Deadweight loss

Deadweight loss is the inefficiency caused by, for example, a tax or monopoly pricing. The diagram below shows a deadweight loss (labeled "gone") caused by a sales tax.

Deadweight loss
The net loss in economic welfare that is caused by a tariff or other source of distortion, defined as the total losses to those who lose, minus the total gains to those who gain.

Deadweight Loss. The net cost to society due to market imperfections or government interventions such as trade restrictions --i.e., losses by consumers or producers that are not offset by gains elsewhere, such as increased government revenues.

Deadweight loss of an indirect tax - The loss of consumer surplus plus producer surplus from the imposition of an indirect tax.

DEADWEIGHT LOSS: A net loss in social welfare that results because the benefit generated by an action differs from the foregone opportunity cost.

Deadweight Loss
The costs to society created by market inefficiency. Mainly used in economics, deadweight loss can be applied to any deficiency caused by an inefficient allocation of resources.

deadweight loss the loss in producer and consumer surplus due to an inefficient level of production. (7, 10) ...

The reason is that fines are transfers and do not create deadweight losses (i.e., losses to some that are not gains to others); imprisonment, on the other hand, ...

Taxes generally reduce economic efficiency by introducing a deadweight loss. In a competitive market, the price of a particular economic good adjusts to ensure that all trades which benefit both the buyer and the seller of a good occur.

Although they can solve the free rider problem, the downside of these laws is that they create a monopoly (often with significant market power) and (almost always) cause a deadweight loss.

The welfare effect of a prohibitive tariff is analogous to a non-prohibitive tariff, in that suppliers gain and demanders lose. However, there is no tariff revenue, since imports are zero, and as a result the deadweight loss from the tariff is ...

See also: Equilibrium, Population, Saving, Welfare, Perfect competition