Question

Gas tax increases by 7 cents in Washington State

Washington State gas taxes will rise by 7¢ a gallon now and by a further 4.9¢ a gallon next summer.
If the demand for gasoline is inelastic and the supply of gasoline is​ elastic, who will pay more of the increase in​ Washington's gas​ tax: drivers or the gasoline​ companies?
If the demand for gasoline is inelastic and the supply of gasoline is​ elastic, _______.

Answer 1

Answer: Drivers

Step-by-step explanation:

The demand for gasoline is inelastic. Inelastic demand means that a change in price would have very little or no impact on quantity demanded. Quantity demanded would remain the same even if price changes.

If demand of gasoline is inelastic, more of the burden of tax can be shifted to the drivers.

Therefore, the drivers would pay more of the tax increase.

If supply is elastic, it means quantity supplied is sensitive to changes in price. Therefore, gasoline companies would pay less of the tax increase.

I hope my answer helps you.