In the united states, say gasoline costs consumers about $2.50 per gallon. In Italy, it costs consumers about $6 per gallon. What effect does this price differential likely have on: a. The size of cars in the United States and in Italy?

b. The use of public transportation in the United States and Italy?

c. The fuel efficiency of cars in the US and Italy?

d. What would be the effect of raising the price of gasoline in the US to $5 per gallon?

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Dayton

Business

14 February, 09:54

In the united states, say gasoline costs consumers about $2.50 per gallon. In Italy, it costs consumers about $6 per gallon. What effect does this price differential likely have on: a. The size of cars in the United States and in Italy?

b. The use of public transportation in the United States and Italy?

c. The fuel efficiency of cars in the US and Italy?

d. What would be the effect of raising the price of gasoline in the US to $5 per gallon?

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Williamson · Answer 1

If in the united states, gasoline costs consumers about $2.50 per gallon and in Italy, it costs consumers about $6 per gallon. The effect that this price differential is likely to have is that:

a. The size of cars in the United States and in Italy:

Consumers in Italy will opt to have lesser cars than those in the United States because the cost of owning cars is technically in Italy is higher when the price of fuel which is the running cost is considered.

b. The use of public transportation in the United States and Italy:

As a result of people not having as much cars in Italy in comparison to consumers in the United States due to higher gasoline costs, the resultant effect will be that more people will have to use the public transport in Italy because there are less private cars in comparison to the U. S. Contrariwise, lesser people will use public transport system in the U. S. because there are more private cars available

c. The fuel efficiency of cars in the US and Italy:

Consumers tend to be more efficient when products are more expensive therefore fuel efficiency in Italy will be higher than in the United States because gasoline will almost be like a luxury good while in the U. S. it will be seen as a necessity.

d. What would be the effect of raising the price of gasoline in the US to $5 per gallon:

The quantity demanded of gasoline will fall naturally and remarkably by 50% because gasoline is most likely price-elastic. People will sell off their cars and begin to use the public transport system. Those who can afford to keep their cars will be more fuel efficient