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Homework answers / question archive / Consider four markets for luxury yachts, Markets A, B, C, and D
Consider four markets for luxury yachts, Markets A, B, C, and D. The demand for yachts in Market A is perfectly elastic. In Market B the price elasticity of demand, as an absolute value, is 3. In Market C the price elasticity of demand, as an absolute value, is 0.25. Finally, the demand for yachts in Market D is perfectly inelastic. The elasticity of supply in all four markets is identical across every level of quantity. If the government imposes the same size tax on all of these markets, in which market will the deadweight loss be the smallest? Explain your answer.
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