Deadweight loss is value that disappears entirely: neither consumers, producers nor the government gets it. It is larger when demand and supply are more elastic.
How to use the Deadweight Loss Calculator
- Equilibrium quantity
- Quantity after intervention
- Price paid by buyers
- Price received by sellers
Results update as you type, and every field accepts the units shown in its menu.
How it works
Enter the equilibrium quantity, the quantity after the intervention, and the price buyers pay and sellers receive after it.
Inputs explained
| Field | What to enter |
|---|---|
| Equilibrium quantity | A number |
| Quantity after intervention | A number |
| Price paid by buyers | Amount in your currency |
| Price received by sellers | Amount in your currency |
What each result means
- Deadweight loss = 0.5×abs([Price paid by buyers] – [Price received by sellers])×abs([Equilibrium quantity] – [Quantity after intervention])
- Price wedge = abs([Price paid by buyers] – [Price received by sellers])
- Tax revenue (if a tax) = abs([Price paid by buyers] – [Price received by sellers])×[Quantity after intervention]
Example values
How the main result changes when Equilibrium quantity changes and everything else stays at the example values above:
| Equilibrium quantity | Deadweight loss |
|---|---|
| 500 | 450 |
| 750 | 75 |
| 1,000 | 300 |
| 1,250 | 675 |
| 1,500 | 1,050 |
| 2,000 | 1,800 |
Formula
Deadweight loss = ½ × (price buyers pay − price sellers receive) × (equilibrium quantity − new quantity)
For a tax: DWL = ½ × tax per unit × reduction in quantity
Worked example
Inputs: Equilibrium quantity: 1,000; Quantity after intervention: 800; Price paid by buyers: $12; Price received by sellers: $9.
Results: Deadweight loss = $300.00; Price wedge = $3.00; Tax revenue (if a tax) = $2,400.00.
Frequently asked questions
What is deadweight loss?
The loss of total welfare when trades that would benefit both sides don't happen.
What causes deadweight loss?
Taxes, subsidies, price controls and monopoly pricing.
Does a bigger tax cause more deadweight loss?
Yes, roughly with the square of the tax.