suppose that the market for product x is characterized by a typical, downward-sloping, linear demand curve...
suppose that the market for product x is characterized by a typical, downward-sloping, linear demand curve and a typical , upward-sloping, linear supply curve. suppose the price of supply is 0.7. will the dead weight loss form a $3 tax per unit be smaller if the absolute value of the price elasticity of demand is 0.6 or if the absolute value of the price elasticity of demand is 1.5?
Homework Answers
Deadweight loss would be smaller if demand is relatively inelastic because when demand is inelastic imposition of tax decreases quantity demanded by smaller proportion than with elastic demand.
Thus deadweight loss would be smaller if the absolute value of the price elasticity of demand is 0.6
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suppose that the market for product x is characterized
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