Answer the following problems
1. On Wednesday the 16th, 2008 huge avalanche knocked out the lines which transmitted electricity from a hydroelectric dam to Juneau, Alaska. This eliminated Juneau’s main 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 instantly dropped from an average of 1600 kwh per month per household, to 1280 kwh.
• cross-price elasticity of demand for electricitywith respect to fuel oil is 0.32
• income elasticity of demand for electricity in Juneau is 0.23
a. Determine 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 the increase or a decrease in revenue? Describe.
c. Are fuel oil and electricity substitutes or complements? If electricity consumption finally declined by 25%, what do you expect occurred to fuel oil consumption?
d. This avalanche imposed great hardship on Juneau citizens for approximately three months, including some job losses. What do you expect occurred to electricity demand given that income of the average Juneau resident declined by 3%?