1. Suppose that a particular customer has the following demand curve relating the quantity demanded(measured in Kilowatt hours, KWH) to the price of electricity (measured in cents per KWH):KWH = 1600 – 100*PNote that an alternative way to represent the same relationship is in terms of the maximum price thatthe customer would be willing to pay for each KWH of electricity, or P = 16 – .01*KWHThis customer’s demand for electricity would, if plotted, look like Figure 1:Now we will consider a number of rate schedules used by utilities, and we will examine their effects on electricity consumption and expenditure. Question 1: Philadelphia Electric prices electricity using a simple flat rate of $.08 per KWH. How much electricity would be demanded by a customer with the demand curve given above and who lives in Philadelphia? What would be her monthly bill?Question 2: If the rate were lowered to $.07, how much electricity would she buy? What would be her monthly bill in this case?
Demand for electricity
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