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The elasticity of demand for domestic heating oil is -o.5, and for gasoline is -1.5. The price of both sorts of fuel is 6oc/ per litre: included in this price is an excise tax of 48c/ per litre. The government wants to reduce energy consumption in the economy and to increase its tax revenue. Can it do this (a) by taxing domestic heating oil? (b) by taxing gasoline?

Microeconomics, Economics

  • Category:- Microeconomics
  • Reference No.:- M91623576

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