The government rations the amount of gasoline that consumers can purchase. A consumer who would have purchased more than the rationed amount of gasoline will instead A. purchase less gasoline, more of other goods, and be on a higher indifference curve. B. purchase less gasoline, more of other goods, and be on a lower indifference curve. C. purchase more gasoline, less of other goods, and be on a higher indifference curve. D. purchase more gasoline, less of other goods, and be on a lower indifference curve.

Question

Jane Erickson

Business

1 November, 11:48

The government rations the amount of gasoline that consumers can purchase. A consumer who would have purchased more than the rationed amount of gasoline will instead A. purchase less gasoline, more of other goods, and be on a higher indifference curve. B. purchase less gasoline, more of other goods, and be on a lower indifference curve. C. purchase more gasoline, less of other goods, and be on a higher indifference curve. D. purchase more gasoline, less of other goods, and be on a lower indifference curve.

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Answers (1)

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Quinton Rose · Answer 1

B. purchase less gasoline, more of other goods, and be on a lower indifference curve.

Explanation:

When the goverment rationing is at the left of the equilibrium position, the consumer will be forced to consume less of the limited good. Thus, we will consume more of other goods.

The indiference curve, will be lower thus, rationing binds the consumer and reduces his welfare. Because, without the restriction he will consume larger amount of gasoline.