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.

Question

Business

Bryson Yoder

11 April, 13:13

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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Answers (1)

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Ari · Answer 1

If the federal gasoline tax increases to $1 per gallon, the gasoline price rises, demand for bicycles shifts rightward.

Option B

Explanation:

If the price of gasoline increases, then probably there will be a decrease in the consumption of the same as a result of which the demand for the substitute product, bicycle increases.

Demand curve a graphical representation of changes in the product or service demanded along with the changes in the cost or price of the service or product. Increase in the demand for a product, is generally represented by the rightward shift in the demand curve.