You are correct - this diagram is purely a representation of moving towards competitive outcomes. You will most certainly be credited highly in an exam if you explain the diagram as I have in the video
***** Sir, in contestable markets, they say price tends to normal profits where AR=AC. Given that this resembles perfect competition too (operating at normal profits), would it be applicable to draw the diagram where Pc and Qc equal to AC instead?
im a bit confused by the diagram. if firms are trying to profit maximise why are they moving from MR=MC to AR=MC instead of staying at the profit maximising level?
They're not trying to profit maximize, due to high competition in the market from more firms entering due to privatisation then to stay competitive they are going to be producing the allocative efficient point which is AR=MC so they have reduced price and increase quantity.
Hi, i had a question regarding the diagram to draw in an essay if it asked "has rail privatisation been successful." Would I draw a Perfect competition diagram as that was the aim (increase competition) and how would I explain that? Or would i draw a monopoly diagram as that is in fact what happened with the formation of rail track? Thank you for your videos!
I have so many wants (I suppose they are unlimited..) one of which is a video on integrated transport policy. The OCR A2 text book is pretty bad in my opinion in this area of Transport Economics and I'm sure all A2 Transport economists would be even more grateful, but then again that is quite impossible :)
Hi, you are the specialist here and I am just curious about something. You say that the triangle is the gain in consumer surplus. But is the gain in consumer surplus not the triangle plus the rectangle to the left of it? Thanks, Josh
I think he meant a gain in consumer welfare, as the triangle was previously a deadweight loss of welfare. but you are right regarding the gain inconsumer surplus, it is also the rectangle + triangle.
Hi @EconplusDal, I’m a little confused why the diagram you have drawn would not be the other way? As surely when a state firm is privatised it is likely to become a monopoly whilst a state run company looking to maximise social welfare will produce where MC=AR?
Actually, when an industry is state run it is more likely to be dominant and therefore a lack of competition which may lead to a more monopoly approach, whereas for a privatised org there is more competition. However I dont get why the diagram is shifted to a position of resource allocation??
@@DameTime13 nationalised firms are allocatively efficient so im not sure why hes drawn it as a profit maximiser. And the reason that when its privatised there is allocative efficiency is because you get competitive outcomes where MC=AR (becasue MC=Supply and AR=Demand)
Hi, quick question. When drawing the cost and revenue diagram, when should you have the min point of the AC curve at MC=MR? I understand the min point is productive efficiency, but I'm confused as to why sometimes the min point passes through MC=MR and sometimes it doesn't. Cheers.
Also sorry, why does the firm when privatised switch to producing at P=MC, if the private firm will be profit maximising? Should it not carry on production at MC=MR? Thanks again!
xPSG1 If it was just sold off to the private firm then yes it would keep producing at MC=MR. However the idea is that once it's sold off, competition increases and other firms enter the market (as they're now competing with this one firm and not the entire government). So, the industry moves towards the more competitive price where P=MC and only normal profits are being made. That's why one of the 'Depends on' points was whether firms actually flock to enter the industry. That's how I understand it anyway lol.
Hi, your videos are amazing and really helpful. I got a question wanna ask. For the diagram you had mentioned at the very begging, I'm wondering whether or not it is a valid comparison of privatization. Since the first price level is set under the the assumption of profit maximization which is not the objective of a government owned department( perhaps AR=AC). I can understand you want to show us the idea in which by the process of privatization, it will increase the quantity and lower the price level. But just my curiosity. Please point out any mistake that I have made in this question, thank you.
@@ron3799 lol it's hard bro I only need a B but I'm trying to get the best grade I can - I spent so much time on my medicine application and preparing for my interviews and I got an offer of BBB thank god but I got so behind on my revision so now I'm really panicking but paper 1 should be ok. What about you man?
Hi, Privatisation is transferring a public asset into the private sector so it was initially run by the government right? Wouldn't it have already been allocatively efficient under state control?
Yes you would expect this but there is room for even greater gains in allocative efficiency for private firms who can reduce costs and prices more than nationalised firms can (the profit motive incentive). As a result prices tend to be lower and quantities produced tend be higher hence further gains in allocative efficiency...assuming privatisation leads to competitive outcomes
***** reducing costs by a private corporation usually means reducing services (if allowed) or by reducing the quality of those services through various means like out sourcing to cheaper & less skilled overseas workers - both of which hurts a nation. Government run utility's are far more stable, the services are still payed for by the public individual but are also subsidized by a nations taxes keeping the costs down the money comes back through a healthy GDP created by affordability & Stability.
Yh he's got a whole playlist on it Labour Market, Distribution of Income/Wealth and Poverty - Year 2 A Level: ruclips.net/p/PLWeicFreBUYCs7NjXgFhQpoEDvnryFip2
The argument that private corporations will be forced to run efficiently to guarantee profit is false. They would love to obtain greater profit as less cost, who wouldn't want that.
who else is here after the 2019 prediction video
YOU ARE A GENIUS. CAN'T THANK YOU MORE. SERIOUSLY BRO.
You are correct - this diagram is purely a representation of moving towards competitive outcomes. You will most certainly be credited highly in an exam if you explain the diagram as I have in the video
***** Sir, in contestable markets, they say price tends to normal profits where AR=AC. Given that this resembles perfect competition too (operating at normal profits), would it be applicable to draw the diagram where Pc and Qc equal to AC instead?
im a bit confused by the diagram. if firms are trying to profit maximise why are they moving from MR=MC to AR=MC instead of staying at the profit maximising level?
They're not trying to profit maximize, due to high competition in the market from more firms entering due to privatisation then to stay competitive they are going to be producing the allocative efficient point which is AR=MC so they have reduced price and increase quantity.
@@ma_0288 makes sense, thank you
@@ma_0288 yep, are you prepared for the test tomorrow ? (If u are taking it)
@@ma_0288 why would it be a movement from profit max at MC=MR to competitive when governments dont profit maximise, surely they wouldnt produce there
Why is it that you represent a nationalised firm profit maximising? Just out of curiosity, thanks in advance
Soft gentle voice
can the lack of competition be blamed on some firms inheriting a natural monopoly??
I am doing foundation year by NCUK in UK. do I need to work according to your 2019 prediction video. will those suggestion work for NCUK?
Hi, i had a question regarding the diagram to draw in an essay if it asked "has rail privatisation been successful."
Would I draw a Perfect competition diagram as that was the aim (increase competition) and how would I explain that? Or would i draw a monopoly diagram as that is in fact what happened with the formation of rail track?
Thank you for your videos!
no you probably wouldn't
Hi, with privatisation, is there a chance of reorganisation within the firm?
I have so many wants (I suppose they are unlimited..) one of which is a video on integrated transport policy. The OCR A2 text book is pretty bad in my opinion in this area of Transport Economics and I'm sure all A2 Transport economists would be even more grateful, but then again that is quite impossible :)
Super useful. Thank you mate
Hi, you are the specialist here and I am just curious about something.
You say that the triangle is the gain in consumer surplus. But is the gain in consumer surplus not the triangle plus the rectangle to the left of it?
Thanks, Josh
I think he meant a gain in consumer welfare, as the triangle was previously a deadweight loss of welfare. but you are right regarding the gain inconsumer surplus, it is also the rectangle + triangle.
Hi, Your videos are really helpful. Can you do some videos for global economy? e.g. Latvia internal devaluation
Hi @EconplusDal,
I’m a little confused why the diagram you have drawn would not be the other way? As surely when a state firm is privatised it is likely to become a monopoly whilst a state run company looking to maximise social welfare will produce where MC=AR?
Actually, when an industry is state run it is more likely to be dominant and therefore a lack of competition which may lead to a more monopoly approach, whereas for a privatised org there is more competition. However I dont get why the diagram is shifted to a position of resource allocation??
@@star1847 exactly! Im so confused Ive always thought that private firms were profit maximisers and nationalised firms are allocatively efficient
@@DameTime13 nationalised firms are allocatively efficient so im not sure why hes drawn it as a profit maximiser. And the reason that when its privatised there is allocative efficiency is because you get competitive outcomes where MC=AR (becasue MC=Supply and AR=Demand)
I am here one day before my economics o level exam 🙃 . I am learning new things.
What did u get
@@abdirahmanmumin I Got 'B'
When did you start revising and is it too late in your opinion
@@princessdani7725 start asap
Hey sir, I was just wondering how do you show the Deadweight loss before moving to competitive outcomes?
Thank you so much l have present ions tomorrow about privatization and this really help me may God bless you
hope your present ions went well
Hi, quick question.
When drawing the cost and revenue diagram, when should you have the min point of the AC curve at MC=MR? I understand the min point is productive efficiency, but I'm confused as to why sometimes the min point passes through MC=MR and sometimes it doesn't.
Cheers.
Also sorry, why does the firm when privatised switch to producing at P=MC, if the private firm will be profit maximising? Should it not carry on production at MC=MR? Thanks again!
xPSG1 If it was just sold off to the private firm then yes it would keep producing at MC=MR. However the idea is that once it's sold off, competition increases and other firms enter the market (as they're now competing with this one firm and not the entire government). So, the industry moves towards the more competitive price where P=MC and only normal profits are being made. That's why one of the 'Depends on' points was whether firms actually flock to enter the industry. That's how I understand it anyway lol.
Neeor not necessarily your right for most of it but firms are not making normal profit and P=MC they make normal profit when AR=AC
very helpful video
Hi, your videos are amazing and really helpful.
I got a question wanna ask.
For the diagram you had mentioned at the very begging, I'm wondering whether or not it is a valid comparison of privatization.
Since the first price level is set under the the assumption of profit maximization which is not the objective of a government owned department( perhaps AR=AC). I can understand you want to show us the idea in which by the process of privatization, it will increase the quantity and lower the price level. But just my curiosity. Please point out any mistake that I have made in this question, thank you.
had the same question icl
@@ron3799 8 years later same here
@@hstudies HOWS YOUR REVISION MAN
@@hstudies same lol
@@ron3799 lol it's hard bro I only need a B but I'm trying to get the best grade I can - I spent so much time on my medicine application and preparing for my interviews and I got an offer of BBB thank god but I got so behind on my revision so now I'm really panicking but paper 1 should be ok. What about you man?
@1:30 surely, pre privatisation, the firm would be producing at the socially optimum level of output where mc = p?
Refer to pre privatisation as a state run monopoly and thus, produces at PmQm
Hope that helps George!
Thank you mate
Hi, Privatisation is transferring a public asset into the private sector so it was initially run by the government right? Wouldn't it have already been allocatively efficient under state control?
Yes you would expect this but there is room for even greater gains in allocative efficiency for private firms who can reduce costs and prices more than nationalised firms can (the profit motive incentive). As a result prices tend to be lower and quantities produced tend be higher hence further gains in allocative efficiency...assuming privatisation leads to competitive outcomes
Alright I see! I'm enjoying your videos, thank you for making them!
*****
reducing costs by a private corporation usually means reducing services (if allowed) or by reducing the quality of those services through various means like out sourcing to cheaper & less skilled overseas workers - both of which hurts a nation. Government run utility's are far more stable, the services are still payed for by the public individual but are also subsidized by a nations taxes keeping the costs down the money comes back through a healthy GDP created by affordability & Stability.
Many thanks.
Why will there be a loss of economies of scale if a natural monopoly was to be privatised? Also could you give an example please.
likely to be split up into smaller companies, bit late but hopefully helps
Thank you sir love you
Thank you
WHT ABOUT -- productive efficiencvy??
Why is there an increase in competition in market due to privatisation?
a.k.a why do economists assume that firms flock the market that has been privatised?
Idk if this is too late, but there's an increase in competition due to deregulation e.g. removal of barriers to entry.
W live stream
Hi, have you got any videos on labour markets please?
Yh he's got a whole playlist on it
Labour Market, Distribution of Income/Wealth and Poverty - Year 2 A Level: ruclips.net/p/PLWeicFreBUYCs7NjXgFhQpoEDvnryFip2
@@KIRAN5P ty
The argument that private corporations will be forced to run efficiently to guarantee profit is false. They would love to obtain greater profit as less cost, who wouldn't want that.
2021 anyone?