The Economist defines deadweight loss (or deadweight cost) as the extent to which the value and impact of a tax, tax relief, or subsidy is reduced because of side effects. (See Tax Revenue and Deadweight Loss.)
However, as noted by Alex Tabarrok (reference below) the term can also be applied to the loss associated with external costs, as illustrated below. (See Externality.)
Atlas topic, subject, and course
The Economist, Deadweight cost/loss, Economics A-Z, at http://www.economist.com/economics-a-to-z/d#node-21529719, accessed 6 May 2016.
Alex Tabarrok, minute 5:56 – 6:20 of An Introduction to Externalities (12-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/externalities-definition-pigovian-tax, accessed 6 May 2016.
Page created by: Ian Clark, last modified 6 May 2016.