Your state legislature is considering increasing the sales tax on two different commodities: prescription drugs and restaurant meals. You estimate owm-price elasticity of demand for prescription drugs Lo be -0.08 and uwn-price elasticity of dermard for reslaurant meals lo be -0.95. If the legislaturc's primary gnal in incrcasing taxcs is to raiscmoncy most efficiontly (i.c., minimizing the resulting deadweight loss), it should tax bullıdrugs and restaurant meals equally. drugs bccausc domand is morc pricc inclastic. reslaurant meals Lecause lhey are nol a rnecessily. only thosc prescription drugs that arc not lifc saving. restaurant meals because demand is more price elastic.
Your state legislature is considering increasing the sales tax on two different commodities: prescription drugs and restaurant meals. You estimate owm-price elasticity of demand for prescription drugs Lo be -0.08 and uwn-price elasticity of dermard for reslaurant meals lo be -0.95. If the legislaturc's primary gnal in incrcasing taxcs is to raiscmoncy most efficiontly (i.c., minimizing the resulting deadweight loss), it should tax bullıdrugs and restaurant meals equally. drugs bccausc domand is morc pricc inclastic. reslaurant meals Lecause lhey are nol a rnecessily. only thosc prescription drugs that arc not lifc saving. restaurant meals because demand is more price elastic.
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter7: Consumers, Producers, And The Efficiency Of Markets
Section: Chapter Questions
Problem 7PA
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Question
![Your state legislature is considering increasing the sales tax on two different commodities:
prescription drugs and restaurant meals. You estimate owm-price elasticity of demand for
prescription drugs Lo be -0.08 and uwn-price elasticity of dermard for reslaurant meals lo be -0.95. If
the legislaturc's primary gnal in incrcasing taxcs is to raiscmoncy most efficiontly (i.c., minimizing the
resulting deadweight loss), it should tax
bullıdrugs and restaurant meals equally.
drugs bccausc domand is morc pricc inclastic.
reslaurant meals Lecause lhey are nol a rnecessily.
only thosc prescription drugs that arc not lifc saving.
restaurant meals because demand is more price elastic.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F63e34a02-5253-4e89-8c4d-911b67e25ab6%2Fb8c50d1f-1821-439c-ad6e-c909bae98d46%2Fvq9i329.png&w=3840&q=75)
Transcribed Image Text:Your state legislature is considering increasing the sales tax on two different commodities:
prescription drugs and restaurant meals. You estimate owm-price elasticity of demand for
prescription drugs Lo be -0.08 and uwn-price elasticity of dermard for reslaurant meals lo be -0.95. If
the legislaturc's primary gnal in incrcasing taxcs is to raiscmoncy most efficiontly (i.c., minimizing the
resulting deadweight loss), it should tax
bullıdrugs and restaurant meals equally.
drugs bccausc domand is morc pricc inclastic.
reslaurant meals Lecause lhey are nol a rnecessily.
only thosc prescription drugs that arc not lifc saving.
restaurant meals because demand is more price elastic.
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