Final answer:
E. Converge. The spot price and forward price converge as a contract approaches maturity. This is due to a reduction in the factors that differentiate the two prices over time. In supply and demand, shifts in either curve affect equilibrium prices and quantities differently.
Step-by-step explanation:
As a contract approaches maturity, the spot price and forward price E. Converge. This convergence occurs as the difference between the contract delivery date and the current date narrows, reducing the uncertainties and factors like storage cost, interest rates, and convenience yield that typically lead to differences between forward and spot prices. In commodity markets, this relationship holds as long as there are no major disruptions or market frictions.
In the context of supply and demand, shifts in the demand or supply curves can have significant effects on equilibrium prices and quantities. An increase in demand can lead to higher prices and quantities, while a decrease in demand tends to lower them. Conversely, an increase in supply can decrease prices but increase quantity, and a decrease in supply is likely to increase prices and lower quantity.