17 As newly appointed “Energy Czar” your goal is to reduce the total demand for residential designed to accomplish this goal:

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17 As newly appointed “Energy Czar” your goal is to reduce the total demand for residential designed to accomplish this goal: (a) a tax that would effectively increase the price of residential heating fuel by $2; (b) a subsidy that would effectively reduce the price of natural gas by $1; or (c) a tax that would effectively increase the price of electricity (produced by hydroelectric facilities) by $5. To assist you in your decision, an economist in your office has estimated the demand for residential heating fuel using a linear demand specification. The regression results are presented on the next page. (pg 114) Based on this information, which proposal would you favor? Explain

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