The governor wants to levy a $1 excise tax on a product but wants to minimize the deadweight loss.The deadweight loss will be LEAST when the demand curve is _____ and the supply curve is _____.

Question

Quizplus · Accepted Answer

The deadweight loss will be least when both the demand and supply curves are inelastic. This is because inelastic demand and supply mean that the quantity demanded or supplied changes very little in response to price changes, resulting in a smaller deadweight loss from the tax.

The Governor Wants to Levy a $1 Excise Tax on a Product