Asked by Alaysia Mcnill on Jul 25, 2024
Verified
A government wants to reduce electricity consumption by 40%. The price elasticity of demand for electricity is -10. The government must ________ the price of electricity by ________.
A) raise; 4.0%
B) raise; 0.25%
C) raise; 1.25%
D) lower; 0.25%
Price Elasticity
A measure of how much the quantity demanded of a good responds to a change in the price of that good, expressed as a percentage.
Electricity Consumption
The amount of electrical energy used by households, businesses, and industries over a certain period, typically measured in kilowatt-hours (kWh).
- Understand the effect of government policies on consumption based on price elasticity.
Verified Answer
DJ
Dominque JacksonJul 26, 2024
Final Answer :
A
Explanation :
The price elasticity of demand formula is percentage change in quantity demanded divided by percentage change in price. To reduce consumption by 40% with an elasticity of -10, the price must be raised by 4% (40% / -10 = -4%).
Learning Objectives
- Understand the effect of government policies on consumption based on price elasticity.