• When supply and demand are out of balance, creating market inefficiencies, there is a deadweight loss.

  • The deadweight loss primarily arises from the inefficient allocation of resources caused by various interventions such as price caps, floors, monopolies and taxes.
  • These factors lead to the fact that the price of the goods is not accurately reflected, that is, the goods are either overpriced or underestimated.
  • If the price of a product is not accurately reflected, this leads to a change in the behavior of consumers and producers, which, as a rule, has a negative impact on the economy.