Given any downward-sloping demand curve for a good,the more inelastic the supply curve,the _____ equilibrium output will fall and the _____ will be the deadweight loss when the government imposes an excise tax.

Question

Quizplus · Accepted Answer

When the supply curve is more inelastic, it means that suppliers are less responsive to price changes. Therefore, the equilibrium output will fall less because suppliers cannot easily adjust their quantity supplied. Additionally, the deadweight loss will be smaller because the tax causes less distortion in the market when supply is inelastic.

Given Any Downward-Sloping Demand Curve for a Good,the More Inelastic