Question: 1. How is it that a tax creates a deadweight loss by decreasing quantity, but a subsidy creates a deadweight loss by increasing quantity?
2. Let's apply the economics of taxation to romantic relationships.
a. What does it mean to have an inelastic demand for your boyfriend or girlfriend? How about an elastic demand?
b. Sometimes relationships have taxes. Suppose that you and your boyfriend or girlfriend live one hour apart. Using the tools developed in the chapter, how can you predict which one of you will do most of the driving? That is, which one of you will bear the majority of the relationship tax?