Question

Raising gas taxes to finance infrastructure is​ "politically tricky" because​ _______.

A. the demand for gasoline is highly inelastic and a rise in the gas tax paid primarily by consumers can jeopardize the​ re-election of politicians.
B. the demand for gasoline is highly inelastic and a rise in the gas tax substantially decreases the quantity of gas bought so other taxes will have to rise at the same time to help finance infrastructure.
C. the demand for gasoline is highly elastic and a rise in the gas tax paid primarily by consumers can jeopardize the​ re-election of politicians.
D. a rise in the gas tax makes the supply of gasoline more elastic so most of the rise in the gas tax is paid primarily by​ consumers, which jeopardizes the​ re-election of politicians.

Answer 1

Raising gas taxes is politically tricky because the inelastic demand for gas means consumers, rather than producers, bear most of the tax burden, potentially leading to voter dissatisfaction and political repercussions for those who support the tax increase.

Step-by-step explanation:

Raising gas taxes to finance infrastructure is "politically tricky" because the demand for gasoline is highly inelastic and a rise in the gas tax paid primarily by consumers can jeopardize the reelection of politicians. In inelastic markets, like that of gasoline where consumers' demand does not decrease significantly with a higher price, an increase in tax burdens consumers more heavily as they continue to pay for the essential good. Hence, option A is correct. Politicians may avoid raising such taxes due to the risk of losing voter support. The elasticity of supply and demand affects who bears the burden of a tax. If demand is more elastic than supply, producers bear more cost, whereas if supply is more elastic than demand, buyers bear most of the tax burden. In the case of gasoline, where the demand is inelastic, consumers are likely to bear the majority of the tax increase, jeopardizing the re-election of politicians who advocate such measures.