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Deadweight Loss of a Tax

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PPGPortal > Home > Concept Dictionary > D, E > Deadweight Loss of a Tax
 

Deadweight Loss of a Tax 

The total social cost associated with the reduced output caused by a tax.

(Ben Eisen)

 

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Taxes reduce the amount consumed and produced in the market. The deadweight loss, otherwise known as the "social cost" of a tax is the difference between the quantity produced under the tax, and the quantity produced at the market equilibrium.

 

 

References

 

https://portal.publicpolicy.utoronto.ca/en/concepts/sites/A/transitivepreferences/PublishingImages/socialcostoftaxes.png

     

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