Question

When considering sales tax, more elastic demand results in _____

a. more deadweight loss and less revenue

b. less deadweight loss and less revenue

c. less deadweight loss and more revenue

d. more deadweight loss and more revenue

e. less distortion and less revenue

Answer 1

a. more deadweight loss and less revenue

Step-by-step explanation:

Sales tax increases the price of a good or service.

Demand is elastic if a small change in price has a greater effect on the quantity demanded.

If a sales tax is imposed on a good or service, the price of the good would increase and become more expensive. This would lead to a fall in quantity demanded and an increase in deadweight loss and a loss of revenue.

I hope my answer helps you