Unit 3

1. What might be the long-run effect of the rising price of gas? This tax will be levied on fuel because the cost-elasticity of the market for fuel is rather low when compared to yachts, products have a highly flexible demand. The government will gain cash in the short run, but at a certain point, consumers will switch towards less expensive options, reducing revenue. 2. Who benefits and who is harmed by the price increase? Customers suffer because of the revenue tax, which allows retailers to pass along the expense of the tax onto customers through higher pricing. Residents who live in households with low incomes are also disadvantaged. 3. Are low-income households disproportionately harmed compared to high-income households? Why? Yes, I believe that families with low incomes suffer more than those who are high-income ones. This is because, in comparison to wealthy families, they have two-wheelers that operate on gasoline, as well as cars that operate on electrical power and diesel. As a result, it will be more difficult for low-income people to make ends meet. Reference Hubbard, G., & O'Brien, A. P. (2020). Economics (8th ed.). Pearson Education (US). https://purdueuniversityglobal.vitalsource.com/books/9780135957271
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