Compute the welfare loss from a tax or price distortion on linear curves.
Please do not make financial decisions based on these results.
What is the Deadweight Loss Calculator?
Compute the welfare loss from a tax or price distortion on linear curves. To use the Deadweight Loss Calculator, enter tax per unit, reduction in quantity; it returns deadweight loss, and shows them instantly as you type.
Where the Deadweight Loss Calculator fits
Compute the welfare loss from a tax or price distortion on linear curves. The main figure it returns is the Deadweight loss, worked out from the values you enter.
It belongs with the other macroeconomics tools. If you are comparing options or checking a result from another angle, try the Inflation Rate Calculator, Currency Forward Calculator or the GDP Calculator (Gross Domestic Product).
How to use the Deadweight Loss Calculator
- Fill in the fields. You will need Tax per unit ($), Reduction in quantity. Use real figures from your own records where you can. Fields marked optional can stay at zero.
- Read the result. The highlighted box gives the Deadweight loss. Tables and charts break it down further.
- Test other scenarios. Results update as you type. Change one value at a time to see what drives the answer, and press Reset to go back to the defaults.
Formula and how it works
Example with real numbers
Here is the Deadweight Loss Calculator using the default values shown in the calculator above:
Inputs
| Tax per unit ($) | 2 |
|---|---|
| Reduction in quantity | 500 |
Results
| Deadweight loss | $500.00 |
|---|
With these inputs the calculator returns Deadweight loss: $500.00. Change any value in the calculator to see how the result moves.
What if you change one input?
Sensitivity check: raising Tax per unit ($) from 2 to 2.4 (about 20% higher) and leaving everything else as in the example above changes the results like this:
| Result | Example | After the change | Change |
|---|---|---|---|
| Deadweight loss | $500.00 | $600.00 | +20% |
The input that moves the result most is the one to check twice. Change it in the calculator above to test your own case.
Method and limits. This calculator applies the formula in the section above to your inputs, in your browser; nothing you enter is stored on our servers. The result is only as accurate as the numbers you enter and the formula shown above. It is for information, not financial, tax or legal advice.
Frequently asked questions
What causes deadweight loss?
Taxes, price controls and monopoly pricing that cut trades beyond the efficient level.
What is the difference between nominal and real GDP?
Nominal GDP uses current prices; real GDP removes price changes using a deflator so output can be compared over time.
What is the spending multiplier?
It is 1 divided by one minus the marginal propensity to consume, so an MPC of 0.8 gives a multiplier of 5.
Are the results guaranteed?
No. Results depend entirely on the numbers you enter and the formulas shown on this page. Please do not make financial decisions based on them alone; confirm important figures with a licensed professional.
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