Elasticities and the excess burden

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We suggested above that elasticities are important in determining the size of the deadweight loss of a tax. Going back to Figure 5.3, suppose that the demand curve through were more elastic (with the same supply curve, for simplicity). The post-tax equilibrium would now yield a lower value and a price between and . The resulting tax revenue raised and the magnitude of the excess burden would differ because of the new elasticity.