Question

How much does residential electricity consumption increase when the electric company lowers prices by 20%, assuming an elasticity of demand (ed) for electricity of 0.25?

(a) 5%
(b) 10%
(c) 15%
(d) 25%

Answer 1

The residential electricity consumption will increase by 5% when the electric company lowers prices by 20% with an elasticity of demand (ed) for electricity of 0.25.

Step-by-step explanation:

The residential electricity consumption will increase by 5% when the electric company lowers prices by 20% with an elasticity of demand (ed) for electricity of 0.25.