If coal and oil are substitute inputs in the production of electricity, an increase in the price of oil
A) will increase the demand for coal.
B) will reduce the demand for coal.
C) will increase the supply of coal.
D) will reduce the supply of coal.
E) will not affect the demand for coal.

Question

Quizplus · Accepted Answer

An increase in the price of oil makes it more expensive relative to coal, leading producers to substitute coal for oil, thus increasing the demand for coal.

If Coal and Oil Are Substitute Inputs in the Production