Foundations of Economics

| June 22, 2015

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From the article that i will upload please answer these questions about BRITISH GAS by using references
1) Demand – Supply
– Law of demand and supply?
– If the price of gas increases/decrease what happens to the Qd and Qs?
– What would be the behaviour of  the consumers and producers?
– Substitution effect? Complementary effect?
– What would be the effects of a price increase in other industries? 

2) Elasticity
– What type of good is gas? Is it elastic, unit elastic, inelastic?
– Then what would happen to the firm’s revenue when price of gas goes up/down?
– If the energy market is very attractive for suppliers what would happen to the supply? Why?
– Can this elasticity/inelasticity/unit  elasticity for gas change in the long run? How?
– What would you expect firms to do in the case of cost related price increases? I.e. Do they bear the increasing costs of inputs or pass onto the customers?

3) Competition
– Who are the rivals in the UK energy market?
– What kind of market is this? I.e. What is the degree of competition in the market? Give your justification for your answer.
– What type of conditions might occur due to this market structure?
– If government wants to create a more competitive market for gas, what kind of actions it might take? 
– If government is successful, then what would be the effect of these actions on the market in terms of supply and demand?
– How would government’s actions affect the behaviour of  current suppliers in terms of price?

4) Government Intervention
– How government might intervene to the market? What would be the effect of such an action?
– If that happens, how the behaviour of  the producers would change? How that would affect prices?
– If any, what type of tax do consumers pay for gas purchases? What is the feature of this type of tax?

5) Stock exchange
– If the firm increases its price, what would happen to its shares in the stock exchange?
– What happens if the energy prices goes down?

 

 

 

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Economics Final Thoughts
UK Energy Supply Market

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