IN ECONOMICS HOW TO CALCULATE DEADWEIGHT LOSS?

Deadweight loss (DWL) is calculated by determining the loss of economic efficiency that occurs when the equilibrium in a market is not achieved or is distorted. To calculate DWL, you typically identify the area of the triangle formed between the supply and demand curves, where the quantity traded is less than the equilibrium quantity due to a tax, subsidy, or price control. The formula for DWL is 0.5 × (P1 - P2) × (Q1 - Q2), where P1 and P2 are the prices at the original and new quantity levels, and Q1 and Q2 are the quantities at those price levels. This area represents the loss in consumer and producer surplus that is not offset by any gain elsewhere in the economy.