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Definitions from the Web

Dead Weight Loss

Definition: Dead Weight Loss refers to the economic loss resulting from inefficient allocation of resources in a market, usually caused by market distortions such as taxes, subsidies, or price controls. It represents the reduction in social welfare that occurs when the equilibrium quantity of a good or service is not maximized.

Example:

• The implementation of a tax on sugary beverages led to a dead weight loss as consumers reduced their overall consumption, resulting in a decline in total surplus.
• When the price ceiling was set below the equilibrium level in the housing market, it created a dead weight loss, causing a shortage of available housing units.
• A monopoly in the pharmaceutical industry can lead to dead weight loss as the market power allows the company to set high prices, reducing consumer surplus.

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