Price Ceilings: Deadweight Loss

In this video, we explore the fourth unintended consequence of price ceilings: deadweight loss. When prices are controlled, the mutually profitable gains from free trade cannot be fully realized, creating deadweight loss. With price controls, less trading occurs and both buyers and sellers miss out on the mutually profitable gains that could have occurred. We’ll show how to calculate deadweight loss using our example of a price ceiling on gasoline.

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00:00 How price ceilings create deadweight loss
00:24 Lost gains from trade
01:06 Price ceilings: reduce gains from trade

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• #supply
• #demand
• #economics
• #ceiling
• #floor
• #price