Suppose the current price of gasoline at the pump is $1 per gallon and that 1 million
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Suppose the current price of gasoline at the pump is $1 per gallon and that 1 million gallons are sold per month. A politician proposes to add a 10 cents tax to the price of a gallon of gasoline. She says the tax will generate $100,000 tax revenues per month (1 million gallons × $0.10 = $100,000). What assumption is she making?
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She assumes that the demand for gasoline is perfectly ine...View the full answer
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