Question

1. Suppose that the government places a tax on heating oil in order to conserve oil. However, for poor families, the government rebates enough income to ensure that poor consumers are able to achieve the same level of utility after the rebate that they had before the tax was imposed. That is, the poor are no worse off after the tax and rebate than they were to begin with. Will the tax and rebate policy completely eliminate the conservation of oil by the poor? Illustrate and explain using an indifference curve diagram.

Microeconomics

Answer 1

There exist a lot of debate on the fuel prices. Prices of crude oil was significantly less than highest levels. relatively low fuel price was however managed by oil companies which are in the mainstream by bearing the burden cut on taxes on the fuel and subsidy payments being deferred for those oil companies which are in the downstream. this in turn impacted the fiscal accounts of the Government and also the market value of the oil companies. a temporary relief was provided to the customers by the strategy but led complete stress on the physical state. There existed no direction for the process of possible resolution. high amount of fiscal deficit could not be allowed to continue for long.fuel tax is a levy on the business as well as individuals. Fuel tax is equitable. Input price of the business if increase it passes on to the buyers. Increase in the fuel taxes has the potential of mitigating the emission of carbon congession reduced local urban environment improved. the taxation of rural follows a progressive policy mainly in the low income countries. The rich countries can rectify from regressivity by cutting from other taxeswhich have an adverse effect on the poor people by spending more on the services for the poor people. in the low income countries for people generally spend a very small income of their money on fuel for transportation. Some amount of cost from the taxes on fuel are passed to the poor people buy a more expensive public transport and also food transport.