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deadweight loss

The loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved or is artificially distorted, typically by taxes, subsidies, or price controls.
Noun

This term is a specialized technical expression used primarily in economics and public policy. It describes a specific type of inefficiency where the loss of consumer and producer surplus exceeds the revenue gained by the government through a tax, or the cost of a subsidy. It carries a negative connotation of waste and inefficiency.

Because it refers to a conceptual economic measurement, it is treated as an uncountable noun. You would not refer to "three deadweight losses" in a standard economic analysis; instead, you would discuss "the amount of deadweight loss" or "a significant deadweight loss" to describe the magnitude of the inefficiency.

Meanings

Noun

The loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved or is artificially distorted, typically by taxes, subsidies, or price controls.

The imposition of a high tax on luxury goods often results in a significant deadweight loss as consumers reduce their purchases.

Examples

The new luxury tax created a significant deadweight loss in the high end car market.

Business

The new luxury tax created a significant deadweight loss in the high end car market.

Why does this tariff cause a deadweight loss if the government collects more revenue?

School Life

Why does this tariff cause a deadweight loss if the government collects more revenue?

Monopolies often restrict output to raise prices, resulting in a deadweight loss to society.

Business

Monopolies often restrict output to raise pricesresulting in a deadweight loss to society.

I wonder if the subsidy actually helps or just increases the deadweight loss.

none

I wonder if the subsidy actually helps or just increases the deadweight loss.

Price ceilings on rent often lead to shortages and a measurable deadweight loss.

Business

Price ceilings on rent often lead to shortages and a measurable deadweight loss.

The professor explained how the triangle on the graph represents the deadweight loss.

School Life

The professor explained how the triangle on the graph represents the deadweight loss.

We need to minimize the deadweight loss associated with these regulatory burdens.

Office

We need to minimize the deadweight loss associated with these regulatory burdens.

It is a classic case of deadweight loss where neither the buyer nor the seller benefits.

Trivia

It is a classic case of deadweight loss where neither the buyer nor the seller benefits.

The inefficiency is clear when you calculate the total deadweight loss from the quota.

Business

The inefficiency is clear when you calculate the total deadweight loss from the quota.

Related Words

economicsefficiencymarkettaxsubsidymonopolyoligopolypricequantitydemandsupplyequilibriumsurplusconsumer surplusproducer surpluswelfareutilitycostbenefitinefficiencydistortioninterventionregulationtariffquotaprice ceilingprice floortaxationlevyincentiveallocationresourcescarcityopportunity costmarginal costmarginal benefitPareto efficiencyPareto optimalitysocial welfaremarket failureexternalitypublic goodcompetitionprice discriminationelasticitydemand curvesupply curvetradeoffwastelossprofitrevenueexpenditurefiscal policymonetary policydeadweightburdenoptimizationequilibrium priceunderproductionoverproduction
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