What is meant by deadweight loss?

Deadweight loss refers to the loss of economic efficiency that occurs when the equilibrium outcome in a market is not achieved or is not achievable. This inefficiency often arises due to distortions such as taxes, subsidies, price ceilings, or price floors, which prevent the market from reaching a state where supply equals demand.

When the market is not operating at equilibrium, there are transactions that do not take place which would have otherwise benefited both buyers and sellers. This results in a loss of total welfare, as there are potential gains from trade that remain unrealized. Therefore, the concept of deadweight loss highlights the inefficiencies created by market interventions or failures, leading to a decrease in overall economic well-being.

The other options presented, such as a gain of economic efficiency, an increase in social welfare, or an optimal point of market equilibrium, do not accurately describe deadweight loss. Instead, they reflect conditions where resources are allocated efficiently and welfare is maximized, contrasting with the detrimental effects attributed to deadweight loss.