The state of pennsylvania is considering increasing taxes


The state of Pennsylvania is considering increasing taxes in order to raise funding for a new Punxsutawney Phil theme park. The government is concerned about the deadweight losses that could result from the new "Punxsutawney tax." Currently the two potential taxes are (1) a sales tax on fruits and vegetables purchased at farmer's markets, or (2) a sales tax on cigarettes. Which good should the government tax if they wish to minimize the deadweight losses of taxation? Your answer should be based on elasticities and nothing more.

 

 

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Microeconomics: The state of pennsylvania is considering increasing taxes
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