in the spring 2008, Senators John McCain and Hillary Clinton proposed a temporar

Question

in the spring 2008, Senators John McCain and Hillary Clinton proposed a temporary elimination of the federal gasoline tax, effective only during summer of 2008, in order to help consumers deal with high gasoline price
a) During summer when gasoline demand is high because of vacation driving, gasoline refiners are operating near full capacity. what does this fact suggest about price elasticity of supply ?
b) in light of your answer to (a), who do you predict would benefit from the temporary gas tax holiday ?

Explanation / Answer

a) The price is being set by the amount consumers are willing to pay. b) Since the price is being set by what consumers are willing to pay, the tax holiday would just allow the gasoline distributors to increase their profit.

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