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Sublight2097 Sublight2097
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9 years ago
What is the error in the following argument? "An increased sales tax on gasoline won't reduce consumption, because while the higher price will at first reduce demand, the reduced demand will eventually bring the price back down again, and consumption will return to its former level."
A) A higher price doesn't reduce demand.
B) A reduced demand does not cause lower prices.
C) The tax-induced price increase may be greater than the price reduction due to the lower demand.
D) the tax-induced price increase will necessarily be greater than the price reduction due to the lower demand, because demand is never perfectly inelastic.
E) The ultimate effect on consumption may be to increase it beyond its original level.
Textbook 
The Economic Way of Thinking

The Economic Way of Thinking


Edition: 13th
Authors:
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Chimelo46Chimelo46
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9 years ago
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Sublight2097 Author
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#2
9 years ago
Seriously, you've been tremendously helpful! Thank you.
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9 years ago
Happy to assist!
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