A local utility estimates that natural gas consumption by an average household i

ID: 3393662 • Letter: A

Question

A local utility estimates that natural gas consumption by an average household is given by the following:

Usage = 1.48 - 0.89(Price)

where Usage is the number of mcf consumed and Price measures the price of natural gas per mcf.

What is the predicted change in usage if the price decreases by 0.26 dollars? ANSWER: 0.23

A local utility estimates that natural gas consumption by an average household is given by the following:

Usage = 1.48 - 0.89(Price)

where Usage is the number of mcf consumed and Price measures the price of natural gas per mcf.

What is the predicted change in usage if the price decreases by 0.26 dollars? ANSWER: 0.23

(change in y) = coeff*(change in x) = (-0.89)*0.26 = -0.2314

Thus, y-hat decreases by 0.23

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