Deadweight loss
Definition. Deadweight loss is the reduction in total economic welfare that occurs when a market produces at an output away from the allocatively efficient level, so that mutually beneficial transactions fail to take place. It represents surplus that is lost to society rather than transferred between parties.
A monopoly restricting output below the competitive level creates a deadweight loss, as do taxes, subsidies and price controls. On a diagram it appears as a welfare triangle.
This term belongs to Monopoly in A Level Economics. Read the full chapter for the diagrams, worked examples and exam technique.
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