Economics Consumer Surplus And Producer Surplus Questions Medium
The impact of a change in price on deadweight loss depends on the elasticity of demand and supply in the market. Deadweight loss refers to the loss of economic efficiency that occurs when the equilibrium quantity traded in a market is less than the optimal quantity.
If the demand and supply in the market are relatively inelastic, meaning that the quantity demanded and supplied do not change significantly in response to a change in price, then a change in price would have a minimal impact on deadweight loss. In this case, the market is already operating close to its optimal quantity, and any change in price would not result in a significant deviation from the efficient outcome.
On the other hand, if the demand and supply in the market are relatively elastic, meaning that the quantity demanded and supplied are highly responsive to changes in price, then a change in price would have a larger impact on deadweight loss. When the market is elastic, a change in price can lead to a significant deviation from the efficient outcome, resulting in a larger deadweight loss.
In summary, the impact of a change in price on deadweight loss depends on the elasticity of demand and supply in the market. If the market is relatively inelastic, the impact would be minimal, whereas if the market is relatively elastic, the impact would be larger.