What is the primary effect of taxation on market efficiency as it relates to deadweight loss?

Taxation can make markets less efficient because it creates something called deadweight loss. This happens when taxes change the way buyers and sellers behave, leading to fewer transactions than would happen without the tax. For example, if a tax is placed on a popular product, some buyers might decide to buy less of it because it costs more, while some sellers might choose not to sell it at all. This reduction in buying and selling means that the market is not operating at its full potential, resulting in a loss of economic welfare for both consumers and producers. Therefore, while taxes can help fund important services, they can also lead to inefficiencies in the market.