Subsidy boosts demand for electricity via electric cars

Steps:

• Subsidy lowers production costs for electric cars, increasing their supply and sales.
• Higher electric car sales raise charging demand, increasing electricity demand.
• Rightward shift in electricity demand curve occurs.
• New equilibrium shows higher price and quantity of electricity sold.

Why D is correct:

• Law of demand: Increased demand shifts curve right, raising equilibrium price and quantity sold.

Why the others are wrong:

• A: Price falls only if supply increases or demand decreases, but demand rises here.
• B: Price falls contradicts demand increase; sales should rise, not fall.
• C: Sales fall would require leftward demand shift, opposite of the effect.

Final answer: D