Question 5: Combined state and federal taxes on gasoline average around 50 cents per gallon, and these taxes are statutorily levied on gasoline sellers. Because the demand for gasoline is relatively inelastic compared to the supply of gasoline: O buyers likely do not bear much of the actual burden because it is statutorily levied on sellers who must submit the tax payments. sellers likely bear most of the actual burden of the tax through lower gasoline prices. O the net price received by sellers after they pay taxes likely falls by almost the full amount of the tax. ●buyers likely bear most of the actual burden of the tax through higher gasoline prices.
Question 5: Combined state and federal taxes on gasoline average around 50 cents per gallon, and these taxes are statutorily levied on gasoline sellers. Because the demand for gasoline is relatively inelastic compared to the supply of gasoline: O buyers likely do not bear much of the actual burden because it is statutorily levied on sellers who must submit the tax payments. sellers likely bear most of the actual burden of the tax through lower gasoline prices. O the net price received by sellers after they pay taxes likely falls by almost the full amount of the tax. ●buyers likely bear most of the actual burden of the tax through higher gasoline prices.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Question 5:
Combined state and federal taxes on gasoline average around 50 cents per gallon, and these taxes are statutorily levied on gasoline sellers. Because
the demand for gasoline is relatively inelastic compared to the supply of gasoline:
buyers likely do not bear much of the actual burden because it is statutorily levied on sellers who must submit the tax payments.
sellers likely bear most of the actual burden of the tax through lower gasoline prices.
O the net price received by sellers after they pay taxes likely falls by almost the full amount of the tax.
O buyers likely bear most of the actual burden of the tax through higher gasoline prices.
Expert Solution
Step 1
An economic concept known as "inelasticity" describes an item or service's unchanging quantity while its price varies. When prices rise, consumers' purchasing patterns essentially stay the very same, and when prices fall, those purchasing patterns still hold true. This is known as inelastic demand.
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