On which factor does the amount of deadweight loss from taxes depend
A)the price elasticity of demand and supply
B)how much of the tax revenue the government plans to spend
C)the product the government is planning to tax
D)market price before the tax was levied

Question

Quizplus · Accepted Answer

The amount of deadweight loss from taxes depends on the price elasticity of demand and supply. The more elastic the demand and supply, the higher the deadweight loss. This is because a tax will cause a greater change in quantity demanded and supplied when the markets are more elastic, leading to a larger loss of mutual benefit from trade.

On Which Factor Does the Amount of Deadweight Loss from Taxes