Gasoline taxes are paid by sellers from the revenues they earn from total sales. Thus, to receive the same effective price for selling a given quantity of gasoline, a gasoline producer must charge an actual price that is higher by exactly the amount of the tax.

Who truly pays the tax depends on the price elasticity of demand. The more inelastic demand, the more consumers pay. If the demand for gasoline was perfectly inelastic, the entire burden of the tax would fall on consumers. If demand was perfectly elastic, the entire burden would fall on sellers. Estimates of the price elasticity of demand for gasoline indicate values between 0.2 and 0.5.

Based on the information in this example, if excise taxes increased by 10 percent, by what percentages might desired gasoline purchases decrease?