Re: Re: A Primer on the Gas Tax Holiday
by Len Burman
Thank you for your comment. I don't think it follows that there would be no price response to a tax increase. It may well be true that it would be much easier for refiners and wholesalers to withhold gasoline, especially in response to a temporary tax increase, than to increase the quantity supplied. You are, of course, right that the tax, nominally paid by suppliers, would have no effect on the demand for gasoline, although a higher price would reduce the quantity demanded. It's easy to muddle this point in trying to explain market responses to lay people. My only slightly weak defense is that people who understand the convention that demand refers to the relationship between quantity demanded and price paid by consumers probably do not need us to explain the market dynamics. It would suffice to explain that supply is nearly perfectly inelastic with respect to price increases in the short run (and demand isn't).
Post comment:
Format Type: 
  Convert newlines
  Receive comment notifications for this article
Subject: 
   
insert bold tags insert italic tags insert underline tags insert strikethough tags insert link insert blockquote tags
Comment: 
Comment verification:

Please enter the text you see inside the graphic to post your comment:
You are not currently logged in. If you would like your user information to be displayed with your comment, please enter your login information below.
Login information:
Username: 
Password: 
If you would like to post contact information on your comment, please enter your information into the optional fields below:
Contact information:
Name: 
URL:  example: http://yourdomain.com
Email: 
Please note: email will not be displayed on the site, only for the blog owner. If logged in, URL will only be used.