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camillanewberry
camillanewberry
15.02.2020 • 
Business

The authors evaluate observed changes in natural gas prices and production beginning in 2007, when shale gas began to compose a substantial share of total U.S. gas production. From 2007 to 2013, the "Henry Hub price" fell in real terms from $8.00 per mcf to $3.82 per mcf. The authors analysis is based upon a fairly simple set of demand and supply equations Domestic demand Acy(PHH + mark upi)' су Domestic supply: Net export demand To make your lives a little easier, I have provided a spreadsheet (EEP147_PS1.xls) which summarizes the authors' estimates of the domestic supply and demand parameters for 2007 and 2013, respectively Your assignment (i) Using the parameter values provided, compute the domestic demand, domestic supply, and net export demand quantities for the years 2007 and 2013, respectively (i) Using the parameter values provided, compute the "counterfactual" domestic demand and domestic supply if the price in 2007 had been $3.82 mcf (instead of $8) Using the parameter values provided, compute the counterfactual domestic demand and domestic supply if the price in 2013 had been $8.00 per mcf (instead of $3.82) You now have two points on the two domestic demand and supply functions, respectively Sketch these curves and the observed equilibrium outcomes in 2007 and 2013 in a well labeled graph. Why do domestic supply and demand curves not intersect at the observed equilibrium prices? (iv) (v)On the graph you generated in part (iv), show the change in consumer surplus associated with a change in price from $8 to $3.82 in 2013. Can this be interpreted as a measure of the consumer welfare impact of the shale gas boom? Why or why not?

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