However, the government decides to impose a price ceiling of $400 to make the drug more affordable. At this

price ceiling, firms in the market now produce only 15,000.
76 3 • Demand and Supply

As a result, two changes occur. First, an inefficient outcome occurs and the total surplus of society is reduced.

The loss in social surplus that occurs when the economy produces at an inefficient quantity is called

deadweight loss. In a very real sense, it is like money thrown away that benefits no one. In Figure 3.24 (a), the

deadweight loss is the area U + W. When deadweight loss exists, it is possible for both consumer and producer

surplus to be higher, in this case because the price control is blocking some suppliers and demanders from

transactions they would both be willing to make.

A second change from the price ceiling is that some of the producer surplus is transferred to consumers. After
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