Describe the concept of deadweight loss.

Describe the concept of deadweight loss.

Deadweight loss refers to the loss of economic efficiency that occurs when the equilibrium quantity of a good or service is not produced or consumed due to market distortions, such as taxes, subsidies, or price controls. It represents the reduction in total surplus or societal welfare caused by market inefficiencies. Deadweight loss occurs when the quantity of a good or service traded in the market is less than the socially optimal quantity, resulting in a loss of consumer and producer surplus.