The October 17, 2022 edition of The Wall Street Journal included an article titled “New England Risks Winter Blackouts as Gas Supplies Tighten” (it is not necessary for you to read the article; we will provide all relevant information in the questions we ask). The article starts with a sentence: “New England power producers are preparing for potential strain on the grid this winter [Winter 2022-23: December 2022 through February 2023] as a surge in natural-gas demand abroad threatens to reduce supplies they need to generate electricity.” For Question 1, consider the New England market for electricity prior to Winter 2022-23 by considering this setting roughly one year ago, in December 2021. Assume that in December of 2021, the market for electricity was in a short-run equilibrium. Draw a graph that shows supply and demand for electricity market in its December 2021 equilibrium. This graph will serve as a starting point for your analysis in Questions 2 through 5. When drawing this graph, please assume that the demand curve is downward sloping and supply curve is upward sloping. Clearly show the market equilibrium in December 2021, labeling the equilibrium price and quantity. Please remember to clearly label your axes, with P on the vertical axis and Q on the horizontal axis. Label the supply curve as S0; demand curve as D0; the equilibrium price as P0; and the equilibrium quantity as Q0.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The October 17, 2022 edition of The Wall Street Journal included an article titled “New England Risks Winter Blackouts as Gas Supplies Tighten” (it is not necessary for you to read the article; we will provide all relevant information in the questions we ask). The article starts with a sentence:

“New England power producers are preparing for potential strain on the grid this winter [Winter 2022-23: December 2022 through February 2023] as a surge in natural-gas demand abroad threatens to reduce supplies they need to generate electricity.”

For Question 1, consider the New England market for electricity prior to Winter 2022-23 by considering this setting roughly one year ago, in December 2021.

Assume that in December of 2021, the market for electricity was in a short-run equilibrium.

Draw a graph that shows supply and demand for electricity market in its December 2021 equilibrium. This graph will serve as a starting point for your analysis in Questions 2 through 5.
When drawing this graph, please assume that the demand curve is downward sloping and supply curve is upward sloping.
Clearly show the market equilibrium in December 2021, labeling the equilibrium price and quantity.
Please remember to clearly label your axes, with P on the vertical axis and Q on the horizontal axis.
Label the supply curve as S0; demand curve as D0; the equilibrium price as P0; and the equilibrium quantity as Q0.

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