Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. economics
  3. an energy company has recently enhanced its capabi

An energy company has recently enhanced its capabilities for generating electricity, resulting in a 10% reduction...

80.2K

Verified Solution

Question

Economics

  1. An energy company has recently enhanced its capabilitiesfor generating electricity, resulting in a 10% reduction in thecost/kwh. The company, which is regulated by the state, is requiredto pass the savings on to consumers via a 10% reduction inrates/kwh. Assume that the company has 100,000 residentialcustomers who paid an average of $60/month consuming each 500kwh/month in the year prior to implementing the new system; thesame 100,000 customers paid $58/month following the shift to thenew system with its lower prices. The total revenue thereforedropped from $6 million per month to $5.8 million per month. Basedupon these facts,

    • What was the increase in volume of electricity that wasgenerated? What was the percentage increase?

Hint: Evaluate first what would have been the averagebill if the volume had stayed the same after the farereduction




    • Was there a change in the demand function? If so, whatis the new demand function? If not, why did the power company haveto produce more electricity?




    • What was the price elasticity in the demand forelectricity?  




    • What was the increase in consumer surplus as a result ofthe reduction in prices?

Answer & Explanation Solved by verified expert
3.9 Ratings (614 Votes)
A Demand function will not change a decrease in cost insteadincrease the supply function The company may    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Zin AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Mr. Thomas has just inherited $ 1000,000. He could either invest his money in the bank...

Finance
Q

Large agranular phagocytes are called: a. Neutrophils b. Basophils c. Eosinophils d. Monocytes e. T-Lymphocytes f. B-Lymphocytes

Medical Sciences
Q

Capillary tube with very thin walls is suspended vertically in a cup containing water Before...

Physics
Q

ow pretend you are tossing a coin 11 times and take X to be the...

Statistics
Q

If money is invested in an account earning 3.15% annual interest that is compounded continuously,...

Algebra
Q

2 41 2 0 543 2 IN 4 4 4 4 3 X Distance formula...

Algebra
Q

2 John is training for a bike race Over his training program he increases his...

Algebra
Q

Help Save & Exit Sub In its first year of business, Laker Corporation had...

Accounting
Q

Hall Corporation is involved in the business of injection molding of plastics. It is considering...

Accounting
Q

Please help me check my work. ...

Accounting
Q

Computing Present Values of Single Amounts and Annuities Refer to Tables 1 and 2 in...

Accounting
Q

YOU WOULD HAVE TO USE R OR R STUDIO FOR THE FOLLOWING OUESTIONS Run the...

Accounting