Why do economists prefer when the government introduces taxes inmarkets where supply and demand are...

Why do economists prefer when the government introduces taxes in markets where supply and demand are more inelastic than in markets where they are more elastic?

Expert Solution

We know that a market with elastic, demand is more receptive to changes in price, it will raise less tax income and more deadweight loss as demand would diminish by more while in a market with inelastic demand and supply, the demand and supply is less receptive to the adjustment in value which won't influence the amount by much so tax produces more income and less deadweight loss.
Economists prefer when the government introduces taxes in markets where supply and demand are more inelastic than in markets where they are more elastic because at that point the market with inelastic demand and supply curve will elevate more tax income contrasted with the market with a elastic demand and supply curve.

Rahul Sunny answered 2 years ago

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