Question

Explain how is the deadweight loss of a tax related to the elasticities of demand and supply?​

Answer 1

Answer:

The amount of the deadweight loss varies with both demand elasticity and supply elasticity. When either demand or supply is inelastic, then the deadweight loss of taxation is smaller, because the quantity bought or sold varies less with price. With perfect inelasticity, there is no deadweight loss.

Explanation:

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