Suppose a tax of $1 per unit is imposed on a good. The more elastic the supply of the good, other things equal, the the larger is the deadweight loss of the tax.
<h3>What Is a deadweight loss of taxation? </h3>
The measurement of loss brought on by the introduction of a new tax is referred to as the deadweight loss of taxation. This is the outcome of a new tax that is higher than what is typically paid to the taxing body of the government. A tax's impact on consumer surplus is known as "deadweight loss."
The amount of money the government makes when a tax is imposed on a good is exactly equal to the surplus that the tax causes to be lost by consumers and producers. A deadweight loss occurs when supply and demand are out of balance, leading to market inefficiencies. Deadweight losses are generally caused by an inefficient resource allocation that is brought about by a variety of interventions, including price floors, ceilings, monopolies, and taxes.
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The complete question is:
Suppose a tax of $1 per unit is imposed on a good. The more elastic the supply of the good, other things equal:
a. the smaller is the response of quantity supplied to the tax.
b. the larger is the tax burden on sellers relative to the tax burden on buyers.
c. the larger is the deadweight loss of the tax.
d. All of the above are correct
