – Qd

Asked on February 14, 2018 in economics.
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