Question

The difference between the economic surplus when the market is at its competitive equilibrium and the economic surplus when the market is not in equilibrium is the:________.

Answer 1

Deadweight loss.

Step-by-step explanation:

Deadweight loss is a concept to characterize an economic situation where there is no free market balance, generating a loss of economic efficiency.

This is usually caused by tax hikes, artificial shortages that generate monopoly prices, external situations, binding minimum prices, and others.

Answer 2

Deadweight loss

Step-by-step explanation:

Deadweight loss can be defined as the lost economic surplus when a market is not allowed to adjust to its competitive equilibrium. The deadweight loss includes losses in both supplier and consumer surplus.

A deadweight loss happens when the equilibrium price for a good or a service cannot achieved usually due to external factors, e.g. price ceilings like rent control, specific taxes, etc.