In economics, a deadweight loss (also known as excess burden) is a permanent loss of well being to society that can occur when equilibrium for a good or service is not Pareto optimal, (that at least one individual could be made better off without others being made worse off). Deadweight loss can be thought of destroying a given quantity of a good or service in question, and in many cases natural waste in a system (like leakage from water pipes) is equivalent to, and is also called, deadweight loss. U.S. Economic Calendar Economics at the Open Directory Project Economics textbooks on Wikibooks The Economists Economics A-Z Daily analysis of economics in the news (UK focus) Institutions and organizations Bureau of Labor Statistics - from the American Labor Department Center for Economic and Policy Research (USA) National Bureau... A good in economics is any physical object (natural or man-made) or service that, upon consumption, increases utility, and therefore can be sold at a price in a market. ... Pareto efficiency, or Pareto optimality, is a central theory in economics with broad applications in game theory, engineering and the social sciences. ...

Deadweight loss can be caused (though not necessarily) by monopoly pricing (or even pricing in markets with high fixed costs), externalities or taxes or subsidies. (Case & Fair, 1999: 442). The term deadweight loss may also be referred to as the "excess burden of monopoly" or the "excess burden of taxation". In economics, a monopoly (from the Greek monos, one + polein, to sell) is defined as a persistent market situation where there is only one provider of a kind of product or service. ... Fixed costs or indirect costs are expenses that do not change in direct proportion to the activity of a business. ... An externality occurs in economics when a decision (for example, to pollute the atmosphere) causes costs or benefits to stakeholders other than the person making the decision. ... Taxes and subsidies have the effect of shifting the quantity and price of goods. ...

An important distinction should be drawn between Hicksian and Marshallian deadweight loss. The latter is related to the concept of consumer surplus, such that it can be shown that the Marshallian deadweight loss is zero where demand or supply is perfectly elastic or inelastic. Hicks analysed the situation through indifference curves and noted that when the Marshallian Demand Curve exhibits perfect inelasticity (this happens when the good is inferior and its income effect counterbalances its substitution effect), a policy or economic situation which causes a distortion in relative prices will have an income effect and that this income effect is a deadweight loss. Sir John Richard Hicks (April 8, 1904 - May 20, 1989) was one of the most important and influential economists of the twentieth century. ... Alfred Marshall Alfred Marshall (July 26, 1842–July 13, 1924), born in Bermondsey, London, England, became one of the most influential economists of his time. ... This page deals with the various forms of economic surplus, including producer, consumer, government, and social/total surplus. ... in Economics see elasticity (economics) in Materials Science the word elastomer refers to a material which is very elastic, like rubber. ... In microeconomics, an indifference curve is a graph showing combinations of two goods to which an economic agent (such as a consumer or firm) is indifferent, that is, it has no preference for one combination over the other. ... Alfred Marshall Alfred Marshall (July 26, 1842–July 13, 1924), born in Bermondsey, London, England, became one of the most influential economists of his time. ... The price of one thing (usually a good) in terms of another; ie, the ratio of two prices. ...

References

• Case, Karl E. & Fair, Ray C. (1999). Principles of Economics (5th ed.). Prentice-Hall. ISBN 0-13-961905-4.

taylor JB & Frost