Suppy+and+Demand+by+Jerry

=TITLE OF EXTRACT:= Supply and Demand

=SOURCE:= MetroNews http://www.wvmetronews.com/news.cfm?func=displayfullstory&storyid=50890

=DATE EXTRACT WAS WRITTEN:= 02/10/2012

=DATE CURRENT EVENT WAS WRITTEN:= Februrary 22nd, 2012

=EXPLANATION OF THE ECONOMIC THEORY RELATED TO THE ARTICLE:= People are starting to use natural gas instead of coal since it is cheaper. Thus, the demand for coal is decreasing. As a result, supply of coal is exceeding demand by far, meaning that there is a supply surplus and that the equilibrium price is going down because of this. To make up for this supply surplus, many firms are shutting down many of their marginal mines and decreasing supply.

=VOCABULARY TERMS AND DEFINITIONS:=
 * 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.

=DIAGRAMS:= =EVALUATION:= This shows the course of change of the market of coal over a period of time as described in the article. As you can see, the demand of coal starts to decrease, causing a lower price. Now the market moves to a price of Q2, P2 (lower quantity and price). Since the market no longer demands as much coal, producers start shutting down some of their minor mines. As shown from the price movement to Q3, P3, producers do so so that they can hinder the dropping of prices by lowering the quantity. Overall, this is not so well for producers, because though they will be able to maintain similar price, they are selling much less, thus losing total revenue. For buyers, it does not effect them as much, even though there is not as much coal on the market as there used to be, the price of coal will still inevitably fall as the market continues to adjust and as cheaper natural gas continues to take over more of the market. The government could possibly intervene by subsidizing the coal producers so that consumers can buy coal at a lower price while producers still profit, however, it will be unlikely, as it seems in the article, natural gas is a much better alternative anyways and governments usually would not reject switching to a new, cheaper resource.