The event that will NOT generate deadweight loss in the market for airline tickets is "A. Recession causing incomes to fall."

Here's why:

A. Recession causing incomes to fall: This is a change in market demand, not a distortion of the market. People have less income, so they demand less of many goods, including airline tickets. The market can adjust to this new level of demand without creating a deadweight loss.

B. A quota on the number of airline tickets allowed to be sold every year: This is a type of price control that restricts the quantity of goods that can be sold. This creates a shortage, which leads to a deadweight loss because the market is not able to reach an equilibrium where supply equals demand.

C. Price ceiling set below the equilibrium price: This is another type of price control. When the price is set below the equilibrium, it creates a shortage because the quantity demanded exceeds the quantity supplied. This also leads to a deadweight loss.

D. Excise tax put on airline tickets: Taxes create a wedge between the price buyers pay and the price sellers receive, which distorts the market outcome. This leads to a deadweight loss because the quantity of tickets sold is less than the equilibrium quantity.

Question

The event that will NOT generate deadweight loss in the market for airline tickets is "A. Recession causing incomes to fall."

Here's why:

A. Recession causing incomes to fall: This is a change in market demand, not a distortion of the market. People have less income, so they demand less of many goods, including airline tickets. The market can adjust to this new level of demand without creating a deadweight loss.

B. A quota on the number of airline tickets allowed to be sold every year: This is a type of price control that restricts the quantity of goods that can be sold. This creates a shortage, which leads to a deadweight loss because the market is not able to reach an equilibrium where supply equals demand.

C. Price ceiling set below the equilibrium price: This is another type of price control. When the price is set below the equilibrium, it creates a shortage because the quantity demanded exceeds the quantity supplied. This also leads to a deadweight loss.

D. Excise tax put on airline tickets: Taxes create a wedge between the price buyers pay and the price sellers receive, which distorts the market outcome. This leads to a deadweight loss because the quantity of tickets sold is less than the equilibrium quantity.

Knowee AI · Accepted Answer

The event that will NOT generate deadweight loss in the market for airline tickets is "A. Recession causing incomes to fall."

Here's why:

A. Recession causing incomes to fall: This is a change in market demand, not a distortion of the market. People have less income, so they demand less of many goods, including airline tickets. The market can adjust to this new level of demand without creating a deadweight loss.

B. A quota on the number of airline tickets allowed to be sold every year: This is a type of price control that restricts the quantity of goods that can be sold. This creates a shortage, which leads to a deadweight loss because the market is not able to reach an equilibrium where supply equals demand.

C. Price ceiling set below the equilibrium price: This is another type of price control. When the price is set below the equilibrium, it creates a shortage because the quantity demanded exceeds the quantity supplied. This also leads to a deadweight loss.

D. Excise tax put on airline tickets: Taxes create a wedge between the price buyers pay and the price sellers receive, which distorts the market outcome. This leads to a deadweight loss because the quantity of tickets sold is less than the equilibrium quantity.

Question

Solution

Similar Questions

Upgrade your grade with Knowee