Suppose the supply and demand curves for natural gas are given by the following equations: QD...

Suppose the supply and demand curves for natural gas are given by the following equations:

QD =34−1.8P QS =18+0.7P,

where Q denotes the quantity of natural gas in thousands of cubic feet and P denotes the price of gas per thousand cubic feet.

4a) Find the equilibrium price and quantity of natural gas. Illustrate your answer using a supply and demand diagram.

4b) Now suppose that the government regulated the market for natural gas and set the regulated price of gas at $4 per thousand cubic feet. Illustrate the impact of the regulated price on the market for natural gas. How much gas is demanded under the regulated price? How much gas is supplied? Is there an excess demand or excess supply of gas? How large is the excess demand or supply?

Expert Solution

Rahul Sunny answered 2 years ago

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