If there’s one thing that can set home heating costs soaring, it’s a long, frigid blast from one of the coldest winters in 20 years and people are going to use 10 to 12 per cent more natural gas this year than they have normally. 

a. How is the price of natural gas determined? 

b. When demand increases, explain the process by which the market adjusts. 

c. On a graph, show the effect of the increase in demand on consumer surplus and producer surplus.