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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.

Respuesta :

letmeanswer

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.

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