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Chapter 3: Q.35 (page 78)

What is deadweight loss?

Short Answer

Expert verified

Deadweight loss is the loss in the social overload that happens when a demand produces an inefficient amount. This happens when supply and market are not in equilibrium.

Step by step solution

01

Concept introduction

Deadweight loss refers to the help failed by clients and producers when demands accomplish not work efficiently.

02

Explanation

The period deadweight means that these are benefits inaccessible to any group. Both producers and customers fail to oversupply because fewer goods are made and finished.

03

Formula

Deadweight Loss=5×(P2-P1)×(Q1-Q2)

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Most popular questions from this chapter

In an analysis of the market for paint, an economist discovers the facts listed below. State whether each of these changes will affect supply or demand, and in what direction.

  1. There have recently been some important cost-saving inventions in the technology for making paint.
  2. Paint is lasting longer, so that property owners need not repaint as often.
  3. Because of severe hailstorms, many people need to repaint now.
  4. The hailstorms damaged several factories that make paint, forcing them to close down for several months.

Suppose there is a soda tax to curb obesity. What should a reduction in the soda tax do to the supply of sodas and to the equilibrium price and quantity? Can you show this graphically? Hint: Assume that the soda tax is collected from the sellers.

What is the difference between the demand and the quantity demanded of a product, say milk? Explain in words and show the difference on a graph with a demand curve for milk.

Explain why the following statement is false: “In the goods market, no buyer would be willing to pay more than the equilibrium price.”

How does a price floor set above the equilibrium level affect quantity demanded and quantity supplied?
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