In economics, deadweight loss describes the loss of total economic welfare when a market produces too little or too much.
The loss occurs when mutually beneficial trades do not happen, or when resources are used for trades whose costs exceed their benefits. Taxes, price controls, monopolies, externalities, and binding quotas can all create deadweight loss by moving output away from the efficient level.
On a standard supply-and-demand graph, deadweight loss is commonly shown as a triangular area between the demand and supply curves. The exact shape depends on the curves and the policy or market failure involved. It is different from a transfer: money shifted from buyers to sellers, or from taxpayers to producers, is not automatically lost welfare. Economists usually distinguish the lost gains from trade from changes in who receives income.
The concept is associated with welfare economics and is often used to compare taxes, regulations, and market structures.