Final answer:
Deadweight loss refers to the loss in economic efficiency due to an inefficient quantity, while welfare loss encompasses deadweight loss and extends to non-economic impacts. Deadweight loss occurs when the economy produces below the socially optimal level, resulting in a decrease in total surplus. Welfare loss includes both economic and non-economic factors that affect well-being.
Step-by-step explanation:
The difference between deadweight loss and welfare loss lies in their scope and measurement. Deadweight loss refers to the loss in economic efficiency when the economy produces at an inefficient quantity.
It represents the decrease in total surplus and occurs when the quantity supplied or demanded is different from the socially optimal level. Welfare loss, on the other hand, encompasses deadweight loss but also includes any reduction in well-being beyond the economic realm, such as environmental or social impacts.