DEMAND

53

things  being  equal,  the  destruction  of  a  large
monetary  surplus  connected  with  one  commodity ­
  is  likely  to  mean  greater  real  loss
than  the  destruction  of  a  smaller  surplus
connected  with  another  thing.  In  the  “  other
things  being  equal  is  impounded  such  a
proviso  as  the  following,  that  each  of  the  two
things  is  consumed  in  bulk  by  the  same
class  or  by  different  classes  in  about  the  same
proportions.
This  conclusion  will  instantly  suggest  some
of  the  uses  that  can  be  made  of  the  doctrine  of
consumers’  surplus.  In  taxation,  for  a  given
gain  on  the  part  of  the  Government,  one  tax
may  wipe  out  more  consumers’  surplus  than
another  tax.  The  one  that  wipes  out  least  is,
of  course,  to  be  preferred,  other  things  being
equal.  Hence  we  may  deduce  that  it  is  well,
in  the  absence  of  strong  reasons  to  the  contrary,
to  avoid  the  taxation  of  things  the  demand
for  which  is  highly  elastic,  because,  when
demand  is  of  this  kind,  a  small  tax  will  largely
reduce  the  consumption  and  so  the  consumers’
surplus.  It  is  an  equally  legitimate  inference
that  the  taxation  of  things  strongly  subject  to
increasing  returns  (which  will  be  explained  in
the  next  chapter)  is  to  be  avoided,  because  the
taxation  of  such  things  raises  price  by  substantially ­
  more  than  the  amount  of  the  tax,