What is the term used to describe the reduction in economic efficiency that occurs when the equilibrium for a good or service is not achieved due to taxation?

The term that describes the reduction in economic efficiency caused by taxation is called "deadweight loss. " This happens when taxes make the price of a good or service higher than what buyers are willing to pay, leading to fewer transactions than would occur in a free market. For example, if a tax is placed on ice cream, some people may decide not to buy it because it has become too expensive, resulting in fewer ice cream sales than if there were no tax. This loss of sales means that both consumers and producers miss out on the benefits of trading, creating a gap in the economy. Overall, deadweight loss shows how taxes can lead to inefficiencies by preventing the market from reaching its ideal balance of supply and demand.