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IV. Assume that the demand for gas is inelastic and supply is relatively elastic. The government imposes a sales tax on gas. The tax revenue

IV. Assume that the demand for gas is inelastic and supply is relatively elastic. The government imposes a sales tax on gas. The tax revenue is used to fund research into clean fuel alternatives to gas.

A. Who bears more of the burden of this tax, consumers or producers?

B. Show in a diagram who bears how much of the burden.

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