Suppose the market demand for milk is  Qd = 40 – 4P Where Qd is millions of gallons demanded and P is price per gallon.  Suppose the market supply for milk is Qs = - 40/3 + 20/3P   Suppose demand for milk is relative elastic and demand for gasoline is relatively inelastic. Holding all else constant, A.taxing milk will generate lower deadweight losses than the same tax on gasoline. B.taxing milk will generate the same deadweight losses relative the same tax on gasoline. C.taxing milk will generate greater deadweight losses than the same tax on gasoline.

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Q: Figure 2-1 20 arice 18 16 14 12 10 6. 10 20 30 40 50 60 70 80 quantity

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