A government wants to reduce electricity consumption by 10%. The price elasticity of demand for electricity is -5. The government must the price of electricity by .

increase

2%

Explanation:

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.

Price elasticity of demand = percentage change in quantity demanded / percentage change in price

If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.  

5 = 10 / percentage change in price

percentage change in price = 10%/5 = 2%

Demand is elastic because the elasticity of demand is greater than 1 in absolute terms. So, if price is increased, there would be a greater change in quantity demanded.

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.

answer; functional fixedness;