In late 2018, French president Emmanuel Macron, in an attempt to reduce air pollution

by reducing petrol use, imposed a unit tax of e 0.50 on consumers for each liter of

petrol purchased. The tax policy was very unpopular and was one of the catalysts of

the Gilet Jaune protest movement.

(a) Many protestors, especially rural industrial workers, complained that they needed

to drive to get to work. Explain what this means for the elasticity of demand

for petrol. Using a supply-and-demand diagram, demonstrate the impact of the

petrol tax on consumer surplus and discuss how the incidence of the tax is shared.

(b) Would Macron have faced less resistance to the petrol tax if he had imposed the

tax on petrol sellers instead of petrol consumers? Explain your answer using a

diagram or a clear verbal argument.

(c) Macron eventually capitulated and withdrew the petrol tax. What are some other

tools that the French could consider to reducing petrol use with less damaging

distributional consequences?