1) El Nino wind patterns affected the weather across the United States during the winter of 19971998. Suppose the demand for home heating oil in Connecticut is given by Q = 20 2Phho + 0.5Png TEMP, where Q is the quantity of home heating oil demanded, Phho is the price of home heating oil per unit, Png is the price of natural gas per unit, and TEMP is the absolute difference between the average winter temperature over the past 10 years and the current average winter temperature. If the current price of home heating oil is $1.20, the current price of natural gas is $2.00, and the average winter temperature this year is 40 degrees compared to 28 degrees over the past 10 years.

A. What is the quantity of home heating oil demanded? How much did change in winter temperature effect demand in comparison to the average winter temperature? B. What is the estimated price elasticity of demand for home heating oil? C. If the sellers of home heating oil are profit maximizers, how should price be adjusted?