Answer to Question #266852 in Microeconomics for argho

Question

Using a diagram, explain the concept of quota and how it can create dead-weight loss.

Answer 1

A deadweight loss occurs when supply and demand are out of balance, resulting in market inefficiencies. Deadweight losses are caused by poor resource allocation, which can be caused by a variety of interventions such as price limits, price floors, monopolies, and levies.