Electric Power producers have a choice of several fuels, including oil, natural gas, coal, and uranium. Once an electrical power plant has been built, however, the scope to switch fuels may be very limited. Since power plants last for 30 years or more, producers must consider the relative prices of the alternative fuels well into the future when choosing a generating plant.
A. Do you expect the cross-price elasticity between the demand for oil-fired power plants and the price for oil to be positive or negative and why?
B. Will the cross-price elasticity between the demand for oil-fired power plants and the price of coal be positive or negative and why?
C. Would the demand for oil-fired power plants be more or less elastic in the long run as compared witht he short run and why?
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- Posted on Jan 13, 2010 at 12:58:18PM
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