Given any upward-sloping supply curve for a good,the more elastic the demand 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 demand is more elastic, the equilibrium output will fall more because consumers are more sensitive to price changes. This will result in a larger deadweight loss when the government imposes an excise tax because the more elastic demand means that the tax burden cannot be fully passed on to consumers in the form of higher prices, leading to a larger reduction in consumer surplus.

Given Any Upward-Sloping Supply Curve for a Good,the More Elastic