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Govt. of the country imposes tax on petrol usage by the people, what impact will this have on budget line of a consumer showing consumption of two commodities petrol and food items on it? What is policy implication behind tax imposition ?

Answer» <html><body><p><br/></p>Solution :When tax is imposed on petrol, its <a href="https://interviewquestions.tuteehub.com/tag/price-1165141" style="font-weight:bold;" target="_blank" title="Click to know more about PRICE">PRICE</a> goes up. Due to this the budget line <a href="https://interviewquestions.tuteehub.com/tag/rotates-1191154" style="font-weight:bold;" target="_blank" title="Click to know more about ROTATES">ROTATES</a> leftwards. <br/> When budget line rotates leftwards, it implies fall in quantity demanded of petrol by the consumers due to increase <a href="https://interviewquestions.tuteehub.com/tag/inits-2739161" style="font-weight:bold;" target="_blank" title="Click to know more about INITS">INITS</a> price. The <a href="https://interviewquestions.tuteehub.com/tag/policy-602125" style="font-weight:bold;" target="_blank" title="Click to know more about POLICY">POLICY</a> implication behind tax on petrol is indirect restriction on usage of petrol and <a href="https://interviewquestions.tuteehub.com/tag/ensures-972243" style="font-weight:bold;" target="_blank" title="Click to know more about ENSURES">ENSURES</a> judicious use of scare resource <br/> <img src="https://d10lpgp6xz60nq.cloudfront.net/physics_images/MIC_ECO_XI_U02_C02_E01_048_S01.png" width="80%"/></body></html>


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