Explain how the gasoline has an inelastic demand

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The mayor of Wappingers Falls was told by your Microeconomics class that gasoline has an inelastic demand and raising the price of an inelastic product raises revenue. The mayor wants to raise town revenues and decides to raise taxes on gasoline in Wappingers Falls. The mayor finds out that after she raised gasoline taxes, the tax revenue FELL instead of increasing. Now she blames your class on giving her wrong advice. Where did she go wrong? How would you defend yourself?

Reference no: EM13245174

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