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Q. Identify the sectors of the economy that will be most affected by an increase of...

Q. Identify the sectors of the economy that will be most affected by an increase of tax on gasoline.

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Answer #1

a) Sectors most affected by an increase in the taxes on the gasoline will be:

  • Automobile sector: Automobile sector and gasoline are complement. Every person buying a car will keep the price of petrol in mind. If the price of the petrol rises because of taxes the demand for the automobiles will come down. increasing unemployment and reducing production in the sector.
  • Transportation: Transportation of anything needs petrol or diesel. IF the price of that input increases the price of the service will also increase. It will make all the things like public transport, private transport and other services costly.
  • General consumer: If the price of the gasoline increases because of the increase in the taxes everything which uses gasoline will get costlier. It will affect the purchasing power of the general public and reduce the demand in the economy.
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