Relative to a situation in which gasoline is not taxed,the imposition of a tax on gasoline causes the quantity of gasoline demanded to
A)decrease and the quantity of gasoline supplied to decrease.
B)decrease and the quantity of gasoline supplied to increase.
C)increase and the quantity of gasoline supplied to decrease.
D)increase and the quantity of gasoline supplied to increase.

Question

Quizplus · Accepted Answer

When a tax is imposed on gasoline, the price of gasoline for consumers increases. This increase in price will lead to a decrease in the quantity of gasoline demanded, as consumers may choose to drive less or use more fuel-efficient vehicles. At the same time, the higher price may incentivize suppliers to supply more gasoline, but this increase in supply may not fully offset the decrease in demand, leading to a decrease in the quantity of gasoline supplied overall. Therefore, both the quantity of gasoline demanded and supplied will decrease.

Relative to a Situation in Which Gasoline Is Not Taxed,the