1. On Wednesday the 16^th, 2008 an enormous avalanche knocked out the lines that transmitted electricity from a hydroelectric dam to Juneau, Alaska. This eliminated Juneau's primary source of electrical power, and took over three months before power from the hydroelectric dam was restored.

• Prices for electricity in Juneau jumped from 11 cents per kilowatt hour (kwh) to 52 cents per kwh. Electricity consumption immediately dropped from an average of 1600 kwh per month per household, to 1280 kwh.
• the cross-price elasticity of demand for electricitywith respect to fuel oil is 0.32
• the income elasticity of demand for electricity in Juneau is 0.23

a. What is the price elasticity of demand for electricity in Juneau?

b. Over the 11 cents/kwh to 52 cents/kwh range of electricity prices, is demand for electricity inelastic or elastic?  Based on this information, do you believe that Alaska Electric Light and Power Co. saw an increase or a decrease in revenue?  Explain.

c. Are fuel oil and electricity substitutes or complements?  If electricity consumption ultimately declined by 25%, what do you expect happened to fuel oil consumption?

d. This avalanche imposed tremendous hardship on Juneau citizens for approximately three months, including some job losses.  What do you expect happened to electricity demand given that the income of an average Juneau resident declined by 3%?