El Mundo.

es (Economia)
Martes 24/09/2013

La luz cerrar 2013 con un

incremento prximo al 4%

Estimation of price elasticities of electricity demand for Spain:

Source: Xavier Labandeira, Jos M. Labeaga and Xiral Lpez-Otero, 2012. Estimation of
Elasticity Price of Electricity with Incomplete Information Energy Economics, Vol. 34(3),
pp. 627-633.

a)

Cables de alta tensin en la A-1 | Alberto Di Lolli

Using the information provided above, get the percentage change in the
quantity demanded of electricity in Spain for households, companies and large
consumers. In which case the responsiveness of demand is larger? Explain
briefly.
Percentage change quantity demanded by households (H): -0.2536 4 = -1.012%
Percentage change quantity demanded by households (H): -0.0308 4 = -0.132%
Percentage change quantity demanded by households (H): -0.253 4 = -0.207%
Households are the consumer segment that responds more to changes in prices.
Still, all the elasticities are quite low (below 1 in all the three cases).

b)

Imagine you are the head of an electric utility that sells 45% of its total sales to
households, 35% to companies and 20% to large consumers. What would be the
average percentage increase in your total sales? Explain how you get it.

To get an average percentage increase in sales, we would calculate a weighted

average as follows:
(-1.0120.45) + (-0.1320.35) + (-0.2070.2) = -0.539%
On average, taking into account the relative importance (weight or share) of each
type of consumer in total sales, the decrease in the quantity demanded is around
0.539 %.

c)

Imagine that, given the information you have on the price elasticities for the
three groups of consumers, you are thinking on applying different price
increases to different types of consumers (we call this in economics price
discrimination). Which group of consumers would you charge the highest price
increase? And the lowest? Explain briefly.

The highest price increase should be applied to the market segment that
responds less to it, thus, to companies. On the contrary, the lowest price increase
could be applied to households, which respond more to changes in prices.

d)

According to the work by Labandeira, Labeaga and Lpez-Otero (Table A2, pp.
22) the price of electricity for households is 0.084 ( /kWh) and the quantity
consumed is 478.27 (kWh). Assuming a linear demand curve for electricity (Xd =
a bPx), get the slope of the curve for this group of consumers. Then, get also
the slope of the demand curve for companies (at the same point). Which curve
is steeper? Explain briefly.

For households:
X =

X P
1
P
1
0.084
=
=

= 0.2536
P X
slope X
slope 478.27

slope =

0.084
= 0.00069 = 0.69103
121.28

slope =

0.084
= 0.0057 = 5.70103
14.73

For companies:
X =

X P
1
P
1
0.084
=
=

= 0.0308
P X
slope X
slope 478.27

The demand curve for companies has a larger slope. Thus, at a same point (i.e.,
for the same values of price and quantity) the demand by companies is more
inelastic than the demand by households.
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