Formula for Measurement of Deadweight Loss :

Deadweight Loss is the loss of economic efficiency in terms of utility for consumers/producers such that the optimal or allocative efficiency is not achieved.Some of the major causes of deadweight losses include rent control (price ceiling), minimum wage (price floor) and taxation.

Deadweight Loss = (Qo - Po) × (Pn - Qn)2

(or)

Deadweight Loss = (Price Difference × Quantity Difference)2

Where,

Po - Original Price.

Qo - New Price.

Pn - Original Quantity

Qn - New Quantity.

Example :

The circus show tickets are priced at $8 with 1500 attending the circus in texas. However the U.S government imposed a price floor of $15 due to which the demand declined to 900.

Deadweight Loss = (Qo - Po) × (Pn - Qn)2

Deadweight Loss = (15 - 8) × (1500 - 900)2

Deadweight Loss = 7 × 6002

Deadweight Loss = 42002

Deadweight Loss = 2100

Therefore, the deadweight loss of the circus , in this case, is equivalent to $2100.