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Unformatted text preview: D + E + F F-(D + E) Tax Revenue None B + D +(B + D) Total Surplus A+B+C+D+E+F A + B + D + F-(C + E) increase government tax revenues. The reasoning behind this is that consumers demand for transportation remains fairly inelastic, while their demand for cars can become more elastic. Essentially, the government will always end up with the revenue whether it is through car sales or public transportation. States might try to reduce the elasticity of demand for cars by reducing the availability of public transportation (i.e. shutting down bus lines, offering fewer trains, etc.), and decreasing the tax on cars sold. The state could also subsidize gasoline costs and cut taxes on gasoline to encourage more car sale and use and thus reduce the elasticity of demand....
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