Textbook Guide Economics: Deadweight Loss, Laffer Curve, Economic Equilibrium

• School: UTSG
• Department: Economics
• Course: ECO101H1
• Professor: all

Document Summary

The determinants of the deadweight loss: as the elasticities of supply and demand increase, the potential deadweight loss of a tax increases. When the supply of a market is inelastic, the deadweight loss that could be caused by a tax is relatively small. When the supply of a market is elastic, the deadweight loss that could be caused by a tax is relatively large. When the demand of a market is inelastic, the deadweight loss that could be caused by a tax is relatively small. When the demand of a market is elastic, the deadweight loss that could be caused by a tax is relatively large. Deadweight losses occur because they prevent buyers and sellers from obtaining some of the benefits resulting from trade: choose the word or phrase that best completes the sentence. The size of a tax and the deadweight loss are ________ correlated: positively, negatively, not, tax revenue and elasticity, is the correct answer.