3 ms·
> Deadweight loss happens when a person who is willing to pay more is charged less than the amount they're willing to pay That's not what a dead weight loss is
by andrewmutz 4y ago
> Deadweight loss happens when a person who is willing to pay more is charged less than the amount they're willing to pay
That's not what a dead weight loss is. DWL happens when transactions don't happen for some reason (like price controls) and people who would have benefitted from the transaction at the market price can't do so
What the author describes is instead a situation where the consumer keeps the surplus, rather than the business. Regardless of how much a person tips, no wealth is being created or destroyed, it just affects moves from the consumer to the producer.
- zeroonetwothree 4y agoRight, what the author describes is a reduction in consumer surplus.
- andrewmutz 4y agoYes. I think its an important distinction because deadweight losses represent wealth that is lost to the world, whereas the surplus question is not about creating wealth, just moving it around. We should always strive to eliminate deadweight losses because it makes the world richer. Moving the surpluses around is not making the world richer and is just just redistribution.