The government wants to reduce the consumption of electricity by 5%. The price elasticity of demand for electricity is - 0.4. The government should

Name: The government wants to reduce the consumption of electricity by 5%. The price elasticity of demand for electricity is - 0.4. The government should
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Question

Quizplus · Accepted Answer

The price elasticity of demand formula is % change in quantity demanded / % change in price. To reduce consumption by 5% with an elasticity of -0.4, the price must be increased by 5% / 0.4 = 12.5%.

The Government Wants to Reduce the Consumption of Electricity by 5