Terms Beginning With 'd'

Deadweight Loss

  • January 29, 2020
  • Team Kalkine

When the demand and supply (fundamental forces steering the economy) become out of equilibrium, a loss of economic efficiency occurs, which is referred to as deadweight loss. It can also be understood by loss of the social surplus or total welfare, that arises due to causes like price ceilings or floors, taxes or subsidies, monopoly pricing and externalities.

While some members of society might gain from the economic imbalance resulting in deadweight loss, others are usually negatively affected by a shift away from equilibrium.

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