Have had microeconomics for 2 YEARS NOW and these guys explain it in such a efficient way! i have learned more in 2 days than I have in 2 years! Bless you both!
This was well-written and well-executed. I learned from this video explanation more than I learned from some other videos on the subject that I've watched.
The explanation about deadweight loss is the perfect example of why economics and policy don't mix well. People would complain like crazy if you taxed inelastic goods. If we were to tax basic necessities, there would be an uproar about how evil this is. We can't even get the public to release the tax break on healthcare even though it is causing a mess. Maybe we should call the relative elasticity of demand in relation to taxes the "coefficient of complaining curve". Very inelastic = lots of complaining.
I know he mentioned exceptions, but again, the problem with this followed to it's conclusion and put into practice is the diagram around 7:27 the left would represent something like luxury yachts and the right would represent something like electricity. "Pretty clearly we want to tax the hell out of electricity because if people are held hostage to it you can get away with it." Sooner or later its going to get around to something people need instead of want.
How do you calculate the new price the buyers are going to pay? You mentioned the wedge method around 1:40 but I have no idea what this thing is ...
Рік тому
A bit late and maybe not relevant to you anymore, but they introduced the "wedge method" in a video called "Commodity Taxes" (at least as of the time I am writing this, there is a mark in the video indicating the exact part in which they introduce it). I think they recorded these videos assuming that people would follow the full course/playlist (or that if people look up a specific concept, they will already be familiar with "previous" concepts). The wedge method is simply taking the tax (as a vertical line, whose length is the tax value in whatever units the y-axis has) and starting from the equilibrium point move left till its upper limit touches the demand curve and its lower limit touches the supply curve. It is meant to be a shortcut to moving the supply curve up to account for the tax, finding its new equilibrium point (intersection with the demand curve) and drawing a vertical line from there till it touches the old supply curve (to determine how much the supplier will get after paying the new tax).
thank you so much the chapter explaining this made no sense what so ever to me and this just explained it making it look like the easiest thing in the world
It is a hypothetical example in order to illustrate the theory. The real work of economists is to gather real world data which validates the theory, without that the theory is just a theory. Conducting such research establishes economic principles and laws.
I feel like you cannot use the example about the yacht as there are other confounding variables. There may have been a fall in demand for luxury goods due to the economic crisis around the 1990s. I do not think we can suggest causality between the tax and the fall in yacht purchases. Not sure about what people think about this.
Good question! Check out our video on price ceilings: ua-cam.com/video/YbLAASzzo6A/v-deo.html. If a price ceiling is imposed below the equilibrium level, then the quantity supplied will shrink (see the shortage at 1:07 ua-cam.com/video/YbLAASzzo6A/v-deo.html&feature=youtu.be&t=67). This means there will be a shortage: more people will want to purchase the good at that price, but there simply isn’t enough production. The price is too low to make it profitable for sellers to produce more. There are a number of people who want the good but can’t get it because of this decreased production. This is actually the source of the deadweight loss- the sales that should have taken place under normal conditions (and the ensuing consumer and producer surplus from those sales) but don't because the price is set below the equilibrium level. The deadweight loss triangles, for consumer and producer, are clearly seen at 2:49 (ua-cam.com/video/YbLAASzzo6A/v-deo.html&feature=youtu.be&t=169). You’re right though, at the lower price, it’s true that consumers who actually purchase the good may have a higher consumer surplus. This surplus is a transfer from producers to consumers, so it’s not increasing overall surplus. Additionally, if there is a shortage, there may be some lost consumer surplus from having to wait in lines or search for the good, so it may not be a perfect transfer. Hope this helps. -Mary Clare
Ali Abdul You would use calculus. Take the integrate over the quantity no longer produced because of the tax the difference between demand (MB) and marginal cost.
Since the amount of the dead weight loss that is a decrease of consumer surplus is due to a reduction in consumption, why is it not named savings, which is usually considered a good thing. It seems to me that only the decreases in producer surplus is a real loss to the economy and even they could use the resources to produce other things like trips to a cheaper city.
Pareto optimality means the "free market" maximizes happiness only from the initial distribution. If you want to maximize happiness you might want to change that initial distribution, if you want to respect that distribution you aren't interested in maximizing revenue. Are you a Utilitarian or a Libertarian? (And why would you be either a Utilitarian or a libertarian given that neither are appealing doctrines?)
if you wanted to pay 10$ for a sandwich, but the producer sells it for 7$, you basically save 3$ (that is what consumer surplus means) its the difference between what you would pay, and what you actually pay. I know this is a super late reply but anyone reading this comment from now on would understand more hopefully
Thanks for the video content! Apologies for chiming in, I would love your opinion. Have you heard the talk about - Tarbbatigan Vintage Sales Tip (Sure I saw it on Google)? It is a good one of a kind guide for finding government and police auctions for cars trucks and SUVs minus the headache. Ive heard some super things about it and my work buddy at last got cool success with it.
Actually the price of the trip was initially $40 , but remember that the consumer was willing to spend $50, so this is the value that he gives to the trip, then he would have a trip that for him values $50 plus $10 in the pocket. Now he just have $50 in the pocket and no trip.
Continue learning with practice questions: mru.io/7pm
1 day before micro final. Wish me luck
Good luck ;)
Me 1 year later lol
SAME LOLL
How was it
Have had microeconomics for 2 YEARS NOW and these guys explain it in such a efficient way! i have learned more in 2 days than I have in 2 years! Bless you both!
Same here man 💓
University are useless, this video made me learn more than the entire course
i do agree on that hahaha
facts
Yeah
My professor make these easy lessons look so hard . I was so close to drop out the subject 🤣
you just saved my life lol. this is so helpful and easy to understand and I feel like a pro lol
This was well-written and well-executed. I learned from this video explanation more than I learned from some other videos on the subject that I've watched.
Thank you sir. I nominate you to be the hero of Economics.
The explanation about deadweight loss is the perfect example of why economics and policy don't mix well. People would complain like crazy if you taxed inelastic goods. If we were to tax basic necessities, there would be an uproar about how evil this is. We can't even get the public to release the tax break on healthcare even though it is causing a mess. Maybe we should call the relative elasticity of demand in relation to taxes the "coefficient of complaining curve". Very inelastic = lots of complaining.
these videos are fantastic man
I know he mentioned exceptions, but again, the problem with this followed to it's conclusion and put into practice is the diagram around 7:27 the left would represent something like luxury yachts and the right would represent something like electricity. "Pretty clearly we want to tax the hell out of electricity because if people are held hostage to it you can get away with it." Sooner or later its going to get around to something people need instead of want.
Amazing explanation!! 👏
Thank you so much! :)
Great Video! Thank You!!
Thurs 2nd May 2024.
00.05am.
Thank you. 👍
Online learning is the way forward
Thank you ☺️ I was finding it very hard to understand but now I love econ 😅
so touching for an excellent video
Very helpful and clear video, thank you!
How do you calculate the new price the buyers are going to pay? You mentioned the wedge method around 1:40 but I have no idea what this thing is ...
A bit late and maybe not relevant to you anymore, but they introduced the "wedge method" in a video called "Commodity Taxes" (at least as of the time I am writing this, there is a mark in the video indicating the exact part in which they introduce it). I think they recorded these videos assuming that people would follow the full course/playlist (or that if people look up a specific concept, they will already be familiar with "previous" concepts).
The wedge method is simply taking the tax (as a vertical line, whose length is the tax value in whatever units the y-axis has) and starting from the equilibrium point move left till its upper limit touches the demand curve and its lower limit touches the supply curve. It is meant to be a shortcut to moving the supply curve up to account for the tax, finding its new equilibrium point (intersection with the demand curve) and drawing a vertical line from there till it touches the old supply curve (to determine how much the supplier will get after paying the new tax).
thank you so much the chapter explaining this made no sense what so ever to me and this just explained it making it look like the easiest thing in the world
very helpful! keep up the good work!
I found the video very helpful :) thx
easy to understand. thankyou. would prefer your lessons over any book.
this was of great quality thanks
Thank you so much sir thiz video helps me to get to a clear idea ....
I am totally speechless life saver!
i love these lecturers economics is not the easiest subject for me and i really understand it better now. have exam in a few :(
Good luck!
Me too
I am confused on why doesnt the suuply curve or demand curve shift by taxation
It is a hypothetical example in order to illustrate the theory. The real work of economists is to gather real world data which validates the theory, without that the theory is just a theory. Conducting such research establishes economic principles and laws.
I feel like you cannot use the example about the yacht as there are other confounding variables. There may have been a fall in demand for luxury goods due to the economic crisis around the 1990s. I do not think we can suggest causality between the tax and the fall in yacht purchases. Not sure about what people think about this.
This is what I definitely subscribe to
Very helpful. Thanks.
i cant be the only one thinking about shipping fees while watching this
THAAAAANK YOU SOOOO MUCH!!!! VERY HELPFUL!!
SUBSCRIBED!! 💝💝
but Why can a deadweight loss occur when a price
ceiling is set below equilibrium even though some consumers increase their consumers
surplus?
Good question! Check out our video on price ceilings: ua-cam.com/video/YbLAASzzo6A/v-deo.html. If a price ceiling is imposed below the equilibrium level, then the quantity supplied will shrink (see the shortage at 1:07 ua-cam.com/video/YbLAASzzo6A/v-deo.html&feature=youtu.be&t=67). This means there will be a shortage: more people will want to purchase the good at that price, but there simply isn’t enough production. The price is too low to make it profitable for sellers to produce more. There are a number of people who want the good but can’t get it because of this decreased production. This is actually the source of the deadweight loss- the sales that should have taken place under normal conditions (and the ensuing consumer and producer surplus from those sales) but don't because the price is set below the equilibrium level. The deadweight loss triangles, for consumer and producer, are clearly seen at 2:49 (ua-cam.com/video/YbLAASzzo6A/v-deo.html&feature=youtu.be&t=169). You’re right though, at the lower price, it’s true that consumers who actually purchase the good may have a higher consumer surplus. This surplus is a transfer from producers to consumers, so it’s not increasing overall surplus. Additionally, if there is a shortage, there may be some lost consumer surplus from having to wait in lines or search for the good, so it may not be a perfect transfer. Hope this helps. -Mary Clare
This is what I call making things easier for students....In my macroeconomic class, this was more than difficult to understand. Now I can teach it.
What and who decides the benefit of something? Isn't that quite subjective? Great video!!
grt job .. sir !
how do you calculate deadweight loss without the triangle method? mathematically?
Ali Abdul You would use calculus. Take the integrate over the quantity no longer produced because of the tax the difference between demand (MB) and marginal cost.
Since the amount of the dead weight loss that is a decrease of consumer surplus is due to a reduction in consumption, why is it not named savings, which is usually considered a good thing. It seems to me that only the decreases in producer surplus is a real loss to the economy and even they could use the resources to produce other things like trips to a cheaper city.
Third year in highschool and watching economics video too understand cuz I don't get much in school
Beautiful Video, I am not able to understand this topic. Do like the video so that people know that they will understand it's a good video.
Has anyone tried to estimate how much deadweight loss of all sorts there are in the economy at large?
yeah but how do u find the quantity and price after the tax
Does the government ever practice price discrimination with its taxes? Seems like it would be beneficial in reducing DWL.
good explanation
I couldn't ask for a better explanation! thank you!
THANK YOU
Question:' the general rule is to tax goods with inelastic demand' , could this rule apply to tariff? Anyone who can help?
Yes
You’ve my life when saying ‘ nobody gets DWL’
You are very good.
thanks a lot sir
Thank you 😍😍
Me watching this video night before exam tomorrow
Dead weight loss can also occur because of high price?
If you mean price floors then yes, the minimum wage is a good example.
You are the best😍
Does Income Tax cause Deadweight Lose?
Not alwys, tax helps us to set off the spillover effect of externalities
Pareto optimality means the "free market" maximizes happiness only from the initial distribution. If you want to maximize happiness you might want to change that initial distribution, if you want to respect that distribution you aren't interested in maximizing revenue. Are you a Utilitarian or a Libertarian? (And why would you be either a Utilitarian or a libertarian given that neither are appealing doctrines?)
U r the best :)
thank youuuu
Land has a completely inelastic supply, so no deadweight loss. Perfect taxes
icb my 40-pages readings can be explained in a 11-minute video
how is this so good lmao
Great
man economics is so crappy sometimes. what kinda surplus do I get as a consumer? I don't see any money given to me
if you wanted to pay 10$ for a sandwich, but the producer sells it for 7$, you basically save 3$ (that is what consumer surplus means) its the difference between what you would pay, and what you actually pay.
I know this is a super late reply but anyone reading this comment from now on would understand more hopefully
this is why we need small government
You are f*cking awesome! Kel kafanıza kurban dayılar. You are my second and third favorite balds. You know the first one ;)
helpful
You sir look like peter schiff
Thanks for the video content! Apologies for chiming in, I would love your opinion. Have you heard the talk about - Tarbbatigan Vintage Sales Tip (Sure I saw it on Google)? It is a good one of a kind guide for finding government and police auctions for cars trucks and SUVs minus the headache. Ive heard some super things about it and my work buddy at last got cool success with it.
So isn't deadweight loss only really bad for the suppliers and the government then? Because the consumer still has $50 (in that example)
Actually the price of the trip was initially $40 , but remember that the consumer was willing to spend $50, so this is the value that he gives to the trip, then he would have a trip that for him values $50 plus $10 in the pocket. Now he just have $50 in the pocket and no trip.
Yes, but the consumer still has $50 to use as (s)he pleases.
"Wedge technique" how does that work u didnt really explain
AA universities are not useless go back and check out with your lecturer
I can't tell if you chose such high tax rates to make it easier to understand, or if you're trying to inject a little libertarianism into the lecture.
bias wrecker ko na tong lalakeng to. magaling magexplain. btw bias ko yung babae na ang hinahon magexplain AHAHAHAHA
I love you!!!11
If I can give a thousand likes I would
I want higher taxes!!!
U sound like Donald trump some time