INTRODUCTION
According to our textual knowledge, supply and demand are the important part of economics , while considering the prices of the product both the theories of demand and supply are kept in mind .Without knowing the demand and supply position in the market the prices of the product cannot be determined so these both are beneficial .
In my this assignment, I am going to share my views on the topic how the prices of the gas industry rises in the last ten years and what was the demand and supply for the gas in Australia.
DEMAND
Demand refers to the quantity of a commodity that a consumer is willing and able to buy the product at the given price. There is direct relationship in expectation of change in price in future between the demand of the commodity. Moreover if the price is going to be increase in future than the demand of the commodity will increase in present times.LAW OF DEMAND
Law of demand states that other things being equal, if the prices of the commodity are higher than lower is the quantity demanded of that commodity and if the prices are lower than the quantity demanded is higher.
On a part of all this law of demand describes that there is inverse and negative relationship between price and quantity demanded .
In the microeconomics it is stated that every individual and the society practice the law of demand. People are always interested to buy the good at the time when the prices are lower.
As we talk about the gas industry the demand of gas has been increased from the last ten year .There are number of companies which provide gas services it depend on companies per unit as the price of per unit is cheap in one state and might be higher in another stateand population also has a great effects.
DETERMINANTS OF DEMAND
INCOME;Income of individual depend upon the purchasing power of that product and the demand . If the income of individual is more than its purchasing power will also increase.But when the income is unfavourable , the demand will also decrease.
POPULATION AND NUMBER OF BUYERS ;this factor has great influence as if the population is higher in the growth rate which will create a great demand for the product.
PRICE OF RELATED GOOD;
This to explain that demand for a good is affected by the changes in price of related goods. There are two categories which are substitute goods and complementary goods.
– Substitute goods: Substitute goods is define as the goods can be replace by another goods. For example, coffee and tea, chicken and pork and many others goods that can find a similar replacement.- Complementary goods: Complementary goods are those goods that are used in conjunction with another good.
SUPPLY
Supply is the total quantity of a product that a market offers to individual. Supply of a commodity refers to a schedule showing various quantities of a commodity that the producer are willing to sell at different possible prices of the commodity at the point of time
LAW OF SUPPLY
This law states that other things being equal higher the quantity supplied and higher will be the price of that product and lower the price and lower the quantity supplied. The law of supply had direct relationship between price and quantity supplied. Seller will want to have more profit so that’s why he will sell the good more that the normal price.
As we talk about the prices of gas industry in Australia in the past ten year the graph was at medium rate there was not much increase in prices of the gas. There is a huge competition among the supply of electricity as there are number of companies which supply the gas to the different parts of Australia and the rate of each has there own prices.
But if we talk about the demand for gas in this country it had increased a lot . A we all know that the population in Australia in increasing a lot ad one has to survive for that one need to have a good life style but which there is need of gas system. Moreover the in almost use in cars also earlier the demand for gas was quite less due to less use o gas in cars but now a days almost cars are manufacture with dual gas system which requires a large amount of gas and by which the demand for the gas industry has been increased a lot. And as the demand for the gas increase the prices of the gas will also increase.
DEMAND FOR GAS
Australia has ample number of natural gas resources the gas industry, albeit driven by different factors. The market prices for gas are escalating on the east coast in response to a huge demand for indigenous gas for LNG production and export, driving up the value of new gas and hoovering up existing low cost of production gas. Some new price/demand sense of balance will eventually emerge on the east coast domestically reflective of costs of production (as we are now seeing in Western Australia) as the price bubble drives both demand and supply responses. But once again policy issues are limiting the ability to bring on new production in some sectors and the network impacts are yet to materialise. As outlined, investment in network assets comes from either growth in demand or from increases in prices (or a combination of both) and high prices are already driving down demand for gas. The impact on gas use for power generation due to the combined effects of reducing electricity demand and escalating gas prices is becoming stark – several gas generators have shut down or significantly curtailed production and resold their gas contracts (profitably) in 2013 and early 2014. The flow-on to industrial and domestic use is set to go the same way as electricity demand – down.
QUESTION- 2
Specialization and exchange
Introduction
In the earlier time the most important and common source of specialization is labor where specialization refers to production and by the exchange of goods and services. With the development in this modern world specialization is in the form of machines
Specialization is the method of production in which the firm concentrate on a less number of activities. Exchange is the way by which trading is done to obtain what we desire or what we want. Production is that activity which is designed to satisfy the demand of people.
Specialization-
- By industry
- By firm
- By workers
- Br region
- By international
Exchange – money is the basic medium of exchange where medium of exchange is accepted everywhere, measure of value is on the basis of single commodity the prices are fixed, deferred payment method where one can buy good on credit basis.
With advancement of technology or with moving world the specialization of labor is reduced by the machine. Machines are more specialized then labor.
Types of specialization
- Labor
- Machine
- Plant and enterprise
- Regional and local
Specialization of labor
This specialization of labor was recognized at the earlier time period with the times of Plato and Xenophon an many other people before the Adams smith.
According to Adams smith, he intended the division of labor which means work is divided so that one can be specialized in the particular field. He was the first person who engaged other people in the division of work. As when the smith wrote the wealth of nation with the concept of division of labor he was already familiar to this by other people’s work. After analyzing smith found that the advantages of division of labor.Individual skills is increased by acquiring the work men
With the concentration of task it also saves the time
Invention of labor save machine
Cannan had pointed out the smith that he had ignored the fact the one another advantage that is gained for the particular that one should be fitted in that task in which they are specialized.
Other economies found that specialization of labor was also effective in mental as well as mechanical operation. After examination of al the economist about the division of labour smith has given one disadvantage when the workers are confined to few simple operations they are ignorant and stupid.
Smith with bitter approval added that division of labor is the capital method of increasing the surplus value of individual worker.
The other point is that the high degree of specialization of labor will lead to increase the unemployment rate and difficulty in finding new job was stressed set by Marshall. Specialization of labor produced also increased the inequality of income which promote a difference between the performance and the income of individual person abilities.
Specialization of machine
With the modern technology specialization of machine has been developed more. Machines may be a specialized as by the worker whom it replaced.
In the recent years ,with the advancement of automatic and semi automatic machines are specialized in the sense with the production of one commodity
For example,one machine can transform the raw steel plates into finifhed product.with the advancemen tof modern high techniques on high electronic gadgets like computers and the processing machine line can turn out with the variety of different colour combination.
Specialization of plant and firm
As Adam Smith first pointed out, specialization is central to economic growth because it is a source of increasing returns. The indivisibility of human capital investment implies a fixed cost element independent of subsequent utilization of skills, which means that two identical individuals gain by specializing, as they increase the utilization rate of the knowledge they acquire (Rosen, 1983).
If we accept the hypothesis that coordination costs are a key limit on our ability to benefit from the increasing returns derived from specialization, designing the right institutions to minimize such costs seems crucial. Whether markets or firms are best at mediating transactions between specialists, and whether increasing specialization will take place within or between firms has been long debated. A view of the role of firms holds that the coordination of a group of specialists in a particular task must take place within a firm.4 Empirically, this view implies that as specialization increases, the set of tasks undertaken by an individual firm should not change, so that individual specialization should be entirely unrelated to firm specialization. On the other hand, as Hayek (1945) noted, the market appears ideally suited to the coordination of different specialized tasks and the reliance on divided knowledge. A theory consistent with this alternative argument was espoused by Stigler (1951), who argued that as an industry grows, vertical disintegration should be the norm as the different cost functions involved in the different aspects of the production of a good lead to different optimal efficient scales. Such a view implies that increases in the returns to individual specialization should lead to greater firm specialization, so that the two should move together.
CONSEQUENCES OF HIGH ENERGY COS
Energy intake underpins all factors of cutting-edge society. Recent supply disruptions and fee will increase have added interest to a commodity that’s frequently taken without any consideration. Our electricity machine is greater complicated and various now than at any preceding time in human records.
The energy sector in Australia makes a substantial contribution to the nation’s gross domestic product, export earnings, and employment. A secure supply of affordable, reliable and environmentally sustainable energy is essential to Australia’s future economic growth and prosperity.
Australia continues to have the world’s largest known economic uranium resources, the fourth largest coal (black and brown) resources and substantial conventional and unconventional gas resources There is good potential for further growth of the non-renewable resource base through new discoveries. Identified resources of crude oil, condensate and liquefied petroleum gas are more limited and Australia is increasingly reliant on imports for transport fuels.
Australia also has abundant and widely distributed wind, solar, geothermal, wave and tidal useful resource . Hydro energy assets have been substantially developed, and wind, sun and bioenergy assets are increasingly being exploited for energy generation. Although adoption of offset technologies (e.G. Geothermal warmness pumps, solar warm water) has gradually expanded, the alternative renewable energy sources stay in large part untapped for power technology. The utilization of renewable energy will keep to growth appreciably to round 2020, reflecting authorities guidelines (e.G. The Renewable Energy Target) and falling installation costs. Advances in renewable energy generation and storage technology and higher mapping of useful resource potential can be important for persevered uptake, and so will technology and regulations for grid integration
HIGH ENERGY PRICES
There are three major components of a typical energy bill: wholesale costs (covering electricity being generated or gas being extracted); network charges (paying for the reliable delivery of energy via power lines or gas pipelines); and a retail margin (paying for meter reading and other services).
Energy bills can also include components for Australian and state and territory government-based environmental programs such as those aimed at increasing renewable electricity generation. The share of each component can vary significantly across jurisdictions and for different types of customers. However the cost of transporting energy and wholesale costs typically accounts for around three-quarters of the final energy bill.
Retailers compete for customers on price and other services in all jurisdictions except Tasmania. All states and territories except Victoria and South Australia regulate electricity or gas retail prices in some way. Retail prices incorporate the costs of maintaining and upgrading supply networks, which are largely set by a single Commonwealth regulator under nationally agreed rules. The wholesale cost of electricity and gas prices is largely set in competitive markets. While major electricity and gas wholesale markets are connected across some state and territory boundaries, state and local factors can be an important determinant of wholesale price outcomes.
In recent years, much of the increase in prices has been attributed to the need to invest in the network component because of previous underinvestment in maintaining the network or to increase capacity. Also important has been the impact of policies to address environmental issues.
In the case of electricity, the rate of price increase is expected to moderate in the next few years. Overall, household electricity prices are expected to increase at an average of 3% over the next year, with outcomes varying across jurisdictions from a high of 16% in the Northern Territory to a 1% fall in prices in South Australia.
Smaller electricity price increases are largely the result of recent changes to the regulation of transmission and distribution networks and competition in electricity wholesale markets due to low demand growth. These may be offset in some jurisdictions by removing state and territory government interventions that have kept electricity prices lower.
In the case of gas, prices for households and businesses are expected to increase significantly in eastern Australia, as the development of new gas export terminals leads to a tightening of supply. This effect will depend on how quickly new gas resources are developed.
Proposals to keep further price increases in check have included:
further privatisation of state government-owned electricity networks
adjustments to environmental policies that impact on wholesale energy costs
further retail price deregulation
setting reliability standards based on the value that customers place on network reliability.
EnergyAustralia offers a number of green, renewable, and solar products to customers, including standard gas and electricity plans. EnergyAustralia currently has four options available to enable customers to choose whether a portion or all of their electricity usage will come from renewable resources, including wind and solar power.
Residential plans include their No Frills Electricity and Gas, Flexi Saver with no minimum term contract, Anytime Saver, and Secure Saver with lock-in price guarantee. EnergyAustralia offers a range of carbon neutral electricity options with their plans.Business plans include small business, industrial, and multi-site accounts. Account features include options to monitor and control energy use.
REFERENCES
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