Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

3. An economic advisor to the Treasurer of the United States. Congress is considering increasing the sales tax on gasoline by $.10 per gallon. Last

3. An economic advisor to the Treasurer of the United States. Congress is considering increasing the sales tax on gasoline by $.10 per gallon. Last year motorists purchased 10 million gallons of gas per month. The demand curve is such that every $.01 increase in price decreases sales by 100,000 gallons per month. You also know that for every $.01 increase in price, producers are willing to provide 50,000 more gallons of gasoline to the market.

a. The legislature has stated that the $.10 tax will increase government revenues by $1,000,000 per month and raise the price of gasoline by $.10 per gallon. Is this correct?Evaluate the impact of the tax on government revenue and the price of gasoline.Include at least one supply and demand analysis.

Please state in your response whether you agree or disagree with the estimate of the increase in government revenue and the price of gasoline.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Principles of economics

Authors: N. Gregory Mankiw

6th Edition

978-0538453059, 9781435462120, 538453052, 1435462122, 978-0538453042

More Books

Students also viewed these Economics questions