To minimize deadweight loss,excise taxes should be levied on goods with inelastic demand and inelastic supply rather than goods with elastic demand and elastic supply.

Question

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When an excise tax is levied on goods with inelastic demand and inelastic supply, the quantity demanded and supplied do not change significantly in response to the tax, resulting in a smaller deadweight loss. On the other hand, when the tax is imposed on goods with elastic demand and elastic supply, the quantity demanded and supplied are more responsive to changes in price, resulting in a larger deadweight loss.

To Minimize Deadweight Loss,excise Taxes Should Be Levied on Goods