A tax on a market for a good will not generate any DWL if the tax is levied on buyers. demand is perfectly elastic. the tax is levied on sellers. demand is perfectly inelastic.
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In this case, when the tax is imposed, the price of the good will increase for buyers. However, since the demand is perfectly elastic, buyers will simply stop purchasing the good altogether because they can easily find substitutes or alternatives. As a result, Show more…
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