Question

A tax on gasoline encourages people to drive smaller, more fuel-efficient cars. which principle of economics does this illustrate?

a. the cost of something is what you give up to get it

Answer 1

People respond to incentives.

Step-by-step explanation:

The response to incentives is an economic principle that occurs when people make decisions by comparing costs and benefits, their behavior can change when costs or benefits change. An example of this can be seen in the question above, because when the impotence of gasoline increases, people realize it is better to use smaller cars that consume less fuel, so the cost-effectiveness of gasoline gets better.

Thus, the price of gasoline proves to be an incentive to use smaller cars.

Answer 2

The correct answer is that people respond to incentives.