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Question
The government raises gasoline taxes as part of the price of gasoline and receives more tax revenues. However, after five years, the government discovers that revenues from the gasoline tax have declined. This situation would be most likely to occur if
A) the long-run elasticity of supply was much greater than the long -run elasticity of demand.
B) the demand for gasoline was inelastic in the short run, but elastic in the long run.
C) the long-run elasticity of demand was greater than the long -run elasticity of supply.
D) the demand for gasoline was perfectly inelastic in both the short run and the long run.
Answer
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