The consulting firm that you work for has been hired by the US Government to pro

Question

The consulting firm that you work for has been hired by the US Government to provide an independent analysis of the demand-side effects of a contemplated increase in the tax on gasoline. They provide you with a data set relating to the period 1962-1987, which they say contains valuable historic lessons relating to the impact of volatile pump prices due to the supply restrictions imposed by the Organization of Petroleum Exporting Countries (OPEC), and the Corporate Average Fuel Economy (CAFE) regulations that required car manufacturers to increase the fuel efficiency of the cars they sold, while at the same time Real Disposable Income (RDI) per capita was rising, the number of passenger cars (NPC) almost doubled, and inflation was pushing up the Consumer Price Index (CPI).

Explanation / Answer

demand side analysis would be that the cars are increasing but the gasoline is decreasing. Hence the best alternative would be improving the cars with alternate fuels like Hydrogen, Electricity(from nuclear power) etc.

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