Question 2:

At the end of February 2022 and thereafter, the Russian invasion of

Ukraine had a significant impact on energy markets. As a result,

natural gas prices increased across most of the world. Higher natural

gas prices had increased the cost of producing electricity since

natural gas is used as fuel by many power plants.

Analyze what happened to the market for electricity in New England

in late February 2022. Assume that the heating season temperatures

in the region, which influence the use of electricity by consumers, had

not changed between December 2021 and late February 2022.

• Using your graph from Question 1, depict the changes that have

taken place in the electricity market. Clearly show any shifts in

demand and/or supply curve(s). Label any curves that have

shifted as D₁ and/or S₁; and show the direction of the shift

graphically with an arrow.

• Clearly show the new market equilibrium if it has changed from

your answer to Question 1. Label the new equilibrium price

as P, and equilibrium quantity as Q₁.