Assume that the demand for fries is relatively inelastic and that the demand for poutine is relatively elastic.If the same percentage tax were placed on both goods,the tax on which product would create a larger deadweight loss
A)fries, if the supply of the fries is also relatively inelastic
B)poutine, if the supply of the poutine is also relatively elastic
C)fries, if the supply of the fries is relatively elastic
D)poutine, if the supply of the poutine is relatively inelastic

Question

Quizplus · Accepted Answer

Deadweight loss is larger when either demand or supply is more elastic. Since poutine has relatively elastic demand, a tax on it would create a larger deadweight loss, especially if its supply is also relatively elastic.

Assume That the Demand for Fries Is Relatively Inelastic and That