Question

A new tax on gasoline causes a reduction in the purchase of new vehicles with poor fuel economy. This is an example of what type of incentive?a. Negative directb. Positive directc. Negative indirectd. Positive indirecte. The tax does not provide an incentive.

Answer 1

Option (C) is correct.

Step-by-step explanation:

Negative Indirect.

This is due to the indirect affect of tax on the purchase of new vehicle because a new tax on gasoline reduces the consumers incentive to the buy the new vehicles. Therefore, it is a negative indirect incentive.

Also, there is a fall in the number of cars or vehicles purchased because of the tax imposed on the gasoline.