Given the relationship between the price elasticity of demand and the deadweight loss of a per-unit tax,it is best to tax items that
A) only the rich can afford.
B) are expensive.
C) have few substitutes.
D) are luxuries.
E) have many substitutes.

Question

Quizplus · Accepted Answer

Taxing items with few substitutes results in a smaller deadweight loss because the quantity demanded does not decrease significantly when the price increases, due to the lack of alternative options.

Given the Relationship Between the Price Elasticity of Demand and the Deadweight