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Deadweight Loss Formula Excel Template

The document provides two examples to illustrate the calculation of deadweight loss. In the first example, a price floor of $12 is imposed on movie tickets that were originally priced at $9, reducing attendance from 1,200 to 800. The deadweight loss is calculated as $600 using the formula of 1/2 * price difference * quantity difference. The second example uses demand and supply curves represented by equations to calculate deadweight loss of $1,250 when the demand curve shifts from (-0.08x + 80) to (-0.08x + 60).

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Mustafa Ricky Pramana Se
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235 views7 pages

Deadweight Loss Formula Excel Template

The document provides two examples to illustrate the calculation of deadweight loss. In the first example, a price floor of $12 is imposed on movie tickets that were originally priced at $9, reducing attendance from 1,200 to 800. The deadweight loss is calculated as $600 using the formula of 1/2 * price difference * quantity difference. The second example uses demand and supply curves represented by equations to calculate deadweight loss of $1,250 when the demand curve shifts from (-0.08x + 80) to (-0.08x + 60).

Uploaded by

Mustafa Ricky Pramana Se
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as XLSX, PDF, TXT or read online on Scribd
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Deadweight Loss Excel Template

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Let us take the example of demand and price of theatre tickets to illustrate the computation of deadweight loss. In a perfec
the theatre tickets are priced at $9 with 1,200 attending the movies. However, the government imposed a price floor of $12
the demand declined to 800. In the perfect market scenario, 800 people would be attending the movies only if the
price went upto $15. Calculate the movie theatre’s deadweight loss in the given scenario.

Ticket Price People Attending Movie


$9 1200
$12 800
$15 800

Price Difference $3
Quantity Difference 400

Deadweight Loss is calculated using the formula given below


Deadweight Loss = ½ * Price Difference * Quantity Difference

Deadweight Loss $600


of deadweight loss. In a perfect market scenario,
ent imposed a price floor of $12 due to which
the movies only if the
Let us take another example wherein the original demand curve is represented by the equation (-0.08x + 80) and the
supply curve by (0.08x), where ‘x’ is the quantity demand. However, due to some external factors, the
demand curve shifted to (-0.08x + 60). Calculate the deadweight loss based on the given conditions.

Original Demand
New Demand Curve Supply Curve
Quantity (x) Curve
(-0.08x+60) (0.08x)
(-0.08x+80)
0 $80.00 $60.00 $0.00
125 $70.00 $50.00 $10.00
190 $64.80 $44.80 $15.20
250 $60.00 $40.00 $20.00
315 $54.80 $34.80 $25.20
375 $50.00 $30.00 $30.00
440 $44.80 $24.80 $35.20
500 $40.00 $20.00 $40.00
565 $34.80 $14.80 $45.20
625 $30.00 $10.00 $50.00
690 $24.80 $4.80 $55.20
750 $20.00 $0.00 $60.00
815 $14.80 $65.20
875 $10.00 $70.00
940 $4.80 $75.20
1,000 $0.00 $80.00

Price Difference is calculated as

Price Difference $20.00

Quantity Difference is calculated as

Quantity Difference 125.00

Deadweight Loss is calculated using the formula given below


Deadweight Loss = ½ * Price Difference * Quantity Difference

Deadweight Loss $1,250

$90.00

$80.00

$70.00

$60.00

$50.00

$40.00

$30.00

$20.00

$10.00

$0.00
0 200 400 600 800 1,000 1,200
$50.00

$40.00

$30.00

$20.00

$10.00

$0.00
0 200 400 600 800 1,000 1,200
tion (-0.08x + 80) and the
actors, the

1,200
1,200

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