When evaluating the size of the deadweight loss due to a tax,what do we know
A)the greater the elasticities of supply and demand, the greater the deadweight loss
B)the smaller the elasticities of supply and demand, the greater the deadweight loss
C)the smaller the decrease in both quantity demanded and quantity supplied, the greater the deadweight loss
D)the greater the elasticities of supply and demand, the smaller the deadweight loss

Question

Quizplus · Accepted Answer

Deadweight loss is the loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved due to a market intervention, such as a tax. The size of the deadweight loss is influenced by various factors, including the elasticities of supply and demand. If both supply and demand are highly elastic (i.e., responsive to changes in price), a tax will lead to a significant decrease in the quantity sold, and the deadweight loss will be greater. Conversely, if either supply or demand is inelastic, the quantity sold will not be significantly affected, and the deadweight loss will be smaller.

When Evaluating the Size of the Deadweight Loss Due to a Tax,what