# The supply and demand functions for natural gas from 1950 to 2007 are followings. Qs= 0,02 + 0,7P…

The supply and demand functions for natural gas from 1950 to

2007 are followings.

Qs= 0,02 + 0,7Pg + 0,045Po + 0,06I

Qd= 148,82 -1,8 Pg + 0,069Po + 0,05I

Where Pg is the price of natural gas, Po is the price of crude

oil, the average price of oil is about $50 per barrel, and the

income is $5000.

(i) What is the equilibrium price and quantity for natural gas,

i.e. (Pg*,Qg*)? Explain verbally!

(ii) Calculate the price elasticity, income elasticity and cross

price elasticity for the demand of natural gas at the equilibrium,

and explain briefly.

(iii) Calculate the price elasticity, income elasticity and

cross price elasticity for the supply of natural gas at the

equilibrium, and explain briefly.

(iv) Explain the supply and demand functions briefly, e.g. the

estimates of variables and their positive/negative signs.