Analysis Paper 1 The EIA predicted Midwestern Illinois families to be spending as much as 40% more on heating this year compared to last year because of higher natural gas prices. The increase in price is largely due to the reduction of natural gas supplied. In the short run, supply and demand for natural gas is relatively inelastic. The supply is inelastic because the quantity of known natural gas reserves and the capacity for natural gas extraction …showed first 75 words of 390 total…

…showed last 75 words of 390 total…price of gas will only be in the short run. When the natural gas companies decided to reduce their production of natural gas, they shifted the supply curve to the left (Ex.3). The less gas that is sold, the higher the price. In the long run, when supply and demand are more elastic, the same reduction in supply, measured by the horizontal shift in the supply curve, causes a smaller increase in the price (Ex.4).