1. In a 2017 paper entitled Price and Income Elasticities of Electricity Demand: Evidence from Jamaica, Mr. Alrick Campbell estimated the impact of the price of electricity, income and urban population share on electricity consumption in Jamaica for three sectors: residential, commercial, and industrial customers. Using data covering the period 1970 - 2014 his empirical results suggest that price is the significant determinant of electricity demand with an own-price elasticity of -0.40. The estimated price elasticities are -0.82, -0.15, and -0.25 in the residential, commercial, and industrial sectors, respectively. Commercial and industrial consumers are very responsive to changes in income as the respective income elasticities of 0.77 and 1.22.

1. Of the three categories of consumers which one is most responsive to price change?

(1 mark)

1. Interpret the income elasticities for commercial and industrial customers.

(2 marks)

1. Suppose the OUR grants JPS a rate increase, which category of customer will contribute most to its increase in revenues? Give reason for your answer

(2 marks)