Supply+and+Demand+at+work+by+Jerry

=TITLE OF EXTRACT:= Supply and demand at work

=SOURCE:= http://www.vindy.com/news/2012/feb/27/supply-and-demand-at-work/?newswatch

=DATE EXTRACT WAS WRITTEN:= Feb 27, 2012

=DATE CURRENT EVENT WAS WRITTEN:= Mar 6, 2012

=EXPLANATION OF THE ECONOMIC THEORY RELATED TO THE ARTICLE:= The article begins by stating that there have been improvements in technology in obtaining natural gases. This leads to an increase in the supply of natural gas and as a result, the supply curve for natural gas will shift to the right. On the other hand, there is not much change in the demand for natural gas, and since there is an abundance in supply as compared to demand, there will be an excess in supply. To cover up for this excess the quantity of natural gas demanded has to rise up to meet the amount of supply at a new equilibrium. The producers will naturally have to decrease the prices of their product to do so since the Law of Demand states that quantity demanded of a good or service will increase when the price of it decreases and decrease if the price increases, ceteris paribus. As this happens, the price of natural gas decreases much and becomes much cheaper than its substitute product, oil. This means that natural gas can fulfill and replace consumer need for oil. Since the two products are substitutes, consumers will buy less oil and substitute that demand for oil to natural gas. As a result, it is predicted that the increase in quantity demanded for natural gas will lead to a corresponding shift to the left of the demand curve for oil. Additionally, the article mentions that companies will continue to produce natural gas since it can serve as a feedstock for the chemistry industry, thus benefiting a third party by producing natural gas. This will be further evaluated below.

=VOCABULARY TERMS AND DEFINITIONS:= =DIAGRAMS:=
 * Supply - The quantity of a good or service that producers can and are willing to produce at a given price.
 * Demand - The quantity of a good or service that consumers can and are willing to use/consume/buy at a given price.
 * Law of Demand - quantity demanded of a good or service will increase when the price of it decreases and decrease if the price increases, ceteris paribus.
 * Law of Supply - quantity supplied of a good or service will decrease when the price of it decreases and increase if the price increases, ceteris paribus.
 * Quantity Demanded - the amount of which consumers are willing and able to consume at a given price and time
 * Quantity Supplied - the amount of which producers are willing and able to produce at a given price and time
 * Positive externalities of production: the production of a good or service creates external benefits that are good for third parties.
 * Factors of production: four resources that allow an economy to produce its output: land, labor, capital, entrepreneurship.
 * Opportunity cost: the second best choice foregone in order to execute another economic decision.

=EVALUATION:= Frankly, this increase in the supply of natural gas benefits everyone except the producers for oil. For consumers, the appearance of natural gas and the advance technology developed to extract it offers them with a considerably cheaper price than oil. For consumers, there is never any better news than cheaper goods. For producers, even though they are producing at a lower price, they are probably still profiting more with low cost thanks to technology and mass production. Additionally, as mentioned in the explanation part, the production of natural gas also benefits the chemistry industry as it provides them with a feedstock of ethylene with the ethane content within natural gas. Overall, the economy will also experience boosts as there are more goods and services traded. With the mass production of natural gas, more jobs will be available for people, granting more people more income. Consequently, this increase in income for the people will allow them to consume even more goods and services provided within a society or nation. Through this cycle, the economy of a nation (in this case, America) will increase and hopefully lead to better quality of living for people in general as well. Therefore, consumers, producers, third party companies, and the society in general will all favor this increase of production in natural gas. As for oil producers, it would be best if they could redirect their factors of production to produce natural gas instead. If they cannot and are stuck with producing oil, then perhaps the government could consider subsidizing these companies. However, as the production of natural gas seems to be completely beneficial, subsidizing oil companies could seem less desirable for the government than the opportunity cost that comes with it. The government could always use this money planned to subsidize oil companies to fund education or give aid to the homeless instead.