Question

Gas prices fluctuate often and in both directions. In your initial post, respond to the following: How responsive do you think consumers will be to the price change when these fluctuations occur due to changes in supply? Why? Use the various determinants of elasticity to explain your answer. How does the price elasticity of demand for gasoline impact the effectiveness of taxes on gasoline aimed at correcting a negative externality? Consider incorporating the supply-and-demand model to demonstrate the elasticity of demand for gas and to show the effects of tax on the market for gas. In your response posts to peers, describe in detail how your own actions reflect the ideas shared in the discussion, and relate that to the concept of elasticity.

Answer 1

Answer :-

Natural gas prices are mainly a component of market supply and demand. Since there are restricted short-term options in contrast to natural gas as a fuel for warming and power age during top demand periods, changes in supply or demand over a short period may bring about huge value changes. Prices themselves regularly act to adjust supply and demand.

Factors on the supply-side that influence prices incorporate natural gas production, net imports, and underground stockpiling levels.

Increases in supply will in general draw prices down, while diminishes in supply will in general push prices up.

Increases in prices will in general energize production, imports, and sales from capacity inventories. Declining prices will in general have the contrary effects.

Factors on the demand-side incorporate weather (temperatures), economic conditions, and petroleum prices. Chilly climate (low temperatures) increases demand for warming, while blistering weather (high temperatures) increases demand for cooling, which increases natural gas demand by electric force plants. Economic conditions impact demand for natural gas, particularly by manufacturers. Demand might be directed by petroleum fuel prices, which might be an economical substitute for natural gas for power generators, manufacturers, and huge structure proprietors.

Higher demand will in general lead to higher prices, while lower demand can prompt lower prices. Increases and diminishes in prices will in general lessen or increase demand.

Gasoline taxes can be utilized to address externalities related with automobile use, to lessen reliance on remote oil, and to raise government revenue. The gasoline tax is a significant approach device to control externalities related with automobile use, to diminish reliance on oil imports, and to raise government revenue. Automobile use forces externalities including neighborhood air contamination, carbon dioxide discharges, car crashes, and traffic blockage.

Despite the fact that the gasoline tax isn't the hypothetically optimal tax for these externalities, a solitary tax keeps away from the requirement for different instruments (e.g., separation based taxes and constant blockage valuing) and offers an authoritatively straightforward approach to control these externalities simultaneously. Other than rectifying environmental externalities, the gasoline tax can lessen gasoline utilization and may alleviate worries about the sensitivity of the economy to oil value volatility, constraints on international strategy, and other military and geopolitical costs.