Use the following to answer question:
-(Figure: Tax Incidence)Use Figure: Tax Incidence.Based on the figure,the deadweight loss of an excise tax is likely to be greater in panel _____ than in panel _____.

Question

Use the following to answer question: 
-(Figure: Tax Incidence)Use Figure: Tax Incidence.Based on the figure,the deadweight loss of an excise tax is likely to be greater in panel _____ than in panel _____.

Quizplus · Accepted Answer

The deadweight loss of an excise tax is greater in markets with more elastic demand or supply because the quantity traded is more sensitive to price changes. Panel A, with more elastic demand, would experience a greater deadweight loss compared to Panel B, where demand is less elastic.

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