Recall the Application about how a simultaneous increase in the gasoline tax and decrease in the income tax affect gasoline consumption to answer the following question(s). This Application discusses a gasoline tax increase which is combined with a cut in income taxes to ensure that total tax revenue does not change.
-Recall the Application.How would a simultaneous increase in the gasoline tax a decrease in the income tax effect gasoline consumption?
A) Consumption will decrease.
B) Consumption will stay the same.
C) Consumption will increase.
D) None of the above are correct.

Question

Quizplus · Accepted Answer

The increase in gasoline tax will lead to a higher price of gasoline, making it more expensive for consumers to purchase. This will result in a decrease in gasoline consumption. However, the decrease in income tax may lead people to have more disposable income, which could potentially lead to higher consumption of other goods and services. Nonetheless, the combined effect is still expected to result in a decrease in gasoline consumption.

Recall the Application About How a Simultaneous Increase in the Gasoline