Y1 30) Subsidy and Market Failure. Everything you need to know regarding Subsidies and Market Failure Instagram: / econplusdal Twitter: / econplusdal Facebook: EconplusDal-...
Hey, thanks so much for all the awesome videos! Just a quick question - what does the subsidy incidence look like if there's a market failure? Is is just a rectangle for producers and a rectangle for consumers with no welfare loss?
in an essay, could you a demand and supply diagram of this and talk about how consumer and producer surplus rises , which encourages an increase in consumption and production of merit goods?
What is the explanation as to why the subsidy shifts the mpc curve? I know people will say that the subsidy shifts the supply curve, but why in this instance is the mpc curve regarded as the supply curve ?
when doing analyis on markets, you should always set your upwards and downards shifting curves as S and D. The curve that moves is your social curve, and the remaining 2 will be the private curve (MPC for supply and MPB for demand). MPC is marginal private cost, which is literally the producers cost of production. So with the subsidy, COP falls and this is shown diagrammatically with the MPC curve shifting to the right.
I'm super confused cuz my book says "the more price inelastic is demand the more a subsidy will benefit consumers rather than producers" But in the vid it says the opposite Pls help
@@Theo-vh9iy idk I think the book is right, as if you draw out an AS AD diagram with an I elastic and elastic AD curve the in elastic get it at the cheaper price level
@@mrdefuse6320 yh but the quantity demanded will not increase as price is not the main reason why people do not consume the good, if demand is elastic more people will benefit from the subsidy as the quantity demanded at this new price level will exceed the change in price.
I haven't watched the video completely but the book's idea is right. Assuming a good has a price inelastic demand, we know that a change in its price won't cause a change on its consumption significantly. Hence, by introducing a subsidy, the producers will have a lower production cost and so it may translate into lower prices, however, this lower prices wont increase their profit because sales wont increase because of the price inelastic. Whereas for consumers, they will be experiencing a cheaper consumption. I hope now is clear
@@jordi7770 but the point is that government wants to increase the production and consumption of the merit good that have positive externality so that socially optimum output can be produced and consume, so as you said that subsidy will provide benefit to producer but no sales means no profit, now here is problem in your point as main purpose of a subsidy is to increase output and if no sales are made then it means socially optimum output is not produced and consumed so what I think is that video is right as if demand is price inelastic then producer would use subsidy as to profit themselves and will not reduce price as sales are not affected due to inelastic response as reduced prices would lead to lower increase in demand, thus it's an evaluation that if price is inelastic then subsidy will not benefit greater to increase output to optimal level as by subsidising the product or service people doesn't care about price and still consume same or very little more if prices are reduced as like example in the video in which people prefer car instead of rail or bus even if these option are cheaper due to flexibility and relax journey that a car may provide . Hope you understand my point.
You know he's a G when you're at uni now but still subscribed
I am still watching watching his videos even I am doing master nowXDD
Is uni economics like a more complex and in depth version of a level or is it all completely different?
@@jamesbarker4306 get blanked
@@monsterheh8275 lmao
Facts bro
Notification squad / desperate for good grades squad
MAN LIKE DAL
LEGEND.
THANK YOU for saying HK is a country!!! ❤❤i love you econplusdal you’re my fav econ teacher😛
What a absolute legend 💪🏽
Hey, thanks so much for all the awesome videos! Just a quick question - what does the subsidy incidence look like if there's a market failure? Is is just a rectangle for producers and a rectangle for consumers with no welfare loss?
Really helped me thank you so much 💗
Could you possibly do a video on all A2 diagrams/analysis for micro and macro?
you are aesthetically pleasing x
HI !!!!!!!!!!!! FROM THE UK WE LOVE YOUR VIDS OVER HERE
This acc really helped... tyyyyyy!!!!!!!!!
Many thanks.
THANK YOU
What a banger
Thx for ur teaching rmb CLSS
in an essay, could you a demand and supply diagram of this and talk about how consumer and producer surplus rises , which encourages an increase in consumption and production of merit goods?
aired pal
Pretty sure I failed my as exams, but thanks for the help my G
So did you fail??
@@sabinaxox8269 still wondering
@@ahmedbenhariz8694 same
Did you pass?
@@SarahArnoldGoogle same
legend
Love your videos
Why on consumption diagram is the new curve MPC+ Sub shouldnt it be MSC=MPC+Sub?
yeh innit
Raz and Aayan this guys really helpful but hes done it different on different vids so now i dunno how to do this lol
It doesn't necessarily matter which you choose to do, both explain what's happening to a sufficient degree.
Quasi thank you
Daddy econ
god isnt he so cute
@@CalvinHobbes dad
can you use the green marker to another marker 🤗 anyway its so best video
You are so beutyfull
What is the explanation as to why the subsidy shifts the mpc curve? I know people will say that the subsidy shifts the supply curve, but why in this instance is the mpc curve regarded as the supply curve ?
when doing analyis on markets, you should always set your upwards and downards shifting curves as S and D. The curve that moves is your social curve, and the remaining 2 will be the private curve (MPC for supply and MPB for demand). MPC is marginal private cost, which is literally the producers cost of production. So with the subsidy, COP falls and this is shown diagrammatically with the MPC curve shifting to the right.
boss man
well...HK is not a country, it is a Chinese special administrative region
Is there a deadweight welfare loss on the diagrams?
2:50 ***booooom***
can you make videos about economics gcse please
doesn't exist
@@extrospective It does but its just very uncommon.
I'm super confused cuz my book says "the more price inelastic is demand the more a subsidy will benefit consumers rather than producers"
But in the vid it says the opposite
Pls help
I think the vid is correct, coz inelastic demand means firms can keep price high, and pocket the subsidy. ask ur teacher tho
@@Theo-vh9iy idk I think the book is right, as if you draw out an AS AD diagram with an I elastic and elastic AD curve the in elastic get it at the cheaper price level
@@mrdefuse6320 yh but the quantity demanded will not increase as price is not the main reason why people do not consume the good, if demand is elastic more people will benefit from the subsidy as the quantity demanded at this new price level will exceed the change in price.
I haven't watched the video completely but the book's idea is right. Assuming a good has a price inelastic demand, we know that a change in its price won't cause a change on its consumption significantly. Hence, by introducing a subsidy, the producers will have a lower production cost and so it may translate into lower prices, however, this lower prices wont increase their profit because sales wont increase because of the price inelastic. Whereas for consumers, they will be experiencing a cheaper consumption. I hope now is clear
@@jordi7770 but the point is that government wants to increase the production and consumption of the merit good that have positive externality so that socially optimum output can be produced and consume, so as you said that subsidy will provide benefit to producer but no sales means no profit, now here is problem in your point as main purpose of a subsidy is to increase output and if no sales are made then it means socially optimum output is not produced and consumed so what I think is that video is right as if demand is price inelastic then producer would use subsidy as to profit themselves and will not reduce price as sales are not affected due to inelastic response as reduced prices would lead to lower increase in demand, thus it's an evaluation that if price is inelastic then subsidy will not benefit greater to increase output to optimal level as by subsidising the product or service people doesn't care about price and still consume same or very little more if prices are reduced as like example in the video in which people prefer car instead of rail or bus even if these option are cheaper due to flexibility and relax journey that a car may provide . Hope you understand my point.
god mr dal you are just so hot x
bro?