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The Economic Way of Thinking 13th Edition by David Prychitko, Peter Boettke, Paul Heyne
Edition 13ISBN: 9780132992695The Economic Way of Thinking 13th Edition by David Prychitko, Peter Boettke, Paul Heyne
Edition 13ISBN: 9780132992695 Exercise 12
In 2008, both John McCain and Hillary Clinton proposed that the 18-cents-per-gallon federal tax on gasoline should be temporarily suspended, to help the American consumer. Evaluate the following argument against their proposal:
Repealing the 18-cents-per-gallon tax will give oil companies an additional incentive to raise prices. If skyrocketing gas prices are due to supply and demand factors, as oil companies argue, a reduction of 18 cents will increase demand on a product already in short supply. The increased demand will contribute to increased pump prices. What mistake has the author of that argument made?
Repealing the 18-cents-per-gallon tax will give oil companies an additional incentive to raise prices. If skyrocketing gas prices are due to supply and demand factors, as oil companies argue, a reduction of 18 cents will increase demand on a product already in short supply. The increased demand will contribute to increased pump prices. What mistake has the author of that argument made?
Explanation
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Quantity demanded of any product is dire...
The Economic Way of Thinking 13th Edition by David Prychitko, Peter Boettke, Paul Heyne
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