Suppose an economist collects the following data between May and December of a given year: gasoline prices rose sharply, consumer incomes remained constant, consumers purchased more fuel efficient vehicles than in 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

The data presented allows for the testing of the theory that "when the price of gasoline rises, gasoline purchases fall." This is because the data shows that gasoline prices rose sharply and sales of gasoline decreased by 15 percent. Therefore, the relationship between gasoline prices and gasoline purchases can be tested. The other options (B and C) are not relevant to the information presented. Option D is incorrect as economic theories can always be tested with relevant data.

Suppose an Economist Collects the Following Data Between May and December