question archive 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
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
Subject:EconomicsPrice:2.88 Bought3
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, which of the following statements best explains how this increase might have occurred?
A-Because the regulation effectively reduced the price of cool air, consumers with sufficiently elastic demand might have bought substantially more of it.
B- There is no way the observed change could have occurred if all consumers were fully informed, self-interested, and rational.
C- The government ignored the possibility that the demand curve for electricity might be upward sloping.
D- In practice, people often pay little attention to the relevant costs and benefits when deciding how much of a good, like electricity, to use.
Purchase A New Answer
Custom new solution created by our subject matter experts
GET A QUOTE
Answer Preview
Option A-Because the regulation effectively reduced the price of cool air, consumers with sufficiently elastic demand might have bought substantially more of it is correct.
This is because the regulations have made the use of air conditioners more convenient and effective due to the price level reduction. The elasticity of demand of cool air according to price is more as the price falls down, people who otherwise were not using air conditioners also started using them for cool air and the demand and usage increased leading to more usage of electricity. As more and more people would be interested in consuming these services which were earlier only avoided due to the high prices.
