Deadweight loss
Deadweight loss is the value lost to society when a market produces less (or more) than the efficient quantity, often because of a tax, price control or monopoly. It's surplus that no one gets.
On a supply and demand graph it's the triangle between the curves, from the quantity actually traded to the equilibrium quantity.
Related terms
- Consumer surplus: Consumer surplus is the difference between what buyers would be willing to pay and what they actually pay.
- Price ceiling: A price ceiling is a legal maximum price, like rent control; a price floor is a legal minimum, like a minimum wage.
- Monopoly: A monopoly is a market with a single seller and no close substitutes, which lets it set a higher price and sell less than a competitive market would, creating deadweight loss.
- Market failure: Market failure is when a free market, left alone, doesn't produce the efficient outcome.
Guides
Practise with $10,000 in play money
Free. No real money involved.
For learning only. This isn't financial advice.