Main menu For students For teachers Explore our subjects Student events & courses

Explore

More for students
Sign in

Free Economics resources

Topic Videos

Deadweight Loss of Economic Welfare Explained

Level:
A-Level, IB Diploma
Board:
AQA, Edexcel, Eduqas, IB, OCR, WJEC

Last updated 14 Jan 2018

Share this content:

The idea of a deadweight loss relates to the consequences for economic efficiency when a market is not at an equilibrium. The concept links closely to the ideas of consumer and producer surplus.

Deadweight Loss of Economic Welfare Explained

Deadweight loss is relevant to any analytical discussion of the:

Impact of indirect taxes and subsidies
Introduction of maximum and minimum prices
The economic effects of trade tariffs and quotas
Consequences of monopoly power for consumer welfare

But keep in mind:
  1. Taxes are often justified on grounds of market failure
  2. Freely functioning markets often fail to take into account the effects of externalities from production and consumption
  3. Try to analyse the effects of an intervention in terms of the likely net effect on economic and social welfare
Share this content:

You might also like

Enrichment Economics: Why the UK High Street Wants to Sell You a Package

14th July 2026

In the News Teaching Activity – Has nationalisation improved South West Railway? (June 2026)

18th June 2026

In the News Teaching Activity – Is Live Nation-Ticketmaster abusing its monopoly power? (Apr 2026)

27th April 2026

UK Fuel Market: Rocket and Feather Pricing: A Case Study in Market Failure

19th March 2026

In the News Teaching Activity – Could the UK deepen its trading relationship with the EU? (Feb 2026)

12th February 2026

In the News Teaching Activity – Should the gambling tax be increased? (Oct 2025)

27th October 2025

In the News Teaching Activity – US tariffs are affecting Chinese e-commerce (May 2025)

15th May 2025

In the News Teaching Activity – the environmental costs of fast fashion and how these can be reduced (May 2025)

1st May 2025