'Assume that the demand for entertainment is more elastic than the demand for petrol'.According to this statement, the tax levied on entertainment will cause the loss of consumer surplus to be:
A)zero
B)relatively large
C)relatively small
D)either small or large (depending on the elasticity of supply)

Question

Quizplus · Accepted Answer

If the demand for entertainment is more elastic than the demand for petrol, consumers are more responsive to changes in price for entertainment than for petrol. Therefore, a tax on entertainment will lead to a relatively large decrease in quantity demanded and a relatively large loss of consumer surplus.

'Assume That the Demand for Entertainment Is More Elastic Than