Final answer:
When demand is extremely elastic, producers are more likely to bear the major portion of a tax, and the resulting deadweight loss is typically larger due to a significant reduction in the quantity sold.
Step-by-step explanation:
If demand is extremely elastic, it is likely that producers will bear most of the burden of a tax and that the deadweight loss (DWL) will be relatively large. Elastic demand means that consumers are very responsive to price changes, so if the price goes up because of a tax, consumers will significantly reduce the quantity demanded.
Since producers cannot easily pass the tax on to consumers through higher prices without losing a substantial number of sales, they are more likely to bear the cost of the tax themselves. Moreover, when demand is elastic, any imposition of a tax tends to result in a larger deadweight loss, because the quantity sold decreases significantly, leading to a considerable loss in economic efficiency.
If demand is extremely elastic, it is likely that consumers will bear most of the burden of a tax and that the deadweight loss (DWL) will relatively decrease. When demand is highly elastic, it means that consumers are very sensitive to price changes. Therefore, if a tax is imposed, consumers are likely to decrease their quantity demanded significantly, and as a result, the burden of the tax falls mainly on them. This also leads to a decrease in the deadweight loss, which represents the loss of economic efficiency caused by the tax.