The Demand for Beer Is More Elastic Than the Demand

question 202

True/False

The demand for beer is more elastic than the demand for milk, so a tax on beer would have a smaller deadweight loss than an equivalent tax on milk, all else equal.

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Definitions:

Subsidy

A subsidy is a financial contribution provided by the government or a public body to support businesses, consumers, or sectors, reducing the price of goods or services.

Supply Function

A supply function is a mathematical relation that shows how the quantity supplied of a good is influenced by its price and possibly other factors, such as production cost.

Demand Function

A mathematical equation that describes the quantity of a good that consumers are willing and able to purchase at various prices.

Subsidy

Financial assistance granted by a government or other institution to lower the cost of producing goods or services or to support consumers directly.