Subsidies on Buyers / Consumers in Perfect Competition - Market Outcomes and Welfare (PS, CS, DWL)

[@国王-d7j]

excellent! Our textbook really oversimplify this part. Your detailed explanation helped me a lot on exam!!!

[@econhelp_official]

This one is tricky! Thanks for the comment, good luck with your studies! :)

[@noone6953]

Thanks for this. Really needed for my assignment

[@econhelp_official]

Glad it was helpful! Good luck with the assignment!

[@sk1ppersk724]

Thankyou soo much. It was very clear and very useful.

[@econhelp_official]

Glad to hear that! Good luck with your study!

[@yuxuanyang5938]

really clear! thanks!

[@econhelp_official]

You're welcome Yuxuan! Hope your studies went well! :)

[@sajidnoor9482]

Very nicely explained. Thank you

[@econhelp_official]

You’re welcome 😊 thanks for the comment ❤️

[@syyttiow3285]

Very useful!! It help me a lot for exam

[@econhelp_official]

Glad to hear that! I hope that your exam and studies has gone well!

[@xDevillic]

Thanks for this very clear explanation!

[@econhelp_official]

You're very welcome Darren Yeo! Hope your study is going well!

[@chuxuansun1579]

You explained it so well! Thank you!

[@econhelp_official]

You're so welcome! Thanks for the comment, Best of luck with your studies :)

[@cashanders5233]

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[@你的父親-j3h]

keep it going , your channel will go viral

[@econhelp_official]

That's a really lovely thing to say! Thanks so much!! :)

[@mafaldaquintana340]

thank you!! you explained it really well!!!

[@econhelp_official]

You're very welcome! Good luck with your studies Malfalda!

[@Alex-kn2km]

really helpful! thanks so much (:

[@econhelp_official]

You're very welcome thanks for the comment!

[@One21Jiggawatts]

Great work. This was really informative. Thank you.

[@econhelp_official]

thanks so much for your comment Wayne!

[@socialusing6208]

Thank you ❤

[@econhelp_official]

You're welcome 😊

[@surajpadhiyar307]

Thank you.....👍👍👍👍👍👍

[@econhelp_official]

Thank you too!!

[@ulquiohime5694]

very helpful! Thank you

[@econhelp_official]

Thanks for your comment! Best of luck with your studies!

[@tvvt005]

Wont subsidy also shift the supply curve as it gives producers more incentive?

[@econhelp_official]

Hi, Good question, In this video the buyers get subsidised, so we shift the demand curve out. The supply curve is actually derived from the marginal cost curve (one way to think about this is that willingness to supply is determined by costs). Since the subsidy is placed on the buyer (not the producer) the supply curve remains unchanged (since the costs of production remains unchanged even with the subsidy). Note the move from Q* to Q' involves an increase in quantity supplied (a movement along the supply curve). This is to say, yes the subsidy incentivises greater levels of production, and we can see that since the quantity traded in the market increases. Does that help?

[@passrrr2030]

HI, thank you for the video. This video is actually directly relevant to one of my assignment questions and I wanted to clarify, how would you calculate the consumer subsidy. Say if the demand is Q=100 - 20P and supply is -20+20P and from there the equilibrium was P=3 and Q=40, what would be the next step in calculating and graphing the effect of subsidy on consumers? thank you in advance. Ive tried looking everywhere for a similar video but no luck

[@econhelp_official]

You're welcome! There is ethical dilemma of how much I can help here with an assignment, so I'll give you some hints but I'll stop short of working directly with your problem. I do go through a worked problem here kzbin.info/www/bejne/hIXTnpWBptF0eMU which will be similar steps, except I apply the subsidy on the producer. Basically, you will need to figure out the equation of the new demand curve with the subsidy. You can the find the new price in the market that the sellers get and the quantity traded by setting that new demand curve equal to the old supply. The price paid by the buyers follows from this too.

[@ma.benjhyenaperez6722]

you saved my life!

[@econhelp_official]

Haha! I'm so glad! Good luck with your study!

[@moshenhlanhladube8089]

good work

[@econhelp_official]

Thanks! Good luck with your study :)

[@milanpongracz178]

Is it the same for Monopolies?

[@econhelp_official]

Mostly, though the welfare analysis will be more complicated (especially calculating DWL). You've got me thinking about it.... leave it with me :), I'll either post a response video or give a more detailed answer to this comment.

[@econhelp_official]

Alright, after some thought. Yes the analysis is the same for Monopolies. The trouble that you will get is in the welfare analysis because Monopoly starts from underproducing relative to the allocatively efficient amount, so it already has a DWL. There are really 3 possible outcomes; the subsidy might not be large enough to correct for the DWL, the subsidy might be so large that the market ends up producing the efficient amount, or it might be so large that it overcorrects and produces too much (relative to the allocatively efficient amount). When calculating DWL, in addition to worrying about misallocation, you also have to make sure that you count the costs of the government in your calculation. The issue I have been grappling with is whether (or not) we can see DWL easily on a diagram (like you can in Perfect Competition). Unfortunately I don't think that you can. I think it's best to calculate total surplus (TS) in perfect competition (producing where MB (demand) = MC), find the TS in the case where you apply a subsidy to a Monopoly, and then find the difference between these two amounts. Theoretically, the difference (if there is one) should be equal to DWL. Does that help?

[@karlie7]

thank you!

[@econhelp_official]

You're welcome!

[@mujtabaafzal2899]

can you help me by recommending a book or something on "effect of subsidy in perfect competition".

[@econhelp_official]

I just checked online and the page here pressbooks.bccampus.ca/uvicecon103/chapter/4-6-taxes/ looks quite good, and covers the points in this video - also the MIT open course ware ocw.mit.edu/courses/economics/14-01-principles-of-microeconomics-fall-2007/lecture-notes/14_01_lec18.pdf - Neither of these pages explicitly show the shift in demand/supply curves, though if you read through the taxation section the discussion (I think) becomes clearer - if it wasn't already. Hope that helps!

[@HabiThapa]

Thank you :)

[@econhelp_official]

Many thanks Habi Thapa for your comment! Best of luck with your studies!