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Unformatted text preview: specific quantity of electricity? A specific percentage number is required. The elasticity of cost in relation to fuel prices is simply the coefficient of the logarithm of the latter. Multiplying 0.60, the elasticity, to 12%, the percentage increase in fuel prices, results in 7.2%, the percentage increase in cost. Extra Credit: If KWH of output increases by 10 percent, what does the cost function predict will be the resulting percentage change in the average cost per KWH? Recall k-1 = Elasticity of Average Cost where k = 1/(a+b+c) 1/(a+b+c)-1 = 0.82 1 = -0.183615-0.183615*10percent = -1.83615 // Cost will reduce by 1.83615%...
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- Spring '08