Neither the demand nor the supply of petrol is perfectly elastic or inelastic. When the government increases the federal tax on petrol, the effect on buyers is that the price they pay

Question

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When the government increases the federal tax on petrol, the price that buyers pay rises regardless of the elasticity of supply or demand. This is because the tax increases the cost of supplying petrol, which is typically passed on to consumers in the form of higher prices. Elasticity affects how much of the tax increase is absorbed by consumers versus producers, but in either case, the initial effect is an increase in the price paid by buyers.

Neither the Demand nor the Supply of Petrol Is Perfectly