This graph illustrates the market for groceries with and without a per unit tax:
The deadweight loss of this tax is

Question

This graph illustrates the market for groceries with and without a per unit tax: 
The deadweight loss of this tax is

Quizplus · Accepted Answer

The deadweight loss of a per unit tax is the reduction in economic efficiency that occurs when the tax is imposed. It can be calculated as the area of the triangle between the supply and demand curves, up to the point where the tax is imposed. In the graph, this area is relatively small because the demand for groceries is relatively inelastic - people need groceries regardless of the price, so they will continue to buy them even if the price increases due to the tax. Therefore, the answer is (B) relatively small because it is a tax on a necessity.

This Graph Illustrates the Market for Groceries with and Without