Question

Suppose that, in an attempt to entice citizens to conserve energy, the government enacted regulations requiring that all air conditioners be more efficient in their use of electricity. After this regulation was implemented, government officials were then surprised to discover that people used even more electricity than before. Using the concept of price elasticity, explain how this increase might have occurred?

Answer 1

The increase in electricity usage after implementing regulations requiring more efficient air conditioners can be explained by price elasticity. The decrease in the cost of using air conditioning outweighs the decrease in electricity required per unit, leading to increased usage.

Step-by-step explanation:

The increase in electricity usage after the government implemented regulations requiring more efficient air conditioners can be explained using the concept of price elasticity. Price elasticity measures how responsive the quantity demanded of a good is to changes in its price. In this case, the increase in electricity usage suggests that the demand for air conditioning is elastic.

When the government made air conditioners more efficient, it potentially lowered the cost of using air conditioning. This lower cost encouraged people to use air conditioning more frequently, leading to an increase in electricity usage. The decrease in the price of using air conditioning outweighed the decrease in electricity required for each unit of air conditioning, resulting in a net increase in electricity usage.