Suppose a city that operates local electric and natural gas companies wants to raise revenues by increasing its rates for electricity and natural gas. The price rise will increase city revenues if the elasticity of demand for electricity and natural gas is
A) inelastic.
B) elastic.
C) negative.
D) equal to −1.

Question

Quizplus · Accepted Answer

If the demand is inelastic, consumers will not significantly reduce their consumption when prices increase, leading to higher total revenue for the city.

Suppose a City That Operates Local Electric and Natural Gas