The governor wants to levy a $1 excise tax on some good-he doesn't care which-but he does want 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

Deadweight loss is minimized when both demand and supply are inelastic because the quantity traded changes less, leading to a smaller loss in total welfare.

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