Suppose the Nunavut government decides to repair Iqaluit roads. One way to generate sufficient funds for this plan is to increase taxes on gasoline. The government will be able to raise total revenue from gasoline sales only if the demand for gasoline is

Question

Quizplus · Accepted Answer

If the demand for gasoline is inelastic, it means that consumers are not very responsive to changes in price, and therefore, an increase in the tax on gasoline will result in an increase in total revenue for the government. If the demand for gasoline is elastic, consumers are very responsive to changes in price, and an increase in taxes could lead to a decrease in total revenue for the government, as consumers may reduce their consumption of gasoline. Therefore, the best choice would be D: inelastic demand.

Suppose the Nunavut Government Decides to Repair Iqaluit Roads