The deadweight loss from a $3 tax will be largest in a market with
A)inelastic supply and elastic demand.
B)inelastic supply and inelastic demand.
C)elastic supply and elastic demand.
D)elastic supply and inelastic demand.

Question

Quizplus · Accepted Answer

Deadweight loss is larger when both supply and demand are elastic because the quantity traded decreases significantly in response to the tax, leading to a larger loss in total welfare.

The Deadweight Loss from a $3 Tax Will Be Largest