The Demand for a Certain Energy-Efficient Home Is Given by F

question 104

Multiple Choice

The demand for a certain energy-efficient home is given by f( $\mathrm { P } 1$ , $\mathrm { P } 2$ ) , where p1 is the price of the home and p2 is the price of electricity. Which of the following explains why $\frac { \partial \mathrm { f } } { \partial \mathrm { p } 2 }$ > 0?

• A) The price of electricity keeps going up due to increased demand.
• B) Homes are too expensive during energy crises.
• C) As the price of electricity goes up, demand for the home goes up.
• D) As the price of electricity increases, demand for the home depends more on the price of the home than on the price of electricity.
• E) As the price of electricity goes up, demand for the home goes down.

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Definitions:

Production Function

An equation or graph that shows the output generated from different combinations of inputs, usually focusing on labor and capital.

Marginal Product

The increase in output that results from an additional unit of input.

Returns to Scale

Refers to the rate at which output increases as inputs are proportionately increased, categorizing into increasing, constant, or decreasing returns.

Carpet Industry

The sector of the economy specialized in the manufacture and sale of carpets and rugs.