Rent control and deadweight loss | Microeconomics | Khan Academy

Let's step through some details on how one kind of regulation can reduce economic efficiency
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[@LarsDahlin]

Really nice explanation of the market. Thanks for sharing it.

[@g4l4h4d1]

I’m always impressed with how well you can write using a mouse

[@bufanpxl8r]

He's probably using an iPad or Wacom tablet

[@BrockAnth]

Do you know everything? I honestly didn't know you did economics stuff too!

[@Drag0nzeyes]

Sal was a hedge fund analyst before quitting his job for KhanAcademy.

[@BrockAnth]

Humm, interesting! So what about the chem part, does he just love everything?

[@nonchalantd]

I love these videos.

[@alicedigianvito1717]

Oh my god THANK YOU now i get it

[@mikeharrison469]

What I don't understand: 2 million square feet of apartments are built, THEN rent control is introduced. That 2M sq ft still exists, it doesn't disappear. Even though the price is reduced, apartment owners need to rent out that land or they straight up LOSE money all of the time. It makes zero sense that they would rent out less land and just leave 1M sq ft of land completely unused. No, they're going to keep renting out those apartments. Increasing marginal cost only makes sense for BUILDING NEW APARTMENTS, not renting out already existing apartments.

[@clipdump]

Buildings can't just be rented out, a lot of work needs to be put into developing even old buildings to keep up with regulations, which I think is a good thing. I've rented all my life and I'm convinced the worst people in the world are landlords 😂. So there is a risk/reward problem which means landlords are not going to want to take the risk. Aspiring landlords have to sink considerably higher investment to make a profitable return viable, meaning that they only go for high end property. Another issue is that the land appreciates in value over time, so you'll see that they can make money just sitting on the asset

[@jillianconte]

gr8 video!

[@Matt10BrickGenius]

Thanks

[@gmartirosyan]

is this rent control really going to be introduced?

[@cilginkosucu]

It already has been in SF. Seattle has tried but it's against state law.

[@IntrusiveThot420]

Someone send this to Bernie Sanders lol

[@darrrenmk]

The result of rent control is that consumers get a greater share of the total economic surplus. Depends on a lot of factors of course, but I don't see that as a necessarily bad thing.

[@mahfuzalalam6088]

correct me if i am wrong isnt 1/2 x 1 x 1.5 =0.75

[@Andrea_Lewis]

I agree. I noted that also but was hesitant to speak. I actually clicked back on to scroll through hoping someone would mention it cause it was bothering me, so thank you.

[@kibelshoty196]

Number One :D

[@InventorGadget]

nice presentation! I also get instant flashback from university where they only teach Keynesian bullshit.. like the "broken glass window" thery and so on..

[@nicksmith9]

Videos would be great if they were not so messy.

[@jsupim1]

You are overestimating the consumer surplus in the context of rent control. You are incorrectly assuming that all consumers to the left of the Q=1 line will rent, while those to the right of the line will not. But there is no reason to assume that someone whose marginal utility of 1sqft is 3.7 will rent for 2$ while someone whose marginal utility is 2.3 will not rent for 2$. More realistically, the flats at 2$ will be allocated to a variety of consumers, some of whom will only gain 0.3$ surplus, while others will gain 0.7$ or 1.9$. Some others who are willing to pay 3.9$ will not get a flat because of the shortage. To estimate the consumer surplus, it would be more accurate to draw a line from P=4$ to Q=1 and compute the area of the triangle under the line.

[@Acid31337]

I don't get that "supply of square foots" point. How it depend on price? Do you see how price hike lead to more housing in area? I do not. You can see some issues here. It is not free market, supply is limited with laws and obvious natural limits, so regulations cannot harm it. Its already broken.

[@jsupim1]

"supply is limited with laws and obvious natural limits, so regulations cannot harm it." So which is it - supply is limited by laws or supply cannot be limited by laws? You might have a point to the extent that supply might be weakly responsive to price - i.e. changing the price by 10% might change the supply by only 1 or 2%. The plot would look a bit different, but the overall analysis would be similar. I'm not sure if that's correct, we would need some data. But it sounds plausible, since major barriers to constructing new homes are zoning laws and regulations, and perhaps shortage of construction workers.