When both supply and demand are price elastic, taxes tend to create _____ deadweight loss and _____ tax revenue collected than when one or both curves are inelastic.

Question

Quizplus · Accepted Answer

When both supply and demand are price elastic, taxes tend to create larger deadweight loss because consumers and producers are more responsive to price changes, leading to significant reductions in quantity traded. This responsiveness also results in less tax revenue collected, as the tax-induced price increase significantly reduces the quantity bought and sold.

When Both Supply and Demand Are Price Elastic, Taxes Tend