The deadweight loss from a tax per unit of good will be smallest 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 smallest in markets where either supply or demand (or both) is inelastic because the quantity traded is less responsive to price changes, leading to smaller efficiency losses from a tax.

The Deadweight Loss from a Tax Per Unit of Good