Im trying to explain the concept of deadweight loss. As well as answer the questions: Why does...

Question

Im trying to explain the concept of deadweight loss. As well as answer the questions: Why does taxing a product lead to deadweight loss? Use an appropriate graph to explain why the deadweight loss is greater the more elastic the demand for a product.

David · Accepted Answer

Dead weight loss is the loss of consumer surplus and producer surplus due to the imposition of a tax on 
a product. 
The taxing of a product causes dead weight loss because taxation leads to a decline in the quantity 
traded (bought and sold) of the product. The greater the decline in quantity traded the greater is the 
dead weight loss of taxation.

Im trying to explain the concept of deadweight loss. As well as answer the questions: Why does taxing a product lead to deadweight loss? Use an appropriate graph to explain why the deadweight loss is...

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment