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Assume that the demand for gasoline is inelastic and supply is relatively elastic. The government imposes a sales tax on gasoline. The tax revenue is used to fund research into clean fuel alternatives to gasoline, which will improve the air we all breathe. a. Who bears the greater burden of this tax, consumers or producers? Briefly explain. b. Is this tax based on the benefits principle or the ability-to-pay principle? Explain.

Business Economics, Economics

  • Category:- Business Economics
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