Test.aspx?testld 168819581&centerwin; yes Microeconomics Fall 17 Quiz: Quiz #7 S

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Test.aspx?testld 168819581&centerwin; yes Microeconomics Fall 17 Quiz: Quiz #7 Submit Qui This Question: 1 pt This Quiz: 24 pls po Help In earty 2015, gasoine prices in many parts of the United States had fallen to below $2.00 per gallon, which a news story called "one of the swiftest declines on record Source: Nick Timiraos, "As Gasoline Heads Toward $2, the Benefits Start to Trickle Down," Wall Street Jounal, January 22, 2015. For most people, gasoline is likely to be O A a normal good because as the price increases people drive less O B. an inferior good because as the price increases people drive more ° C. an iriferior good because as incomes increase people drive less. D. a normal good because as incomes ncrease people drive more Why is your answer important for predicting how much the quantity of gasoline demanded will increase as a result of the price decline? When the price of a good decines,the income effet tels us that the quanty demanded wil Increase lessthe good is a normal good than ifIt s an inferior good

Explanation / Answer

A. a normal good because as the price increases people drive less.

The answer is important because the change in demand because of fall in price is different in case of normal goods and in case of inferior goods. When the price falls, the demand for normal goods increase but that of inferior goods do not.

Last answer: increase more

Explanation: Since it is normal good, because of income effect, demand will increase more as compared to that of inferior goods.

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