4. The government decides to reduce air pollution by reducing the use of petrol. It imposes 0.50...

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4. 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-anddemand 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 hurt by this tax?

Why?

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Business Economics

ISBN: 388402

2nd Edition

Authors: Mark P. Taylor, Andrew Ashwin, N. Gregory Mankiw

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Question Posted: Nov 04, 2024 10:00 AM

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