Deadweight Loss
Definition
Deadweight loss refers to the economic inefficiency that occurs when the allocation of goods and services is not at the socially optimal point, resulting in a loss of total surplus.
Related terms
Socially Optimal Point: The socially optimal point is the allocation of goods and services that maximizes total surplus, where marginal benefit equals marginal cost.
Excess Burden: Excess burden is another term for deadweight loss, representing the welfare loss caused by market inefficiencies.
Tax Incidence: Tax incidence refers to how the burden of a tax is distributed between buyers and sellers, which can lead to deadweight losses if it distorts incentives.
"Deadweight Loss" appears in:
Subjects (1)
AP Macroeconomics
Study guides (9)
AP Microeconomics - 2.7 Market Disequilibrium and Changes in Equilibrium
AP Microeconomics - 2.8 The Effects of Government Intervention in Markets
AP Microeconomics - 2.9 International Trade and Public Policy
AP Microeconomics - 4.1 Introduction to Imperfectly Competitive Markets
AP Microeconomics - 4.3 Price Discrimination
AP Microeconomics - 4.4 Monopolistic Competition
AP Microeconomics - 6.1 Socially Efficient and Inefficient Market Outcomes
AP Microeconomics - 6.2 Externalities
AP Microeconomics - 6.4 The Effects of Government Intervention in Different Market Structures
Additional resources (2)
AP Microeconomics - Unit 2 Overview: Supply and Demand
AP Microeconomics - Unit 4 Overview: Imperfect Competition
Practice Questions (2)
Which of the following describes the deadweight loss associated with an excise tax?
What happens to the deadweight loss when a per-unit tax is imposed on a monopoly with a negative externality?
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Resources
Cram Mode
AP Score Calculators
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Glossary
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Help Center
© 2024 Fiveable Inc. All rights reserved.
AP® and SAT® are trademarks registered by the College Board, which is not affiliated with, and does not endorse this website.