The price of gasoline has increased during the past year.
a. Explain why the law of demand applies to gasoline just as it does to all other goods and services.
b. Explain how the substitution effect influences gasoline purchases and provide some examples of substitutions that people might make when the price of gasoline rises and other things remain the same.
c. Explain how the income effect influences gasoline purchases and provide some examples of the income effects that might occur when the price of gasoline rises and other things remain the same.