Question

in the case of the gasoline tax,what could happen if the rebate to the consumers were based on their original consumption of gasoline x , rather than on their final consumption of gasoline x'

Answer 1

Answer::-))

. Answer: Even though the money comes back to consumers in the form of a rebate, the reason consumption falls from A to C is because the income elasticity of demand for gasoline is relatively low (around . 3 by some estimates) so that the substitution effect dominates the income effect.

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