Suppose Manitoba Hydro (the public corporation that provides natural gas to Manitobans) cuts in half the price of natural gas (a commonly used home heating fuel).

a. What would be the impact on the market price and quantity of insulation (a construction/renovation material that reduces the amount of fuel required to heat a home)? Assume the market for insulation is perfectly competitive.

• Use a supply and demand graph to explain.
• Clearly label the price and quantity of insulationbefore and afterthe price increase of natural gas. Use words (compete sentences) to explain your graph.

b. Suppose that the market for insulation was supplied by one company (a monopolist).Would our supply and demand curve analysis/framework still be valid? Briefly explain.

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