According to the European Commission's Weekly Oil Bulletin for June 12, 2017, taxes made up (66.2 %)
Question:
According to the European Commission's Weekly Oil Bulletin for June 12, 2017, taxes made up \(66.2 \%\) of the \(€ 1.51\) per liter consumer price of gasoline in Italy. Included in the tax total is an excise tax of \(€ 0.728\) per liter levied by the national government, plus excise taxes applied in certain regions; for example, the additional tax in Molise is \(€ 0.031\) per liter. Suppose that the national and regional governments each increased their excise taxes on gasoline by 1 cent and that the former increases the retail price of gasoline by 0.5 cents, while the latter increases it by 1 cent. What is the incidence of each of these taxes on consumers and producers? Explain why the incidence on consumers in a competitive market would be lower for an increase in the national tax than for an increase in a regional tax. How much more elastic is the supply elasticity for any one of the 20 regions in Italy compared to the national supply elasticity?
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