Assume that the demand for salt is relatively inelastic and the demand for orange juice is relatively elastic.Compared to the deadweight loss from the same percentage tax on orange juice, the deadweight loss from imposing a tax on salt would be:
A)greater
B)lesser
C)neither greater nor lesser
D)either greater or lesser

Question

Quizplus · Accepted Answer

Since the demand for salt is relatively inelastic, consumers are not as responsive to changes in price. Therefore, a tax on salt would result in less of a decrease in quantity demanded compared to a tax on orange juice, which has a relatively elastic demand. This means that the deadweight loss from a tax on salt would be less than the deadweight loss from the same percentage tax on orange juice. Therefore, the answer is B- lesser.

Assume That the Demand for Salt Is Relatively Inelastic and the Demand