Editing Deadweight loss (section)

=== Variation based on taxes ===
Taxes may be changed by the government or policymakers at different levels. For instance, when a low tax is levied, the deadweight loss is also small (compared to a medium or high tax). An important consideration is that the deadweight loss resulting from a tax increases ''more quickly'' than the tax itself; the area of the triangle representing the deadweight loss is calculated using the area (square) of its dimension. Where a tax increases linearly, the deadweight loss increases as the square of the tax increase. This means that when the size of a tax doubles, the base and height of the triangle double. Thus, doubling the tax increases the deadweight loss by a factor of 4.

The varying deadweight loss from a tax also affects the government's total tax revenue. Tax revenue is represented by the area of the rectangle between the supply and demand curves. When a low tax is levied, tax revenue is relatively small. As the size of the tax increases, tax revenue expands. However, when a much higher tax is levied, tax revenue eventually decreases. The higher tax reduces the total size of the market; Although taxes are taking a larger slice of the "pie", the total size of the pie is reduced. Just as in the nail example above, beyond a certain point, the market for a good will eventually decrease to zero.<ref name=":0" />