deadweight loss measures the inefficiency as the loss of relative prices.
deadweight loss measures the inefficiency as the loss of relative prices.
deadweight loss measures the inefficiency as the loss of?
relative prices
a tax cause a deadweight loss because it causes buyers and sellers to change their behavior. buyers tend to consume less when the tax raises the price. when the tax lowers the price received by sellers, they in turn produce less. as a result, the overall size of the market decreases below the optimum equilibrium. the elasticities of supply and demand determine to what extent the tax distorts the market outcome. as the elasticities of supply and demand increase, so does the deadweight loss resulting from a tax.









































section::::deadweight loss of taxation.:how deadweight loss changes as taxes vary.
deadweight loss
taxes may be changed by the government or policymakers at different levels. for instance, when a low tax is levied, the deadweight loss is also small (compared to a medium or high tax). an important consideration is that the deadweight loss resulting from a tax increases "more quickly" than the tax itself; the area of the triangle representing the deadweight loss is calculated using the area (square) of its dimension. where a tax increases linearly, the deadweight loss increases as the square of the tax increase. this means that when the size of a tax doubles, the base and height of the triangle double. thus, doubling the tax increases the deadweight loss by a factor of 4.
deadweight loss