The demand for bread is less elastic than the demand for donuts; hence, a tax on bread will create a larger deadweight loss than will the same tax on donuts, other things equal.

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Quizplus · Accepted Answer

The demand for bread is typically more inelastic than the demand for donuts because bread is considered a basic staple food, while donuts are more of a luxury or non-essential item. Inelastic demand means consumers are less sensitive to price changes, so a tax on bread would likely result in a smaller deadweight loss compared to the same tax on donuts, as consumers would continue to buy bread despite the price increase, leading to less distortion in the market.

The Demand for Bread Is Less Elastic Than the Demand