The sum of the change in consumer surplus plus the change in producer surplus is called deadweight loss to society.

Question

Quizplus · Accepted Answer

This statement is true. Deadweight loss represents the loss of economic efficiency that occurs when the equilibrium for a good or service is not achieved, either because of price controls, taxes or other governmental regulations. It is the total economic surplus lost from underproduction or overproduction in a market. The sum of the change in consumer surplus and the change in producer surplus is equal to the total surplus. Thus, when there is deadweight loss, the total surplus is reduced by that amount.

The Sum of the Change in Consumer Surplus Plus the Change