Because there's a constant demand for natural gas, will people purchase gas regardless of what the price is?

Question

please give antithesis view as well.

Answer 1

As you know, the general rule is that as demand goes up and/or supply goes down, the price increases. Then as price increases to a certain level, the demand drops off and prices fall again, or equilibrate.

BUT, there is a certain class of goods that are thought of as having very high inelasticity of demand. In other words, people need them, there are very few, if any subsititutes for them, and thus the demand for those products remains constant even in the face of higher and higher prices. Gasoline is one of those items, electricity is another, water is another, etc. That's not to say that you can keep raising the price ad infinitum with no reduction in demand, but the demand for these items is much more likely to remain constant, relative to goods with very elastic demand curves.

Answer 2

The term "constant demand" needs some clarification. It can mean an "inelastic demand" implying a vertical demand curve, or it can mean a demand curve which, though not necessarily vertical, cannot shift right or left because all factors that can shift the demand curve (such as population, income, taste etc.) are assumed constant.

If you speak of an inelastic demand curve, then in theory, price can increase without any change in the quantity demanded. However consumers do have a budget constraint, and at the extreme, prices must rise within a feasible area. If prices exceed people's income then the good is unattainable. Even if the price is withing the budget constraint, higher prices entails a trade-off. There must be an opportunity cost to purchase higher-cost natural gas. Consumers must give up spending on other things to purchase more natural gas. But there is also a limit to this trade-off. We can speak in terms of marginal utility or of the marginal rate of substitution but that is not necessary. At some point it becomes pointless to give up anything further to purchase more natural gas.

But before even this point is reached, consumers will look for substitutes. As the demand for substitutes increases, people will purchase less of natural gas and more of the substitutes. Substitutes can be oil, solar-powered energy, bio-fuel etc. An increased demand for substitutes will also make previously unfeasible investments in developing new alternatives feasible. So the supply of substitutes will increase and bring down the price of energy in general.

If by constant demand you mean a fixed albeit elastic (not vertical) demand curve, then an increase in price will result in a reduction in the quantity demanded. That should not be difficult.

You have also asked for an alternative view. In the case a an inelastic (vertical) demand curve, people will only continue to purchase natural gas if (1) their income rises accordingly, (2) there are no substitutes to natural gas and (3) people put the same value on the items that they have whether it is a lot or a little. In other words, you can say there is no diminishing marginal utitity.

Answer 3

There's not constant demand for natural gas, is there?

If the price gets too high then substitution effects will start to appear.

Answer 4

The right spelling would be not because, but if.
If demand is constant, then the price will not affect demand.
Of course it does not mean that the demand will be fulfilled, since supply is falling, so if prices do not play their part in curbing demand, one can expect rationning and or queues at the gaz stations.

Answer 5

The demand for gas is NOT "constant" (the technical term is "totally inelastic," by the way). For power generation, gas can be substituted with heating oil. There are also ways to gassify coal without extracting it...

Answer 6

I imagine people will continue to buy gas until it runs out.

Then we're all f*cked, because the current governments don't want to spend the money it will cost to use alternative power.

Answer 7

of course! It is a basic necessity.
Man can't survive without satisfying his needs. He can go to great lenghts for that