Heating Commodities Essay -- essays research papers

Heating CommoditiesBack in the middle of October, the price of natural-gas had risenbecause a gas company was forced to shut drink down a pipeline due to the need forrepairs. This impending shortage led to the decrease in prices for otherheating commodities, as well as big profits. The involve for energy wasbecoming greater and greater because it was that time of year when consumersbegan storing energy in their homes to prepare for the cold winter months ahead.The four commodities mentioned in this article, fierce oil, heating oil,gasoline and natural gas are all substitutes for one another. This is truebecause the cross elasticity of demand states that as the percentage change inthe quantity demanded of one commodity results from a one percent change in theprice of another commodity. In other words, the increase in demand for crudeoil, gasoline, and heating oil was the outcome of the price increase in naturalgas.As shown in the graph below, the cross elasticity of demand is co unt on(positive). As the price of natural increases, the quantity demanded for thethree other energy commodities increase.The market system today functions on price. Consumers make theirdecision on what to vitiate by the price of their desired good. Naturally,consumers will choose the lower price of a commodity they wish to purchase.This is why consu...