Electric power utility companies use various fuel sources (e.g., coal, natural gas, nuclear) to generate electricity for their customers. What happens to the demand for natural gas used to generate electricity as we move from a short-run planning horizon to a long-run planning horizon? Why?
A) Demand becomes more inelastic over time because the other fuel sources become more scarce, so there are fewer options available for electric power utilities in the long run.
B) Demand becomes more inelastic over time because all of the power generation plants tend to choose the same technology, which makes the industry less responsive to prices in the long run.
C) Demand becomes more elastic over time because the electric plant's technology becomes obsolete, and the power company has less flexibility to adjust to changes.
D) Demand becomes more elastic over time because the power companies have more options available and can adopt new generating technologies or substitutes for natural gas over the long run.

Question

Quizplus · Accepted Answer

As time passes, advancements in technology and the development of alternative energy sources increase the number of options available to power companies, making them less reliant on natural gas. This greater choice of options makes the demand for natural gas used to generate electricity more elastic over the long run.

Electric Power Utility Companies Use Various Fuel Sources (E