Deadweight loss

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Deadweight loss is an economic loss to the public without any offsetting gain.

Specifically, a deadweight loss is the loss in efficiency that a society suffers as a result of firms setting their monopoly prices greater than marginal cost (P > MC).

The loss represents the extra value that consumers obtain goods and services that is worth more to them than the price they paid. For example, you may buy lunch for $10 but you may be so hungry that it is really worth $15 to you. If the price of that lunch were raised by a monopoly to $16, then you wouldn't buy the lunch and your individual "deadweight loss" from that monopoly price would be $5 compared to the free market.

In other words, the deadweight loss is due to the loss in value to society of output not produced.

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