We can see the inefficiencies created by a sales tax because

Question

Quizplus · Accepted Answer

Both answers A and B are correct. A sales tax creates a deadweight loss and an excess burden, which leads to inefficiencies in the market. The deadweight loss is the loss of total surplus that occurs when the quantity of goods bought and sold is below the optimal level. The excess burden refers to the additional costs, beyond the tax revenue, that individuals and firms bear as they change their behavior in response to the tax. Thus, a sales tax can reduce economic welfare, distort market outcomes, and create inefficiencies.

We Can See the Inefficiencies Created by a Sales Tax