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Question
Sir,

USA buy LNG gas at US dollar 3 per thousand cubic feet from Qatar. While India pay US dollar 10 for the same quantity to Qatar.
Why so?
Hope your prompt response,
Jose,India.

Answer
Hi Jose,

Thank you very much for the question.

When the U.S. and India buy gas from the same country, the selling country uses an economic discriminatory policy known as "price discrimination." In addition, prices in the two countries are determined by a couple other factors:

1. Trade relations and trade agreements
2. Cost of transportation
3. Mutual political considerations
4. The amount of gas sold per unit time

There is actually an existence of price discrimination. A monopolist (Qatar is in true economic sense not a monopolist but an oligopolist, but for all practical purposes a large seller may be construed as a monopolist in a broad sense) can sell the same product to two different markets at two different prices if two things exist: (a) there are different elasticities of demand for the same product in the two markets in question --price will be higher for the market which has lower elasticity than for the market that has higher elasticity; and (b) if no resale of the product from one market to the other is possible. Other than gas, for example, the same Microsoft software is sold for $400 in Canada while for only about $150 in the U.S.Though on the face of it the demand for gas in India and in the U.S. is both inelastic, the U.S. has relatively higher elasticity than that of India because of its agreements with other major oil producers like Saudi Arabia, and high elasticity of demand means the seller has to give in more.

There is also a hidden political relationship between Qatar and the U.S. which facilitates good deals.

I hope this serves as a prompt response for the question you have, and on that basis you can have further investigation to get your answer.

Best of luck in your studies.

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Eklimur Raza

Expertise

It appears some students in this website are confused about elasticity of demand and the slope of the demand curve when they are trying to figure out why rectangular hyperbola comes up in case of unitary demand curve. First, they don't know that RH can be depicted in a positive quadrant of price,quantity plane. Secondly, they make the mistake that the slope of RH is constant at -1. Two points could help them: first, e=1 at each and every point of the RH, because the tangent at any point shows lower segment=upper segment (another geometric definition of e); yet slopes at different points,dQ/dP, are different; second, e is not slope but [(Slope)(P/Q)]in absolute terms. Caveat: only if we measure (log P) along the horizontal axis and (log Q) up the vertical axis, can we then say slope equals elasticity --in which case RH on P,Q plane is transformed into a straight-line demand curve [with slope= -tan 45 deg] on (log Q),(logP) plane, and e= -d(log Q)/d(log P). [By the way, logs are not used in college textbooks --although that is helpful in econometric estimation of elasticity viewed as an exponent of P, when demand equation is transformed into log-linear form.] I have not found the geometrical explanation I have given in any textbook followed in undergraduate and college classes in Canada (including the book followed in a university where I taught for a short time and in the book followed in George Brown College, Toronto, where I teach.

Experience

About 11 years' teaching economics and business studies, and also English, history and elementary French.Practical experience in a development bank, working with international donor agencies like the World Bank and the ADB. Experience in free-lance journalism, including Canada's "National Post."

Organizations
I teach micro- and macroeconomics at George Brown College (continuing education), Toronto, ON, Canada.

Publications
Many articles and editorials, on different subjects, in English newspapers. Recently an applied Major Research Paper, based on a synthesis of the Solow growth model and the Lewis two-sector model, has be accepted by Ryerson University, Toronto. Professors Thomas Barbiero and Eric Cam, Ryerson University, accepted the paper.

Education/Credentials
Master degree in Interantional Economics and Finance and diploma with honours in Business Administration from Canada.

Awards and Honors
Received First Prize in an inter-university Literary Contest.

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