Assume that the demand for salt is relatively inelastic and that the demand for snowboards is relatively elastic.If a tax is levied on both goods,what is the deadweight loss for snowboards relative tothe deadweight loss for salt
A)The loss of deadweight loss is greater for salt.
B)The loss of deadweight loss is smaller for salt.
C)The gain of deadweight loss is greater for salt.
D)The gain of deadweight loss is smaller for salt.

Question

Quizplus · Accepted Answer

Since the demand for salt is relatively inelastic, a tax on salt will have a smaller impact on reducing the quantity demanded, resulting in a smaller deadweight loss. On the other hand, the demand for snowboards is relatively elastic, so a tax on snowboards will have a larger impact on reducing the quantity demanded, resulting in a larger deadweight loss. Therefore, the deadweight loss for salt is smaller relative to the deadweight loss for snowboards.

Assume That the Demand for Salt Is Relatively Inelastic and That