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Gasoline and Bicycles Are Substitutes in Consumption

Question 3

Multiple Choice

Gasoline and bicycles are substitutes in consumption. Suppose we increase the federal gasoline tax to $1 per gallon. What are the initial changes that result from the tax as these markets adjust to a new general equilibrium?


A) Gasoline price rises, demand for bicycles shift s leftward.
B) Gasoline price rises, demand for bicycles shifts rightward.
C) Gasoline price rises, move downward along bicycle demand curve.
D) Gasoline price rises, move upward along bicycle demand curve.

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