In order to determine the deadweight loss in a market, the equation P=MC is used. The deadweight loss equals the change in price multiplied by the change in quantity demanded. This equation is used to determine the cause of inefficiency within a market.

How do you calculate deadweight loss?

In order to calculate deadweight loss, you need to know the change in price and the change in quantity demanded. The formula to make the calculation is: Deadweight Loss = . 5 * (P2 - P1) * (Q1 - Q2).

What is the area of deadweight loss?

Deadweight loss refers to a cost that stems from economic insufficiency wherein allocations are not balanced. In other words, it's a loss that occurs from market inefficiency, such as an unbalanced supply vs. demand. When a deadweight loss occurs, some people may benefit whereas others may not.