Deadweight Loss Calculator

Calculate the economic inefficiency caused by market distortions such as taxes, price controls, or monopoly pricing.

Market Parameters

Initial Quantity

Final Quantity

Initial Price ($)

Final Price ($)

Calculation Method

Method

Deadweight Loss Analysis

Deadweight Loss

Quantity Reduction

Price Change

Calculation Details

Initial Consumer Surplus:

Final Consumer Surplus:

Initial Producer Surplus:

Final Producer Surplus:

Total Deadweight Loss:

Understanding Deadweight Loss

What is Deadweight Loss?

Deadweight loss represents the economic efficiency lost when the equilibrium outcome is not achieved. It occurs when supply and demand are not in balance, typically due to market interventions like taxes, subsidies, price controls, or monopoly pricing.

Calculation Methods

Triangle Method: DWL = 0.5 × (Price Change) × (Quantity Change)
Elasticity Method: Uses price elasticity to estimate quantity response
Tax-Specific: Accounts for tax revenue in the welfare analysis

Common Causes

Taxes and subsidies
Price floors and ceilings
Monopoly pricing
Externalities
Market regulations

Interpretation

A larger deadweight loss indicates greater economic inefficiency. Policymakers often weigh the social benefits of interventions against the deadweight loss they create.

Deadweight Loss Calculator