Economics: The Basics 1st Edition by Mike Mandel

Exercise 1

Economists regularly suggest that the United States needs to raise the gasoline tax higher.
a) Give the arguments in favor of raising the gasoline tax.
b) Give the arguments against raising the gasoline tax. Who would be hurt?
c) The table below lays out the share of expenditures spent on gasoline and motor oil by households with different levels of income. Using the table, explain why a higher gasoline tax would be regressive or progressive.
d) The data for the table comes from 2006. Since then, the price of gasoline has almost doubled. What would you expect has happened to spending on gasoline as a share of total spending?