The Demand for Potted Plants Is More Elastic Than the Demand

question 38

Multiple Choice

The demand for potted plants is more elastic than the demand for wallpaper.Suppose the government levies an equivalent tax on potted plants and wallpaper.The deadweight loss would be larger in the market for

• A) potted plants than in the market for wallpaper because the quantity of potted plants would fall by more than the quantity of wallpaper.
• B) potted plants than in the market for wallpaper because the quantity of wallpaper would fall by more than the quantity of potted plants.
• C) wallpaper than in the market for potted plants because the quantity of potted plants would fall by more than the quantity of wallpaper.
• D) wallpaper than in the market for potted plants because the quantity of wallpaper would fall by more than the quantity of potted plants.

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Definitions:

Real Gross Domestic Product

An inflation-adjusted measure that reflects the value of all goods and services produced by an economy in a given year.

Price Index

A statistical measure that examines the weighted average of prices of a basket of consumer goods and services, used as an indicator of inflation and deflation.

Nominal GDP

The market value of all final goods and services produced within a country in a given period, measured in current prices.

Real GDP

The total value of all goods and services produced by an economy adjusted for inflation, offering a more accurate reflection of an economy's size and growth rate.