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Elasticity of Natural Gas

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1. Using the elasticity concept explain why the demand for residential natural gas (gas used for heating, cooling, and cooking) is more elastic than the demand for residential electricity.
2. What were some changes of the demand and supply fconditions that lead to the housing market bubble and collapse?

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The response address the queries posted in 402 words with references.
// Before writing such paper, we should be clear with the various concepts related to Elasticity of demand. In this assignment, in question one, we will see why the demand for residential natural gas is more elastic than the demand for residential electricity, using the elasticity concept: //

Answer 1

According to the elasticity concept of demand, it measures the relative change in quantity demand of a commodity in response to a relative change in the price of a commodity. Mathur, N.D. (2001) Elasticity of demand depends on the availability of the substitutes. More availability of substitutes means more elasticity of demand for particular goods. In the case of ...

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The response address the queries posted in 402 words with references.

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See Also This Related BrainMass Solution

Interpreting elasticity coefficients

Price elasticity of demand and Income elasticity of demand

(1) (2) (3) (4)
Electricity Price Natural gas Price Oil Price Income
Electricity -0.6 1.6 1.0 0.9
Natural Gas 1.1 -1.7 1.3 0.8
Oil 0.8 1.5 -1.9 -1.2

a) From those coefficients would you suggest electricity company to increase or decrease electricity price to make more revenues. Justify.

b) After a 25% increase on oil price and considering the fact electricity company cannot increase their production of electricity what price variation of electricity is require to cancel any change on electricity demand. Justify.

c) What impacts will have the construction of a new natural gas company on oil demand. And on electricity demand? Justify.

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