Question

1. (20 pts) The following questions deal with the market for electricity. In column I, answer with the following key:

A: equilibrium price increases

B: equilibrium price decreases

In column II, answer with the following key:

A: equilibrium quantity increases

B: equilibrium quantity decreases

Col. I   Col. II

_____ _____ a. Consumer incomes decrease (electricity is a normal good).

____      ____ b. Taxes are increased on electrical utilities (utilities produce electricity).

____      ____c. The price of coal rises (coal is an input in producing electricity).

____      ____ d. The population grows.

____     _____ e. The price of electrical appliances increases (appliances and electricity are complements).

____     ____   f. The price of natural gas decreases (natural gas and electricity are complements).

____    _____ g. Subsidies are reduced to electric utilities.

____     _____ h. A new technology makes it cheaper to produce electricity.

____     _____ i. A negative (adverse) supply shock hits the electricity market.

____     _____ j. It is summertime, and there is a seasonal increase in the demand for electricity.

Answer 1