When the price of gasoline goes up, people curtail their driving to some extent, but don’t immediately scrap their SUVs and rush out and buy more fuel-efficient automobiles or electric cars. Similarly, when the price of electricity rises, people don’t replace their air conditioners and refrigerators with the most modern, energy-saving models right away. There are three significant issues raised by this kind of example. First, such changes may be transitory or permanent, and people reasonably react differently to temporary changes than to permanent changes. The effect of uncertainty is a very important topic and will.
