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Healthy competition among businesses is needed for a thriving market.Unfortunately, it is inevitable to experience loss when making business ventures,whetherit isthrough government setbacks orsimply bymakingpoor decisions.Boyce describes deadweight loss as when a trade is not made due to adisequilibriumin supply and demand, a reduction in the producer or consumer surplus, and is typically a result of government intervention that has shifted the supply and demand curve, (Boyce, 2021).A common example ofexperiencinga deadweightloss isan oversupply in the market. If a baker has a surplus of bread and only sells 80 percent of his product that day, the other 20 percentof the bread will rot and become a loss.As mentioned by Boyce,dead wight loss is often the result of governmentpoliciessuch as price floors, price ceilings, taxation, and subsidies, alteringthe incentives for the producer to supply and the consumer to demand, (Boyce, 2021). For the local economy to flourish, it is essential for the government intervention of taxes to create revenue.Along with taxes comes the burden of bearing them.Understanding the division of a tax burden between stakeholders is described by Kaganas tax incidence, (Kagan 2021). Priceelasticityplays a key role in understanding tax incidence among parties.According to Kagan, when supply is more elastic than demand, the tax burden falls on the buyers, alternatively, if the demand is more elasticthan supply, producers will bear the cost of the tax, (Kagan, 2021).Possessinga firm understanding of deadweightlossand its causes, along with balancing tax incidence will yield a healthyreputation in a competitive market environment. References: Boyce, P. (2021, April 14).Deadweight loss Definition (3 examplesAndcauses).BoyceWire.https://boycewire.com/deadweight-loss-definition-and-examples/. Kagan, J. (2021, May 19).Understanding tax incidence. Investopedia.https://www.investopedia.com/terms/t/tax_incidence.asp. less
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