The more price-elastic the demand of a taxed item, the lower the excess burden of a tax on the sale of that item.

Question

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The more price-elastic the demand for a taxed item, the higher the excess burden of the tax, because consumers are more responsive to price changes and will significantly reduce their quantity demanded, leading to greater distortions in the market and a higher excess burden.

The More Price-Elastic the Demand of a Taxed Item, the Lower