The deadweight loss from a tax of $x per unit will be smallest in a market
A)in which demand is elastic and supply is inelastic.
B)in which demand is inelastic and supply is elastic.
C)in which demand is inelastic and supply is inelastic.
D)None of the above are correct;we need to know the value of x in order to determine the answer.

Question

Quizplus · Accepted Answer

Deadweight loss is minimized when both demand and supply are inelastic because the quantity traded in the market changes less in response to the tax, leading to a smaller loss in total welfare.

The Deadweight Loss from a Tax of $X Per Unit