Answer:
The price elasticity of demand for home heating oil is -0.36.
Explanation:
To find the price elasticity of demand for home heating oil, we can utilize the formula:
Elasticity of demand = (dQ/dPhho)*(P/Q)
Based on the information provided:
demand for home heating oil in Connecticut = Q = 20 – 2 Phho + 0.5 Png – TEMP
price of home heating oil = $1.20
price of natural gas = $2.00
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Q = 20 – 2*1.2 + 0.5*2 – 12
Q = 6.6
Hence, we calculate price elasticity of demand as follows: (-2)*(1.2/6.6)
Thus, price elasticity of demand = -0.36.
The price elasticity of demand for home heating oil is -0.36.
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