Jamestown heating and air-conditioning company specializes in electric heat pumps. The business should keep track of the price of natural gas, knowing that

Question

BlackTom AI · Accepted Answer

The question asks about how a rise in natural gas prices affects the market for electric heating systems. 
Option 1: gas heating systems and electrical heating systems are complementary goods. This is incorrect because gas and electric heating are generally substitutes, not complements. If natural gas becomes more expensive, consumers are more likely to switch to electric heating rather than use both together. 
Option 2: when the price of natural gas goes up, the quantity demanded also rises. This statement confuses the effect on the demand for natural gas with demand for electric heating. A higher gas price would not cause the quantity demanded of natural gas to rise; rather, it would encourage a shift away from natural gas toward alternatives like electric heat. So this option misstates the link between price and quantity for the relevant good. 
Option 3: an increase in the price of natural gas will increase demand for electrical heating systems. This is correct. As natural gas becomes more expensive relative to electricity, consumers substitute toward electric heating, increasing the demand for electric heat pumps. This aligns with the substitution effect in demand theory. 
Option 4: the demand for natural gas is price elastic. This statement discusses the elasticity of demand for natural gas itself, not the relationship between the price of natural gas and the demand for electric heating. It does not answer the question about how electric heating demand responds to a rise in gas prices. 
Option 5: natural gas creates more environmental greenhouse effects than coal. This is a factual claim about environmental impact, not about the economic relationship between gas prices and demand for electric heating, so it is irrelevant to the question at hand.

Jamestown heating and air-conditioning company specializes in electric heat pumps. The business should keep track of the price of natural gas, knowing that

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