Regardless of whether goods are inferior or normal, the deadweight loss from a per-unit tax is always greater the more price elastic the market demand curve for a good.
Answer the following statement true (T) or false (F)
False
Rationale: Deadweight on the consumer side arise from substitution effects. Consider then two inferior good with the same uncompensated demand curve. But one has a small substitution effect and the other has a large substitution effect, with the income effects leading to the same uncompensated demand. Then the deadweight loss is greater for the latter -- implying it is possible to have a good with a more elastic uncompensated demand that gives rise to a smaller deadweight loss.
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If the money supply grows faster than the rate of growth in GDP
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Sven likes to water ski, but can only water ski during the one week each year when he is on vacation. Therefore, he plans to ski every day, for eight hours a day. The first day, Sven skied for eight hours and enjoyed every hour. The second day, Sven slept in and then skied for seven hours, which was fun but not as much fun as the first day. The third day, Sven skied for six hours, but was starting to get a bit bored by the end. The fourth day, Sven skied for four hours and then took a nap. On the fifth day of Sven's vacation, Sven went blueberry picking all day. Sven's total utility ________ with each hour that he skied.
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