Suppose the Government is looking to raise revenue by taxing a market and has hired you for advice on minimising the deadweight loss of taxation.In identifying which market to tax, you would advise the government to choose a market where:

Question

Quizplus · Accepted Answer

Taxing markets where either supply or demand is highly inelastic minimizes deadweight loss because the quantity traded does not decrease significantly, thus maintaining economic efficiency.

Suppose the Government Is Looking to Raise Revenue by Taxing