Respuesta :
Deadweight loss is strictly increasing in the level of a price floor and deadweight loss is strictly increasing in the level of a price ceiling.
What is Deadweight loss?
The loss of overall welfare or the social surplus as a result of factors such as taxes or subsidies, price ceilings or floors, externalities, and monopoly pricing is known as "deadweight loss." It is the additional burden brought about by the loss of advantage to the trade's participants, who might be either producers, consumers, or the government.
It is conceivable that the new equilibrium price that is determined for the transaction will be higher and that some of this burden will be transferred to the consumer if the producer is subjected to a specific tax for each unit of the commodity he sells.
Both sides' trade will decline as a result of this. The term "deadweight loss of taxation" refers to the loss of welfare attributable to the switch from an earlier, more efficient market mechanism to this one. As a result of the inefficient market outcomes, resources are wasted or underutilised.
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