Consider a perfectly competitive market for two goods: Bread and
Coffee. Assume equilibrium prices of Bread and Coffee are
equivalent and also equlibrium quantities of Bread and Coffee are
equivalent. At the equilibrium point, demand for Coffee is elastic
while demand for Bread is inelastic, and supply of Coffee is
elastic while supply of Bread is inelastic. The government imposes
the same price floor slightly above the equilibrium price in both
Bread and Coffee markets. Can you compare the Deadweight Loss in
the market for Bread and the Deadweight Loss in the market for
Coffee? Explain. In your answer, you may use figures if you find
them useful. [Maximum word limit is 80 for this question.]
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