If the Price of Gasoline in This Country Were Expected

question 75

Multiple Choice

If the price of gasoline in this country were expected to rise due to a permanent increase in the tax on gasoline, which of the following would you expect to happen?

• A) The demand for gasoline would become more elastic.
• B) The demand for gasoline would decrease as a result of the higher price.
• C) Producers will have less of an incentive to supply gasoline as a result of the higher taxes.
• D) The elasticity of demand will not change since gasoline is a necessity good.

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Definitions:

Income Portion

The part of an individual's or household's income that is allocated for various types of spending or saving.

Close Substitutes

Goods or services that can easily replace each other in consumption due to their similar characteristics.

Families' Budgets

Financial plans created by families to manage their income, expenses, savings, and investments over a specific period.

Demand Elastic

A measure of how much the quantity demanded of a good responds to a change in the price of that good, with high elasticity indicating a significant response.