<s>[INST] The Finance Minister of a country is considering to increase the tax on gasoline to curb its consumption and subsequently reduce pollution. The typical consumer behavior when a price of a good rises is to substitute away from the good and not being inelastic to price changes. However, there is confusing evidence regarding the consumers' elasticity of demand with respect to gasoline price. In most empirical studies, it is found that the short run elasticity of demand for gasoline with respect to price is around -0.1 to -0.3. Thus, it would seem that increasing the tax on gasoline would have substantial deadweight loss with little effect on the reduction in its consumption.
However then, why if demand for gasoline is found to be inelastic in short run, then some researchers claim that long-run elasticity to be around 0.6-0.8 which is substantial?[/INST]