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Utility companies routinely ask state commissions for permission to raise utility rates. What does this suggest...

Utility companies routinely ask state commissions for permission to raise utility rates. What does this suggest about the price elasticity of demand? Why is demand so (in) elastic?

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When a price increase results in an increase in revenue, demand is relatively inelastic. When utilities ask for a rate increase to increase revenue means that the demand for gas, electricity, and local telephone service is inelastic. Demand is price inelastic when a change in price causes a smaller percentage change in demand. It occurs where there is a price elasticity of demand (PED) of less than one. This inelasticity in case of utilities is generated by the fact that these services tend to be necessities, have few good substitutes, and, for some people, may be relatively a small portion of income.

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