You are an economic advisor to the treasurer of the united


You are an economic advisor to the Treasurer of the United States. Congress is considering increasing the sales tax on gasoline by $.05 per gallon. Last year motorists purchased 15 million gallons of gas per month. The demand curve is such that every $.01 increase in price decreases sales by 100,000 gallons per month. You also know that for every $.01 increase in price, producers are willing to provide 50,000 more gallons of gasoline to the market. The legislature has stated that the $.05 tax will increase government revenues by $750,000 per month and raise the price of gasoline by $.05 per gallon. Please explain why this is correct.

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Business Economics: You are an economic advisor to the treasurer of the united
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