When you say there is inefficiencies in supply (dead weight loss). Could you argue, through further protectionism, the possibility of specialisation and (depending on may things) a better comparative advantage could be developed by that country, in the long term? if not comparative advantage, a more competitive edge over a country already with a comparative advantage, as domestic efficiencies improve over time. thank you.
@Econplusdal! Just a doubt. Would Pw be above the equilibrium as thats when producers actually export to other countries? If Pw is below domestic equilibrium, that means other countries are more efficient, have a comparitive advantage and the country in question in the diagram is actually importing goods..??
This trade diagram makes the assumption that the domestic country does not have the comparative advantage in producing the good and other countries can produce the good at a lower cost therefore the world price is lower than the domestic price
He explained it in one of the previous videos on trade protection. Basically, in the diagram in this video, if you consider a quantity Q between Q1 and Q3, foreign producers are willing and able to supply it at the world price of Pw; but it is supplied by domestic producers, who charge a price P > Pw visible on the domestic supply curve. So if you take this difference P - Pw and sum it as Q goes from Q1 to Q3, you get the triangle he shaded, and this triangle represents the welfare loss of efficiency that foreign producers suffer due to domestic production being favoured through subsidies.
3:30 I’m baffed Maybe I’m having a dumb moment, but if the subsidy was given to exporting firms to increase exports, wouldn’t it lower their cost of production and so lower their prices, meaning demand would increase from the change in price?
the shift of supply would cause the price to fall. this means that there is an extension along the demand curve- as exports are now relatively cheaper than competing imports. importantly, this is a movement ALONG the demand curve and it will not result in a shift of the curve as a whole.
Prices cannot lower because the price is set at world price. The decrease price from subsidy only takes place in microeconomics. All this does is assist firms in producing more output and consequently lower imports cuz it’s covered by domestic firms
am i the only one who say hi back when his like 'hi everybody'
Yeah
str8 beastin g, keep it calm donny
Instablaster.
You explain things so well! :) I was unsure whether I understood the mechanism right but now I know I do. :)
You sir, have saved my degree.
Do you use this in degree for economics
you explain things so well! :)
cheers mate! Helped me a lot here!
When you say there is inefficiencies in supply (dead weight loss). Could you argue, through further protectionism, the possibility of specialisation and (depending on may things) a better comparative advantage could be developed by that country, in the long term? if not comparative advantage, a more competitive edge over a country already with a comparative advantage, as domestic efficiencies improve over time. thank you.
@Econplusdal!
Just a doubt. Would Pw be above the equilibrium as thats when producers actually export to other countries? If Pw is below domestic equilibrium, that means other countries are more efficient, have a comparitive advantage and the country in question in the diagram is actually importing goods..??
This trade diagram makes the assumption that the domestic country does not have the comparative advantage in producing the good and other countries can produce the good at a lower cost therefore the world price is lower than the domestic price
What about loss of government revenue? Is this marked by the same triangle as deadweight loss of efficiency? Like the amount of the subsidy?
It is shown in this video Grace ruclips.net/video/2ss0cR-msGk/видео.html
Thanks so much! Your videos are amazing. Sanya Bhatia loves them too
can we also say that domestic firms are more likely to export goods and this could be a method of improving the current account position?
Yes, in case of an export subsidy (not a producer subsidy)
daamn i hope this comes up tommorw paper 2
Same here
thank you
This guy is really good. He looks like Mr Bean tho
Haha I've been told I laugh like Mr Bean too 😉
Ohh sure , But you're a great teacher to be honest. I'm writing my exams and I hope to pass with your information. Thank you very much.
How do you know where the DwL triangle is? They seem so random. Are they supposed to be trapped between two specific lines?
He explained it in one of the previous videos on trade protection. Basically, in the diagram in this video, if you consider a quantity Q between Q1 and Q3, foreign producers are willing and able to supply it at the world price of Pw; but it is supplied by domestic producers, who charge a price P > Pw visible on the domestic supply curve. So if you take this difference P - Pw and sum it as Q goes from Q1 to Q3, you get the triangle he shaded, and this triangle represents the welfare loss of efficiency that foreign producers suffer due to domestic production being favoured through subsidies.
3:30 I’m baffed
Maybe I’m having a dumb moment, but if the subsidy was given to exporting firms to increase exports, wouldn’t it lower their cost of production and so lower their prices, meaning demand would increase from the change in price?
the shift of supply would cause the price to fall. this means that there is an extension along the demand curve- as exports are now relatively cheaper than competing imports. importantly, this is a movement ALONG the demand curve and it will not result in a shift of the curve as a whole.
Prices cannot lower because the price is set at world price. The decrease price from subsidy only takes place in microeconomics. All this does is assist firms in producing more output and consequently lower imports cuz it’s covered by domestic firms
ily man
goat
God
Doesn't the dead-weight loss you have shaded in equal the increase of producer surplus below it?
I found your detailed analysis video... hopefully that helps!
Could you say this increases AD?
yes as it increases consumption
also because it reduces imports
This is export subsidy also ?
Diagram
Shush Mac
James Isaacson who’s this again?
Advantage : NO RETALLIATION ?? Hard to prove unlike tarring or quota
you need a new camera mate too blurry to read sort it out