Question

suppose that, in an attempt to entice citizens to conserve energy, the government enacted regulations requiring that all air conditioners be more efficient in their use of electricity. after this regulation was implemented, government officials were then surprised to discover that people used even more electricity than before. using the concept of price elasticity, which of the following statements best explains how this increase might have occurred? because the regulation effectively reduced the price of cool air, consumers with sufficiently elastic demand might have bought substantially more of it. the government ignored the possibility that the demand curve for electricity might be upward - sloping. in practice, people often pay little attention to the relevant costs and benefits when deciding how much of a good, like electricity, to use. there is no way the observed change could have occurred if all consumers were fully informed, self - interested, and rational.

Explanation:

When air - conditioners become more electricity - efficient, the cost of using them (in terms of electricity) effectively decreases. For consumers with elastic demand for cool air (a good related to electricity use in this case), a decrease in the "price" (cost of getting cool air) leads to a proportionally larger increase in the quantity demanded. So, they consume more cool air and thus more electricity.

Answer:

Because the regulation effectively reduced the price of cool air, consumers with sufficiently elastic demand might have bought substantially more of it.