stimulate and control the market or push the economics. The reason for this influence can be educational, when unattractive steps are necessary for development. Another great influence on the price is the bias between producer and customer. This fact has to be evaluated and calculated. The price is not objective and can be set lower as it is supposed to be. The remote sensing industry is a good example for it. The US government has transferred the LANDSAT system to EOSAT in order to “commercialize” the LANDSAT system. EOSAT is a joint venture of GM/Hughes and General Electric Corporation. [US Department of Commerce, 1988] This system is heavily subsidized by the US government, which is also the major consumer of EOSAT data. The reason for the support by government is to expand the market and raise interest in data for private industry. Through this support the price can be reduced and the data are more reasonable. The influence of politics on the price is obvious. The main factors which may cause the price of energy are supply, demand and economic factors. The balancing mechanism is illustrated schematically in the Figure 3.4. [DOE/ER-0099, 1981] The demand curve shows the basic relationship between price and quantity of demand. If the price is high, only a few ask for energy, but when the price is low the quantity of demanded energy increases rapidly. The demand is also influenced by the economic activity of the country and by the energy intensity of its economy (elasticity of demand). The supply curve expresses that there are only a few suppliers when the price of energy is low. When the price rises, the number of suppliers increases. This curve is influenced by supply constraint due to health, safety, environmental and other limitations. Figure 3. 4 Simplified Macroeconomics Model of the Interaction between Energy and the Economy When we fit these two curves together we can see the relationship between price, supply and demand. When the price of energy rises, the expected response in a market economy is a further decrease in demand, together with increased supplies. The demand for energy also decreases when price increases, especially if there are less costly alternative ways to acquire energy. The number and kind of available alternatives depend on the rate of technological progress. New products and technologies tend to displace current products and producers, for example power generating companies, oil and gas selling companies. Assuming that there are many other suppliers the competition among them might be aggressive. This influences the price and it might result in a ruinous dumping. The optimum for the price is where the demand and supply curve intersect. Price Estimation In order to estimate the price of energy there are several mid- and long-term energy/economic models which have an optimizing scheme to project prices into the future depending on capital
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