Explain whether an increase in the supply elasticity raises or lowers deadweight loss

The increase in elasticity of supply or demand does increase the magnitude of the dead weight loss. This is because, greater elasticity shows that the price will lead to greater changes in the quantity supplied. Since the magnitude of change in quantity supplied changes with greater intensity, hence the dead weight loss in case of greater elasticity of supply curve will increase. With perfect inelasticity, there is no dead weight loss.

This can be shown through the following graphs:

The first image shows the dead weight loss which is represented by the red shaded area, in case of a relatively inelastic supply and the second graph shows the dead weight loss in case of relatively elastic supply curve. The magnitude of the dwl is greater in case of elastic supply than in case of inelastic supply curve.

please see the attached file for the complete solution