If the Demand for Electricity Is Inelastic, and the Local

question 80

Multiple Choice

If the demand for electricity is inelastic, and the local utility wants to increase its total revenue, it should ________ its price.

• A)lower
• B)raise
• C)not change
• D)frequently change

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Definitions:

Utility Function

A mathematical expression that measures a consumer's satisfaction or happiness from consuming various bundles of goods and services.

Laspeyres Price Index

An index that measures the change in the cost of purchasing a fixed basket of goods and services, using the prices of a base period.

Per Capita Income

A measure of the average income earned per person in a specified area over a defined period of time, often used as an indicator of economic health.

WARP

Weak Axiom of Revealed Preference, a theory in economics that assumes if a consumer prefers product A over B when both are available, then they will not choose B when A is available.