The demand for beer is more elastic than the demand for milk, so a tax on beer would have a smaller deadweight loss than an equivalent tax on milk, all else equal.

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The demand for beer is generally more elastic than the demand for milk because consumers can more easily find substitutes for beer than they can for milk, which is often considered a necessity. Therefore, a tax on beer would likely lead to a larger reduction in quantity demanded compared to milk, resulting in a larger deadweight loss for beer than for milk, all else equal. Elastic demand means consumers are more responsive to price changes, leading to larger efficiency losses when taxes distort prices.

The Demand for Beer Is More Elastic Than the Demand