Question

The deadweight loss from a tax of $2 per unit will be smallest in a market with a. elastic supply and elastic demand. b. inelastic supply and inelastic demand. c. elastic supply and inelastic demand. d. inelastic supply and elastic demand.

Answer 1

b. inelastic supply and inelastic demand

Step-by-step explanation:

Is supply and demand is inelastic, imposition of tax will not lead change in supply and demand much. So, DWL will be smallest.