The government decides to reduce air pollution by reducing the use of petrol. It imposes £0.50 tax for each litre of petrol sold. a. Should it impose this tax on petrol companies or motorists? Explain carefully, using a supply and demand diagram. b. If the demand for petrol were more elastic, would this tax be more effective or less effective in reducing the quantity of petrol consumed? Explain with both words and a diagram. c. Are consumers of petrol helped or hurt by this tax? Why? d. Are workers in the oil industry helped or

The government decides to reduce air pollution by reducing the use of petrol. It imposes £0.50 tax for each litre of petrol sold. a. Should it impose this tax on petrol companies or motorists? Explain carefully, using a supply and demand diagram. b. If the demand for petrol were more elastic, would this tax be more effective or less effective in reducing the quantity of petrol consumed? Explain with both words and a diagram. c. Are consumers of petrol helped or hurt by this tax? Why? d. Are workers in the oil industry helped or

Microeconomics

13th Edition

ISBN:9781337617406

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter6: Elasticity

Section: Chapter Questions

Problem 14QP

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What effect does a per-gallon tax on gasoline have on the market for gasoline? Who pays for the increase in tax?
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