ABSTRACT
The quantity of natural gas reserves discovered in any year depends on the price of natural gas, the price of oil, the relationship between the search for oil and the search for gas, and the effects of vari ous public policies that affect not only prices but also expectations and the conditions of production for both oil and gas. The relative responsiveness of either gas or oil discoveries to changes in their own price, other relevant influences unchanged, is indicated by the own price elasticity of supply of each output of the exploration process. The effect of the price of oil on the quantity of gas discovered is indicated by the cross elasticity of supply of gas with respect to the price of oil. The reverse effect is the cross elasticity of supply of oil with respect to the price of gas. The cross elasticities of supply are the net effects of an interdependent set of shifts in the supply curve of either output as a result of changes in the price of the other.
