In this chapter, we studied the various factors that determine whether the supply or the demand for a particular good is elastic or inelastic. Some of the applications illustrated how government policies may impact market outcomes. For example, even though it may seem logical to implement a high luxury tax in an effort to raise revenues from those most capable of paying the tax, the wealthy do not necessarily end up paying much of the tax in reality.The majority of the tax burden instead falls on the seller of these products.

Suppose you are a legislator and you are considering placing a tax on gas. Would you hope that the demand for gas is elastic or inelastic, if your objective is to maximize tax revenues for the government? Now suppose the primary reason for implementing a tax on gas is to reduce pollution. In this case, would you hope that the demand for gas is elastic or inelastic?