Electric companies generally practice price discrimination and charge higher prices for electricity used for illumination and lower prices for electricity used for heat. These lower prices for electric heating result primarily from

Question

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Electric companies charge lower prices for electric heating primarily because there are good substitutes available for heating (such as gas, oil, or wood heating), which keeps the demand for electric heating more elastic. If electric companies were to charge higher prices, consumers could easily switch to these substitutes, leading to a loss in market share for the electric companies.

Electric Companies Generally Practice Price Discrimination and Charge Higher Prices