Question

Demand increases(shifts up to the right)	Demand falls (shifts down to the left)	Supply increases(shifts to the right)	Supply falls (shifts to the left)

Consider the market for electricity.  Would each of the following factors increase demand, reduce demand, increase supply, or reduce supply in the market for electricity?  Mark one answer in each row.

1. Consumers’ incomes rise.  

2. The price of natural gas rises.  (This is used as a fuel in homes and in power generation.)

3. Consumers buy more energy-efficient appliances.

4. The government requires power plants to use expensive, new pollution-control equipment.

5. The weather this summer is cooler than normal.

6. New technologies make wind generation of electricity cheaper than before.

7. The population grows rapidly.

8. The largest power plant in the market closes for two years while new equipment is installed.

9. Recent drops in urban crime rates lead cities to reduce the number of streetlights by 60%.

10. New high-voltage transmission lines link the market with power plants in Mexico.

1. Suppose the price of oil rises next year, and the total quantity of oil sold also rises. Which of the following might cause these changes?  Choose one answer:

☐Saudi Arabia and Russia cut the supply of oil  

☐Consumers’ incomes rise

☐The U.S. government opens up oil production in new oil fields in Alaska

Answer 1

Consumers’ incomes rise. : Demand Increases (As income of individual increases he/she purchases more appliances thus conssuming more electricity)

The price of natural gas rises.  (This is used as a fuel in homes and in power generation.): Demand Increases (As electricity serves as a substitute for power generation thus its demand increases)

Consumers buy more energy-efficient appliances.: Demand Decreases (As more energy efficient appliances consume less electricity thus demand for electricity decreases)

The government requires power plants to use expensive, new pollution-control equipment.: Supply Decreases ( Strict government regulations forces power plants to use high end expensive equipments leading to increase in the cost)

The weather this summer is cooler than normal.: Demand Decreases ( As temperature of the season is assumed to be lower thus leading to less consumption of electricity as AC and Fans will be less used)

New technologies make wind generation of electricity cheaper than before.: Demand Decreases (Cheaper alternative sources of energy will reduce the demand for electricity)

The population grows rapidly. : Demand Increases (Increasing population needs more energy requirement)

The largest power plant in the market closes for two years while new equipment is installed.: Supply Decreases ( As power plant closes thus there is assumed to be a shortage of power considering the power plant which is closed is largest)

Recent drops in urban crime rates lead cities to reduce the number of streetlights by 60%.: Demand Decreases (Reduction in street lights reduce the cosumptio of electricity)

New high-voltage transmission lines link the market with power plants in Mexico.: Supply Increases (As New high-voltage transmission lines link the market with power plants in Mexico, more power ca be suppplied to the city)