As newly appointed "Energy Czar," your goal is to reduce the total demand for residential heating fuel in your state. You must choose one of three legislative proposals designed to accomplish this goal: To assist you in your decision, an economist in your office has estimated the demand for residential heating fuel using a linear demand specification. The regression results are presented below.

SUMMARY OUTPUT

Regression Statistics

Multiple R	0.76
R Square	0.57
Adjusted R Square	0.49
Standard Error	47.13
Observations	25

Analysis of Variance
	Degrees of Freedom	Sum of Squares	Mean Square	F	Significance F
Regression	4	60936.56	15234.14	6.86	0.03
Residual	20	44431.27	2221.56
Total	24	105367.84

	Coefficients	Standard Error	t Stat	P-value	Lower 95%	Upper 95%
Intercept	136.96	43.46	3.15	0.01	50.60	223.32
Price of Residential Heating Fuel	91.69	29.09	3.15	0.01	149.49	33.89
Price of Natural Gas	43.88	9.17	4.79	0.00	25.66	62.10
Price of Electricity	11.92	8.35	1.43	0.17	-28.51	4.67
Income	0.050	0.3500	0.14	0.90	-0.75	0.65

Based on this information, which proposal would you favor?

1. a tax that would effectively increase the price of residential heating fuel by $1;
2. a subsidy that would effectively reduce the price of natural gas by $3; or
3. a tax that would effectively increase the price of electricity (produced by hydroelectric facilities) by $4.

Explain how the analysis above contributed to your answer and why you made the selection you did.