What is meant by deadweight loss? Why does a price ceiling usually result in a deadweight loss?
Deadweight loss considers to the benefits lost to either consumers or producers while markets do not operate proficiently.The phrase deadweight denotes that these are benefits not available to any party. A price ceiling will be inclined to result in a deadweight loss as at any price below the market equilibrium price, quantity supplied will be below the market equilibrium quantity supplied, resultant in a loss of surplus to producers. Consumers will purchase less as compared to the market equilibrium quantity, resultant in a loss of surplus to consumers. Consumers will as well purchase less as compared to the quantity they demand at the price set by the ceiling. The extra lost by consumers and producers is not captured by either group, and surplus not captured through market participants is deadweight loss.