For a given supply curve, the more elastic the demand, the _____ the tax incidence on consumers and the _____the deadweight loss will be.
A) higher; larger
B) higher; smaller
C) lower; larger
D) lower; smaller

Question

Quizplus · Accepted Answer

When demand is more elastic, consumers are more responsive to price changes, leading to a lower tax incidence on them and a larger deadweight loss due to reduced quantity traded.

For a Given Supply Curve, the More Elastic the Demand