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Essay / Research Paper Abstract
A 10 page paper. The hypothesis is made that during the oil crises of the 1970s, natural gas acted as a substitute for oil products, which resulted in increased employment in the natural gas industry in the Netherlands. The writer provides an introduction that explains the hypotheses, then discusses the discovery of natural gas in Holland, the effects of that discovery, including Dutch disease, the unemployment rates in the 1960s to the early 1980s, the crude oil prices during that period of time, and the reasons for the shortage of oil. The theory of the elasticity of demand and the theory the elasticity of supply are briefly explained for a point of reference. The writer draws conclusions based on the literature reported. Bibliography lists 7 sources.
Page Count:
10 pages (~225 words per page)
File: MM12_PGgsnth.rtf
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Unformatted sample text from the term paper:
of the elasticity of demand. Elasticity measures the effect of a change. The theory is typically applied to price, supply and demand. In terms of the law of demand, economists
make two assumptions: 1. Price reductions lead consumers to want and purchase more of a good or service. 2. Price increases lead consumers to want and purchase a less
of the good or service. This is also called the theory of the elasticity of demand because a change in the price of goods will affect the level of
demand. There is also a theory of the elasticity of supply. Abowd explained demand and supply in this way: "Price elasticity of demand: how sensitive is the quantity demanded to
a change in the price of the good. Price elasticity of supply: how sensitive is the quantity supplied to a change in the price of the good" (Abowd, 1999). Two
excellent and easy-to-understand examples provided by Abowd are: * When the price of gasoline rises by 1% the quantity demanded falls by 0.2%, so gasoline demand is not very price
sensitive. Price elasticity of demand is -0.2 (Abowd, 1999). It would be price sensitive if there was a much sharper decrease of the purchase of oil products, an event that
was indeed seen in the oil crisis of 1973. * When the price of gold jewelry rises by 1% the quantity demanded falls by 2.6%, so jewelry demand is very
price sensitive. Price elasticity of demand is -2.6 (Abowd, 1999). Using this theory, one could hypothesize that when oil prices soared in the 1970s, there was an increase in the
demand for natural gas. The natural gas must be a substitute for the oil if the theory is valid. Along with that change, there would then be a concomitant change
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