Question: Suppose that the supply and demand schedules for a local electric utility are as follows:
The price is in cents per kilowatt hour (kWh), and the quantity is millions of kilowatt hours. The utility does not operate at prices less than 13 cents per kWh.
a. Using graph paper and a ruler, or a computer spreadsheet or presentation program, carefully graph and label the supply curve for electricity.
b. On the same graph, draw and label the demand curve for electricity.
c. What is the equilibrium price of electricity? The equilibrium quantity? Label this point on your graph.
d. At a price of 17 cents per kWh, what is the quantity supplied? What is the quantity demanded? What is the relationship between quantity supplied and quantity demanded? What term do economists use to describe this situation?
e. At a price of 14 cents per kWh, what is the relationship between quantity supplied and quantity demanded? What term do economists use to describe this situation?
f. Sometimes cities experience "blackouts," in which the demands on the utility are so high relative to its capacity to produce electricity that the system shuts down, leaving everyone in the dark. Using the analysis that you have just completed, describe an economic factor that could make blackouts more likely to occur.