(1) Price elasticity of demand = % Change in quantity demanded / % change in price
(A) On-Peak [Base case v/s Exp 2]
Elasticity = [(985 - 1,000) / 1,000] / $[(0.09 - 0.08) / $0.08]
= - 0.015 / 0.125
= - 0.12
(B) Off-peak (Base case v/s Exp 1]
Elasticity = [(509 - 500) / 500] / $[(0.05 - 0.06) / 0.06]
= 0.018 / - 0.1667
= - 0.11
(2) Cross price elasticity = % Change in quantity demanded of On-Peak / Change in Off-Peak price
[Base case v/s Exp 1]
= [(992 - 1,000) / 1,000] / $[(0.05 - 0.06) / 0.06]
= - 0.008 / - 0.1667
= 0.048
2.6 Vertically integrated utilities often offer two-part tariffs to encourage their con- sumers to shift demand...
2.6 Vertically integrated utilities often offer two-part tariffs to encourage their con- sumers to shift demand from on-peak load periods to off-peak periods. Consump- tion of electrical energy during on-peak and off-peak periods can be viewed as substitute products. The table below summarizes the results of experiments that the 2 Basic Concepts from Economics 45 Southern Antarctica Power and Light Company has conducted with its two-part tariff. Use these results to estimate the elasticities and cross-elasticities of the demand for...