Taxing a Good with Very Elastic Demand Generates More Deadweight

question 57

Multiple Choice

Taxing a good with very elastic demand generates more deadweight loss than taxing a good with very inelastic demand because

• A) the amount of the tax is larger.
• B) the change in consumer behavior is greater.
• C) consumers have to pay these taxes out of pocket.
• D) the change in consumer behavior is smaller.
• E) the government does not bother collecting the revenue.

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Definitions:

Compulsory Share Exchange

A mandatory process where shares of one company are exchanged for those of another, often during mergers or acquisitions.

Short-Form Merger

A type of merger that occurs when a parent company absorbs a subsidiary without obtaining approval from the subsidiary’s shareholders, typically allowed under certain conditions by law.

Statutory Provisions

Specific requirements, rules, or laws enacted by a government’s legislative body.

Creditors

Individuals or entities to whom money is owed by debtors.