Answer to Question #338897 in Macroeconomics for Pinky

Question

How does a fuel levy rise affect the delivery of public social welfare of a country

Answer 1

When gasoline prices increase, a larger share of households' budgets is likely to be spent on it, which leaves less to spend on other goods and services. The same goes for businesses whose goods must be shipped from place to place or that use fuel as a major input (such as the airline industry).