Deadweight Loss Calculator

What deadweight loss measures

Deadweight loss is the value of the trades that stop happening because a tax, a price control or a market power changed the price. Nobody buys those goods, nobody sells them, and the surplus that would have been created by both sides is destroyed. OpenStax's chapter on demand, supply and efficiency draws this as the triangle between the demand and supply curves that disappears once a wedge is driven between the price buyers pay and the price sellers receive.

The word deadweight is doing real work in that sentence. A tax of 50 cents on a 4 dollar product moves 4,500 dollars to the government. That money is not destroyed, it is transferred, so it is not deadweight loss. What is destroyed is the surplus on the 1,000 units that shoppers decided not to buy at the higher price. That surplus belonged to both sides and existed only because the trade happened.

That is why deadweight loss shows up in cost benefit analyses of taxes, price ceilings, rent controls and tariffs. The money collected is easy to count. The gains that never materialize are easy to lose track of, so the calculator below puts a number on them.

The triangle formula

With straight demand and supply lines, the deadweight loss is the area of a triangle: half the change in price times the change in quantity. Written out, DWL = 0.5 x |price after - price before| x |quantity before - quantity after|.

The half is not a shortcut, it is the shape of the gap. The buyer who was just barely willing to buy at the old price loses the whole gap, the buyer who was next in line loses slightly less, and so on down to the buyer who drops out at the margin and loses nothing. Averaged across the lost trades, the shortfall is half the price gap, which is why the area works out to 0.5 x gap x quantity lost.

Two rules keep the arithmetic honest. The gap and the lost quantity have to be measured over the same period, so a daily quantity pairs with a daily price. And the sign of the price change does not matter: a tax pushes the price up, a subsidy pulls it down, and a price ceiling holds it below equilibrium. The area of the triangle is the same shape either way.

Worked example: a 0.50 dollar tax on a 4 dollar product

Assume a 4 dollar product, a 0.50 dollar tax per unit, and a market that sells 10,000 units before the tax. With the tax passed through in full, the price rises to 4.50 dollars and buyers walk away from 1,000 of those units, so sales fall to 9,000.

Read the last two rows next to each other. The government collects 4,500 dollars, which is a transfer from buyers to the treasury, and buyers spend 500 dollars more in total because the 9,000 units they still buy cost 50 cents more each. The surplus that disappears is the 250 dollars on the 1,000 units nobody bought, and that 250 dollars goes to nobody.

Scaled against the original spending, the loss is 250 / 40,000 x 100 = 0.63 percent of what buyers used to spend. Small numbers like this are why deadweight loss gets argued about: a tax can raise thousands and destroy hundreds, and the destroyed part is invisible on a revenue line.

A real rate: the federal gasoline tax

The US Energy Information Administration tax table lists the federal gasoline tax at 18.40 cents per gallon as of January 2026, made up of an excise tax of 18.3 cents plus a leaking underground storage tank fee of 0.1 cents. The same table puts the average of total state taxes on gasoline at 33.27 cents a gallon, and the federal diesel tax at 24.40 cents. The Federal Highway Administration notes that the 18.4 cent motor fuel excise tax has been the federal rate since 1993 and that the money flows into the Highway Trust Fund.

Here is how that real rate behaves in the model. Assume a pump price of 3.00 dollars a gallon, the full 18.4 cent tax passed through, and a market that buys 40.0 million gallons a day. The price after the tax is 3.184 dollars a gallon, and suppose demand is soft enough that a 1 percent drop in sales follows, to 39.6 million gallons a day. Those are illustrative quantities, not measured ones, and the point is to see the shape of the arithmetic.

Change the demand response and the number moves a long way. Halve the drop to 0.5 percent and the loss is 6,160 dollars a day. Double it to 2 percent and the loss is 73,600 dollars a day. The tax rate is fixed by statute, so the elasticity of demand is the part that decides how large the triangle gets.

What makes the triangle bigger

Two things drive the size of the loss: how wide the price gap is and how many trades the gap destroys. The second one is elasticity. When demand is inelastic, buyers keep buying despite the higher price, few trades are lost and the triangle is thin. When demand is elastic, buyers leave quickly and the triangle grows.

The three rows use the same 0.50 dollar tax, so the only thing that changes is how many buyers leave. In the inelastic row the government collects nearly as much revenue as in the middle row while destroying a tenth of the surplus, so 25 / 4,950 x 100 = 0.51 dollars of loss for every 100 dollars collected. In the elastic row the revenue is smaller and the loss is 625 / 3,750 x 100 = 16.67 dollars for every 100 dollars collected. That gap is the standard argument for taxing things people consume less of than they consume a lot of.

Where the triangle sits on the graph

Deadweight loss is the sum of two missing pieces: the consumer surplus on the trades that vanished and the producer surplus on those same trades. Draw a supply and demand diagram with a tax wedge between the price buyers pay and the price sellers keep, and the triangle in the middle is exactly the region where no surplus is created at all.

The same triangle shape appears whenever a price is held away from equilibrium. A binding price ceiling below the equilibrium price creates a shortage, and the mutually beneficial trades that never happen because sellers and buyers cannot agree on a price are deadweight loss. A binding price floor above equilibrium creates a surplus of unsold goods with the same result. A monopoly that restricts output and lifts price above the competitive level produces a deadweight loss too, and that is the standard argument used when regulators want to break up a market.

What all four cases have in common is a quantity that ends up lower than the efficient quantity. That is the test to apply: if the quantity traded falls and the price moves away from where supply meets demand, surplus is being destroyed somewhere in between.

When the loss is zero, and when it is not

A tax that does not change behavior creates no deadweight loss. If buyers pay the same total either way, say a lump sum fee of 50 dollars that is the same for everyone and does not depend on how much they buy, then the quantity sold stays at 10,000 and the loss is 0. The money moves from buyers to the government and nothing is destroyed. This is why economists prefer lump sum taxes when the goal is revenue without a wedge.

Not every tax that raises efficiency is a deadweight loss either. A tax that corrects an externality, such as a fee on a polluting activity, removes a cost that the market was ignoring. The private surplus saved by cutting back the activity is smaller than the social benefit, so the tax can leave total surplus higher than before it was imposed. The triangle you calculate is a measure of the private surplus that disappears, and it is only deadweight loss when the market was close to efficient to begin with.

Two limits are worth keeping in mind. The triangle formula is exact only when the curves are straight, so a market with curved demand or supply needs calculus for an exact figure. And the result depends on the period you measure: a daily loss and a yearly loss differ by a factor of 365, and a change that lasts one year is not the same as one that lasts forever.

What the calculator returns

The defaults are the 0.50 dollar tax example: a price of 4.00 dollars before, 4.50 dollars after, and a quantity that falls from 10,000 to 9,000 units.

Enter the gasoline example next: a price of 3.00 dollars before and 3.184 dollars after, with quantities of 40,000,000 and 39,600,000 gallons a day. The tool reports a deadweight loss of 36,800 dollars per day, which matches the 0.5 x 0.184 x 400,000 triangle in the table above.

The four boxes are deliberately simple, so you can feed in a tax, a price ceiling, a subsidy or any other price and quantity shift you want to measure. If the quantity does not change, the loss is 0. If the price does not change, the loss is 0 as well, since no gap opens between what buyers pay and what sellers receive.

All of the arithmetic happens in your browser. Nothing you type leaves the page.