Problem
When the price of gasoline is $2.00 per gallon, Joe consumes 1,000 gallons per year. The price increases to $2.50, and to offset the harm to Joe, the government gives him a cash transfer of $500 per year. Will Joe be better off or worse off after the price increase and cash transfer than he was before? What will happen to his gasoline consumption? (Assume that Joe's marginal rate of substitution of gasoline for other goods is diminishing.)
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.