In Yusuf Mansur's Electricity and Other Prices, Mansur discusses the effect raising electricity prices by 10%. He calculates that by doing this, most institutions will lose productivity by 1.6%. In industries that use large amounts of energy draining equipment, with electricity being about 30% of their production costs, this could be devastating. In a small economy, like Jordan's, any company that closes down or leaves the country could be detrimental to the country's GDP. This could also lead to increased unemployment, and also an increase in inflation (which would hurt net exports and thus hurt GDP more).
Mansur further explains that the key target for this is to lower large consumption of energy from households who waste large quantities of energy. Unfortunately, this law is not targeting the people who can afford it; it is targeting corporations that will shut down due to this increase.
This shows how important governments are in helping economies thrive. One poor decision could lead to a serious economic problem.
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