The demand for beer is more elastic than the demand for milk.

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Deadweight loss is the loss of total surplus arising out of a distortion in the market due to imposition of a tax.

Explanation
Since the demand for beer is more elastic than milk, imposing a tax on beer would result in a larger deadweight loss in the market.

More elastic demand implies a greater degree of responsiveness of a change in the quantity demanded due to a certain price change.

As price paid by buyers increases due to imposition of a tax in the market for beer, the quantity of beer demanded will shrink by a larger magnitude than the case where the tax is imposed on milk. This is because the demand curve for milk is more inelastic than the demand for beer, which results in a relatively larger reduction of total surplus in the market for beer as compared to the market for milk.

The greater the elasticity of demand, the larger the deadweight loss of a tax.

Therefore, a tax on beer would have a larger deadweight loss when the demand for beer is more elastic than the demand for milk.

Verified Answer
A tax on beer would result in a larger deadweight loss because the more elastic the demand curve is, the greater is the deadweight loss of a tax.