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rd/content/contentWrapper.jsp?content-d -5003946-1 &displayName. Snartworks%3A +Chapter. 5%2C+ Market + Outcomes + and + Tax + Inode or Grade) Smartwork5 Chapter 5, Market Outcomes and Tax Incidence: Homework et Outcomes and T... 85% 09/27/18 0 This is a Multiple Choice question/It is worth 1 point/You have 1 of 3 attempts remaining/There is no attempt pe Question (1 point) 3rd attempt Taxing a good with very elastic demand generates more deadweight loss than taxing a good with very inelastic demandB Choose one: o A the change in consumer behavioris smaller. OB. the amount of the tax is larger. o C. the government does not bother collecting the revenue. D. the change in consumer behavior is greater . E. consumers have to pay these taxes out of pocket 2nd attempt 1st attempt 16 OF 20 QUESTIONS COMPLETED VIEW SOLUTION

Explanation / Answer

Correct option: (d) change in consumer behavior is greater

Reason: Due to elastic demand, an increase in price because of tax leads to a more than proportionate decrease in demand of the good. This leads to creation of deadweight loss as a lot of good produced gets unsold.

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