Deadweight Loss Calculator

Harberger Welfare Economics & Deadweight Loss (DWL) Standards

Deadweight Loss (DWL) (also called allocative inefficiency or excess burden) represents the loss in total social welfare (consumer surplus plus producer surplus) that is not recouped as government tax revenue or monopoly profits:

• Fundamental Harberger Triangle Formula:

DWL = (1) / (2) × Tax Wedge × Δ Q = (1) / (2) × (P_buyer - P_seller) × (Q_equilibrium - Q_taxed)

• Tax Revenue: Tax Wedge × Q_1

• Consumer Surplus Loss (Δ CS): (P_1 - P_0) × Q_1 + (1) / (2)(P_1 - P_0)(Q_0 - Q_1)

• Producer Surplus Loss (Δ PS): (P_0 - P_2) × Q_1 + (1) / (2)(P_0 - P_2)(Q_0 - Q_1)

• Total Social Welfare Loss: Δ CS + Δ PS - Government Revenue = DWL

How to Use This Calculator

Enter your Original Equilibrium Price P0 () (e.g. 50.00), Original Equilibrium Quantity Q0 (e.g. 1000), New Buyer Price P1 () (e.g. 60.00), New Seller Price P2 () (e.g. 45.00), New Traded Quantity Q1 (e.g. 800), and Economic Distortion Scenario — choose from Custom Supply & Demand Values, Excise Tax (15 Wedge: P_buyer 60, P_seller 45, Q 800), Monopoly Output Restriction (P 60 vs 40, Q 350 vs 500). Results update instantly as you type — adjust any value to compare scenarios.

The Formula

Harberger Triangle Formula: DWL = 0.5 (P1 - P2) (Q0 - Q1)

Worked Example

A 20 tariff on an imported good reduces domestic consumption from 2,000 to 1,600 units, generating 32,000 in government tariff revenue but destroying 4,000 in pure deadweight economic loss.

Understanding Your Result

This calculation gives a precise result based on the inputs you provided. For practical decisions, consider whether the result changes meaningfully with slight variations in your inputs — if a 5–10% change in input causes a significant output change, gather more precise input data before deciding. Use this tool to quickly compare multiple scenarios side by side.