Suppose an economist collects the following data between May and December of a given year: gasoline prices rose sharply, consumer incomes remained constant, consumers purchases of fuel efficient vehicles remained constant from the previous year, the size of the population did not change, sales of gasoline decreased by 15 percent. Which of the following theories could be tested with this information?
A) When the price of gasoline rises, gasoline purchases fall.
B) When consumer incomes rise, gasoline purchases rise.
C) When the population increases, purchases of fuel efficient vehicles increase.
D) No economic theory could be tested with this information.

Question

Quizplus · Accepted Answer

This information supports the theory that when the price of gasoline rises, gasoline purchases fall. The fact that sales of gasoline decreased by 15 percent despite constant consumer incomes and purchases of fuel efficient vehicles suggests that the main driver of the decrease in gasoline sales was the increase in gasoline prices. This theory could be further tested by collecting more data over a longer period of time and analyzing the relationship between gasoline prices and gasoline sales. The other theories mentioned, such as the relationship between consumer incomes and gasoline purchases, or population size and purchases of fuel efficient vehicles, are not supported by the given information and cannot be tested with this data alone.

Suppose an Economist Collects the Following Data Between May and December