Question

More than half of homes in the United States are heated by burning natural gas. According to an article in the Wall Street Journal, demand for natural gas decreased during the winter of 2012 because of unusually warm weather. At the same time, "robust production [of natural gas] from U.S. shale fields has created record supplies."The equilibrium of natural gas willa. increase only if demand decreases more than supply increasesb. decrease only if demand decreases more than supply increasesc. increased. decrease

Answer 1

The correct answer is option b.

Step-by-step explanation:

Warm weather in winter would decrease the need for heating. As natural gas is used for heating purpose, the demand for natural gas will decline. At the same time, an increase in the production will cause the supply of natural gas to increase.

The equilibrium quantity will decrease if the decline in demand is greater than the increase in supply.

If the demand decreases less than the increase in supply, the equilibrium quantity will increase.