How will the proposals affect each group

Assignment Help Business Economics

Reference no: EM13830774

There’s a gas shortage in Gasland. You’re presented with two proposals that will achieve the same level of reduction in the use of gas. Proposal A would force everybody to reduce their gas consumption by 7 percent (regulatory policy). Proposal B would impose a tax of 50 cents on the consumption of a gallon of gas, which would also achieve a reduction of 7 percent. Consumers of gas can be divided into two groups - one group whose demand is elastic and another group whose demand is inelastic.

Question - How will the proposals affect each group?

a. With both proposals, each group will demand less oil. Their demand curves will shift down.

b. Proposal A would result in a lower quantity of oil demanded (movement along the demand curve). Proposal B would result in less oil demanded (demand curve shifts).

c. Proposal A would result in less oil demanded (demand curve shifts). Proposal B would result in a lower quantity of oil demanded (movement along the demand curve).

d. With both proposals, the quantity of oil demanded will decline for each group, causing a movement down along each demand curve.

Reference no: EM13830774

Questions Cloud

The nonlinear price discriminating monopoly in panel : Suppose that the nonlinear price discriminating monopoly in panel a of figure 12.4 can set three prices, depending on the quantity a consumer purchases. Where Q is its quantity, p is its price, and A is its level of advertising. Its marginal cost of ..

The potential public relations ramifications : Sensitivity to a minority group is as important as being aware of and using the language of that group effectively. Insensitivity towards any group can cost an organization money and opportunity. What do you think the PR department should do inside t..

Crowding-out effect on the link between government deficits : Clearly explain the implication of the crowding-out effect on the link between government deficits, interest rates and inflation?

Repayments in equal instalments-an add-on interest rate : You plan to borrow $2,000 in order to take a vacation and want to repay the loan in a year. The banker offers you the following two alternatives of repaying the loan. (1) a simple interest rate of 12% with repayments in equal instalments six months a..

How will the proposals affect each group : There’s a gas shortage in Gasland. You’re presented with two proposals that will achieve the same level of reduction in the use of gas. Proposal A would force everybody to reduce their gas consumption by 7 percent (regulatory policy). How will the pr..

Determine profit-consumer surplus-welfare-deadweight loss : The single price monopoly faces a demand curve of p=90-Q and a constant marginal (and average) cost of m=$30. Find the profit maximizing quantity (or price) using math. Determine the profit, consumer surplus, welfare, and deadweight loss.

Pretty much the height of the global financial crisis : Using the data below, we are now going to use our supply/demand framework for US $ to model the movement in the euro per $ exchange rate between December 2007 (the very beginning of the Great Recession) and November 2008 (pretty much the height of th..

What are implications for investors and for public policy : Besides raising taxes and issuing debt, the U.S. government (Treasury Department) can also secure funds by borrowing directly from the FED. What is the potential danger of this route? What are the implications for investors and for public policy of e..

Methods of stimulating economy provides federal government : Which of the following methods of stimulating the economy provides the federal government with the greatest control over how the stimulation takes place?

User Account

All Pages