Suppose the demand curve becomes more elastic, but nothing else changes, this implies that the deadweight loss from a given tax will be smaller.

Question

Quizplus · Accepted Answer

When the demand curve becomes more elastic, consumers are more responsive to price changes, leading to a larger decrease in quantity demanded for any given tax. This increases the deadweight loss because there are more transactions that do not occur due to the tax, which would have been mutually beneficial in the absence of the tax.

Suppose the Demand Curve Becomes More Elastic, but Nothing Else