Answer to Question #41817 in Microeconomics for Nicole

Question #41817

3. If the federal government decided to eliminate the tax on gasoline, we would expect

a. The demand for gas will shift to the right, causing higher prices
b. The demand for gas will shift to the left, causing the price to fall
c. There will be an increase in the quantity of gasoline demanded
d. Eliminating the tax will have no impact on gasoline demand

Expert's answer

The correct answers are b. and c., as the elimination of taxes makes the gasoline more affordable and the demand tends to increase