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2 Discuss the drivers of the natural gas markets(20% _3_ Explain the concept of the Theory of Storage and the role of speculators and hedgers in commodity markets (...

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2 Discuss the drivers of the natural gas markets(20% _3_ Explain the concept of the Theory of Storage and the role of speculators and hedgers in commodity markets (20% _

2 Discuss the drivers of the natural gas markets (20% _ 3_ Explain the concept of the Theory of Storage and the role of speculators and hedgers in commodity markets (20% _



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Explain the economic effects of price supports. Explicitly include environmental and global impacts in your answer. On what grounds do economists contend that price supports cause a misallocation of resources?

So this question is asking us to consider competitive markets terms of consumer and producer surpluses. So let's look at this graphically, the competitive market will have supply, and it's male curve and the equal of your price and quantity will be met. Here have a quantity of Q zero on a price. So now consumer surplus is the point. Is the difference between the amount of consumers willing to pay and the actual price? So this whole upper area is what is considered consumer circles, whereas producer surplus is the difference between the market price and the amount a supplier is willing to take for that product. So here we have that extra in this green area, who knows the producer circles. So in this case, when quantity is set at equilibrium and production has said at that point, we have what is called allocated efficiency. At this point, marginal benefit is gonna equal virtual cost and the consumer surplus and the producer surplus our maximum ist the maximus, the maximum that the consumers are willing to pay its equal to the minimum that the producers are willing to take. So what happens in a case under production here At this point, that's a cure cure. We get a different price fall. And at this price point, consumers are willing to pay more than the producers are producing. You get was called a deadweight lots in this area that's equal to the Syria. So you give him loss of both consumer and producer surplus dead weight loss. Similarly, in a case of overproduction, ah que tu suppliers are producing more than consumers are willing to buy. So you get another loss of this area in both the consumer and producer surplus that lowers the efficiency of the system. So a competitive market is efficient because it sets the quantity and the price where consumer surplus and producer surplus or Maximus.

Looking at the competitive market equilibrium that we see right away is that it occurs at the intersection of supply and demand. We want to know exactly why this occurs, and this is helpful to look at if we start to figure out where the equilibrium would lie if the price had deferred. And so let's suppose that the price were higher. So suppose we're dealing with a price up here instead of at P. One, we're at P. Two. Well, in this case, what we can see is that our supply is much greater than our demand, meaning that consumers really have no reason to pay more for what they're getting because it's already so widely available. So the consumer is probably going to be unwilling to pay this higher price for so much of the product that they see available. So supply is going to end up dropping, and they're going to drop that price back down to P. One, so that the two match one another, because in this case the consumer would be very willing to pay a price at P. One for the supply that is available. Now let's do the same thing. And suppose that our prices were lower than that equilibrium price, and suppose that we're down here at P. Three, in this case we're seeing the opposite of what we saw at P. Two. Here, we have a much higher demand than we do supply, in which case we're dealing with a shortage with the shortage. The consumer is going to be able to pay a much higher price than they currently are to receive those goods because they know it's in short supply, The consumer wants to get their hands on it, so they'll pay higher prices, meaning that those prices going to get pushed up to p. one. Similarly, when it was at P to the price gap, pushed back down to p. one. So in this competitive market, we're going to see the price settle at this intersection of our supply and demand curves so that it matches both the price that the consumer is willing to pay and the price that the supplier is willing to receive.

All right. So today we're gonna be going, Maura, death into the supply curve. Um, talking about structure of it. The law of supply here and more on death into how When we draw too simple supply man crew, this supply curves y It's, um it's shipped over. So you're gonna notice that a lot of the top are a lot of the details of where cover is the same as the demand curve video I made a while back. Um, most of the most of relations and an actual announces off. The curves are very similar to each other. So well, quickly will quickly dive into this for now. All right, so the law supply curve, what states is holding all other factors constant. An increase in price results in an increase in twenties apply. Right. So, um, what we've seen in the demand curve video, um, we have You always have to try this simple graph in that is a relation between price and quality. Right? And when we look at the demand curve, we had a sloping downwards like this, right? This is because, um, its price goes down, right? That's price goes down here. More quantity is purchased right, And that is looking at the consumer's perspective, right? Obviously, with a fixed cheaper, you want to buy more. But now that we're gonna look at it or the supply curve here, um, so the supply curve is always shifted upwards like this, right? And we're gonna look at it in the perspective, off from super like businesses that are manufactured products, right? They want to sell their products at a higher price. Plus, obviously, because if they want to make money, they want to sell it at a price. So this sure to demand section here? You're looking at Wandy. I want to teach commanded train when prices lower, more quantity is demanded, as we could see here. But with the displeasure we're looking at Quantity Joe's Brian a issue quantity, supply, right. And firms will supply more employees when prices hired to maximize their profits. And that basically sums up why the supply curve is shaped upwards. Great. Um, because it's respecting the law of supply here, right? Obviously holding all their factors constant, um so stuff like, uh, consumer expectations or changed in the consumer's income number of buyers and so forth when thes when these factors are all not into play right, we're assuming that none of them are existing. Then the supply curve is perfectly shifted upward. Teoh to highlight the the firm's point of view. All right, now that we've got that down, let's look at the market supply curve so very similar to that of the man curve. Um, we have to look at the horizontal salvation now. What that means is we have to take each individual's, um, supply curve added up. And that's how we determined Dean Market did. Market Speicher's very simple supposed supplier A over here supplies, um five quantity at $2 teddy quantity of $3.50 foretell right suppliers be over here. A same price point supplies that a 24 and six, respectively. So very similar to that of the demand. Uh, the market Dementor. We're gonna look at horizontal summation. Right? So we see here live and to. So I have $2 right? Supplier aid supplies that are five. Sorry. At $2. Supplier A supplies five quantity and suppliers be supplies to point. Should When we add that out, we find the horizontal summation is seven. So they market. Um, supply curve. Uh, $2. Here. It's seven. Wandy supplied. Um, next price, when you look at it is for the street over one. So we see that tennis applied here and force applied for supplier, don't she? 14. And that is just second price. Got a record, whatever. But you look at it right. And finally, for the four doors, you should shifting. And six, we had that up. We get $21 over here. So it's very simple to find out the market to buy curve when we know each individual's, um, tendencies to supply a certain amount of corn. You for a certain price, boy. Right, So later on, we're gonna be This is basically just a very bare bones of the supply curve. Later on, we're gonna look at how the supply cartoons when all these factors are not plus next


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