Principles of Microeconomics / Unit 4 MIC 0326 short lesson, about 20 seconds
The Deadweight Loss of a Tax
Captions available
The idea
The units the wedge stops were worth more to buyers than they cost sellers. That lost surplus is the tax's deadweight loss: the triangle between the curves over the lost quantity.
In practice
Revenue is the rectangle; the loss is the triangle beside.
Where people slip
The loss grows with elasticity, as more units drop out, and faster than the tax: doubling it roughly quadruples the loss.
Your place on the trail
Every lesson rests on earlier ones and opens later ones. Tap any to jump.
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