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If electricity demand is inelastic, and electric rates increase, which of the following is likely to occur?
  • a)
    Quantity demanded will fall by a relatively large amount.
  • b)
    Quantity demanded will fall by a relatively small amount.
  • c)
    Quantity demanded will rise in the short run, but fall in the long run.
  • d)
    Quantity demanded will fall in the short run, but rise in the long run.
Correct answer is option 'B'. Can you explain this answer?
Most Upvoted Answer
If electricity demand is inelastic, and electric rates increase, which...
Impact of Inelastic Demand and Increase in Electric Rates

Inelastic demand refers to a situation where the change in price of a good or service has a relatively small impact on the quantity demanded by consumers. In this case, if electric rates increase, the impact on the quantity demanded of electricity will be relatively small.

Explanation of the Correct Answer:

Option B states that the quantity demanded will fall by a relatively small amount, which is the correct answer. When electricity demand is inelastic, consumers are likely to continue using the same amount of electricity despite an increase in the price of electricity. The reason for this is that electricity is a necessity and consumers may not have the luxury of reducing their consumption of electricity.

For example, if the price of electricity increases, consumers may choose to reduce their usage of other goods and services to continue paying for their electricity consumption. In this case, the quantity demanded of electricity will fall, but only by a relatively small amount.

Therefore, option B is the correct answer as it accurately reflects the impact of an increase in electric rates on the quantity demanded of electricity when demand is inelastic.
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If electricity demand is inelastic, and electric rates increase, which...
B
because electricity is a necessity and the demand for necessity is inelastic although the electricity rate are increased.Hence the demand will fall relatively lesa
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If electricity demand is inelastic, and electric rates increase, which of the following is likely to occur?a)Quantity demanded will fall by a relatively large amount.b)Quantity demanded will fall by a relatively small amount.c)Quantity demanded will rise in the short run, but fall in the long run.d)Quantity demanded will fall in the short run, but rise in the long run.Correct answer is option 'B'. Can you explain this answer?
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