Suppose the government is trying to balance its budget, but needs to raise taxes so t
Suppose the government is trying to balance its budget, but needs to raise taxes so that they can cover the amount they have allocated on infrastructure expenditures. The government has decided to tax both gasoline and diary milk, but legislators are uncertain which to tax more heavily. The government is also concerned about minimizing the deadweight loss to producers and consumers. If the elasticity of demand for gasoline is -4.5, and the elasticity of demand for diary milk is -3.2 which product should the government tax more heavily?