Suppose demand for good X is less elastic than demand for good Y. Suppose the government wants to minimize the deadweight loss from taxation. Which good should the government tax in this case: A. Good X B. Good Y C. It doesn’t matter which good the government taxes, deadweight loss will be the same in both cases
Suppose demand for good X is less elastic than demand for good Y. Suppose the government wants to minimize the deadweight loss from taxation. Which good should the government tax in this case: A. Good X B. Good Y C. It doesn’t matter which good the government taxes, deadweight loss will be the same in both cases
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter8: Application: The Cost Of Taxation
Section: Chapter Questions
Problem 8PA
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Question
Suppose
A. |
Good X |
|
B. |
Good Y |
|
C. |
It doesn’t matter which good the government taxes, deadweight loss will be the same in both cases |
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