Seriously man, you're great!! What students need are not fancy animated videos, but just clear and intuitive but concrete explanations. The idea of threatening the consumer with a price change helped so much!
you are an absolute hero for posting these videos, im revising my university resits and this helps so much more than my textbook. keep them coming man!
So helpful the video! I didn't understand a word in my own lecture class which lasted an hour and a half and you made me understand it all in les than 10 minutes! Thanks A lot!
In this video, an "increase in the price" is an increase in the price of good X. You can see this on the graph. The new budget line is "pivoted" inward. Lecture 7 talks in more detail on how to identify/graph a price change.
Wonderful video, I am 4th year in Econ major, but seem like I still have some missing concepts in Econ. Thus, searching for Compensating Variation, I found you video. Such a helpful vid you posted, Thank you very much.
At around 2:40, you write the calculation of the magnitude of the CV as e(A)-e(C). If I'm not mistaken, it should be the other way around: CV=e(C)-e(A). C is the more expensive bundle that follows the price increase. A is the original, cheaper bundle pre-price increase.
@ThePractist Price is a per unit measure of how much a person has to give up. If the price goes up from 15 to 20 and you currently buy 10 units of the good, you need to be compensated about $50. If the price goes down from 20 to 15 and you currently buy 8 units of the good (less b/c 20 is a higher price), you need to be compensated about $40. This doesn't quite capture why CV differs from EV, but you should start at Lecture 5 and build to Lecture 16 if this idea of price is confusing.
@ecnerwal999 Interesting point. Math is used in economics to clarify reasoning, not to explain what we cannot explain in words. We use math to prevent us from making illogical statements. It is much easier to obfuscate an absurd statement if you're not required to put it into math. Using math allows us to state clearly the assumptions needed for an argument. That said, if math is incomprehensible to you, this method of clarifying thought is counterproductive. Your frustration is understandable.
Very good tutorial. For the equivalent variation, I was wondering why you would put point E below B, in the case of an increase in price of X, individual will consumer less good X and have more good Y, so isnt E above B for the substitution effect. Thanks!!
Hi, thankyou for your explanation. In my class notes it says that you should use EV when assessing the impact on different groups (of policies) and CV otherwise but I can't conclude why?
@yenpet Yes. If there are no income effects (quasilinear utility), this is the case. For a calculus intensive explanation for why, see my Lecture 16A where I relate CV, EV and changes in consumer surplus.
But, we want a measure of how the price change affected the consumer's well being. Given that the price increased, it makes sense that CV is negative (meaning that the consumer is worse off). In other words, CV is e(original bundle) - e(compensated bundle). This would be positive for a price decrease.
How can this guy explain this better than my german prof on a famous economy university in fucking germany in fucking GERMAN man like i cant even speak english wtf ????!?GBEOGKRKGK
@ecnerwal999 They only teach you (usually) one school of though, which is usually the neoclassical school. The neoclassicals sought to use math alot in their modelling of the economy. Different schools, such as the Austrian school, spend less time with this, and more on real life
@ecnerwal999 ummm, actually you're wrong, sorry. all these curves tell a story, once you learn the story based on the assumptions you can then apply them to real world and make changes when the assumption don't hold. How do you think policies are devised? As for the GFC, economists were predicting this because of asset prices and bad lending practices, no economic model could've predicted what you former president and fed chairman allowed to happen. This is human behaviour gone wrong not econ!
if you let yourself fall into this way of thinking, everything in life is pointless. economics help you to think about the world in a mathematical sense and reflects the behavior of people. Although these equations and models may not have a precise real world application, they represent complex systems in a formidable way. this sounds more like your own discontent with your lack of math abilities and understanding of the subjects. don't be spiteful and narrowsighted.
![(M4E8) [Microeconomics] Consumer Surplus: Compensating and Equivalence Variations](http://i.ytimg.com/vi/J9GtoDx_BPI/mqdefault.jpg)
Seriously man, you're great!! What students need are not fancy animated videos, but just clear and intuitive but concrete explanations. The idea of threatening the consumer with a price change helped so much!
I find this stuff so much easier when someone says it to me for some reason, reading it from the book doesn't help at all, thanks a bunch for this!
Most likely, you are the best Intermediate Microeconomics teacher living on earth!
If it wasn't for videos like yours then I would fail my degree. Thank god there are some people who can actually teach!
you are an absolute hero for posting these videos, im revising my university resits and this helps so much more than my textbook. keep them coming man!
So helpful the video! I didn't understand a word in my own lecture class which lasted an hour and a half and you made me understand it all in les than 10 minutes! Thanks A lot!
In this video, an "increase in the price" is an increase in the price of good X.
You can see this on the graph. The new budget line is "pivoted" inward.
Lecture 7 talks in more detail on how to identify/graph a price change.
Terrific guy! Love from Ghana.
Wonderful video, I am 4th year in Econ major, but seem like I still have some missing concepts in Econ. Thus, searching for Compensating Variation, I found you video. Such a helpful vid you posted, Thank you very much.
this guy definately saved my uni life!!!!!!
I'm a master student of economics and this was so useful for me thank you so much!
At around 2:40, you write the calculation of the magnitude of the CV as e(A)-e(C). If I'm not mistaken, it should be the other way around: CV=e(C)-e(A). C is the more expensive bundle that follows the price increase. A is the original, cheaper bundle pre-price increase.
Great explanation, Ivan! A very useful lecture for graduate students studying intermediate microeconomic theory.
am doing my mba..and this video is really dope bro. kip it up.
Have an exam on this in a few hours and your video helped everything to just click into place. GG
@ThePractist Price is a per unit measure of how much a person has to give up.
If the price goes up from 15 to 20 and you currently buy 10 units of the good, you need to be compensated about $50.
If the price goes down from 20 to 15 and you currently buy 8 units of the good (less b/c 20 is a higher price), you need to be compensated about $40.
This doesn't quite capture why CV differs from EV, but you should start at Lecture 5 and build to Lecture 16 if this idea of price is confusing.
Thank you, all the way from South Africa! Life saving.
@ecnerwal999 Interesting point. Math is used in economics to clarify reasoning, not to explain what we cannot explain in words. We use math to prevent us from making illogical statements. It is much easier to obfuscate an absurd statement if you're not required to put it into math. Using math allows us to state clearly the assumptions needed for an argument. That said, if math is incomprehensible to you, this method of clarifying thought is counterproductive. Your frustration is understandable.
Thanks a lot for this video sir the explanation was so easy to understand!
Very good tutorial. For the equivalent variation, I was wondering why you would put point E below B, in the case of an increase in price of X, individual will consumer less good X and have more good Y, so isnt E above B for the substitution effect. Thanks!!
Thank you for this! I have a micro test in a couple of days and this was really helpful :)
This was SOOOOOOOO helpful I can't thank you enough! These videos are saving my butt you have no idea. Now I won't fail my micro exam. :')
very useful, invest in a tripod!!
You are my hero, sir.
Very informative and easy to understand......
this dude saved my life
Very good explanation.. Thanks a ton!!
AOG == All Other Goods. It is a composite of all other goods in the economy. By convention, we set the price of AOG to be 1.
easy to understand and nice video,thank u~
Hi, thankyou for your explanation. In my class notes it says that you should use EV when assessing the impact on different groups (of policies) and CV otherwise but I can't conclude why?
@yenpet Yes. If there are no income effects (quasilinear utility), this is the case. For a calculus intensive explanation for why, see my Lecture 16A where I relate CV, EV and changes in consumer surplus.
Micro final in a few hours, great for review. Thanks brah
@intromediateecon And if there is only an income effect, there is no CV by definition, as the prices can't have changed?
okey, thank you very much, its just that ive got an essay due and im questioning every thing!
thanks a heap!! :)
another question, what do you mean when you say 'increase in price'? do u mean of good x or both?
Thank you, sir! Extremely, useful!
For the EV diagram, is the income effect A to E, and is the substitution B to E? Thanks!!!
Where are the lectures you mentioned in your video?
Dude, i love you for real.
so is CV for the Slutsky analysis and EV for Hicks?
Very well explained, thank you so much :)
Very clear, thanks!
this has been very helpful, you save my life! thx ;)
super explaination, all is clear, thankssssssssssssssss!!!
Thanks! very helpful.
But, we want a measure of how the price change affected the consumer's well being. Given that the price increased, it makes sense that CV is negative (meaning that the consumer is worse off). In other words, CV is e(original bundle) - e(compensated bundle). This would be positive for a price decrease.
sorry but how do we then compare the Slusty CV and the Hicksian CV
Nice video bro
what the real facts that support economist to add another line for the purpose of shown different between the substitution and income effects?
Thank you!
For the compensating variation, shouldn't it be: e(C)-e(A)?
How can this guy explain this better than my german prof on a famous economy university in fucking germany in fucking GERMAN man like i cant even speak english wtf ????!?GBEOGKRKGK
thank you man! I love the passion!
It is helpful, thank you!!
what is on the vertical axis?
Marshall Eriksen teaches econ?
i am confused about what isthe difference between cv and ev, same thing???
Amazinf
it's so clear... thankS..! =)
is it possible that EV = CV?
Guys, the explanation is correct but the graphs are mixed up.
no it's not, EV is based on subsequent utility and CV is based on initial utility
Oh.Love ian
At 1:09, does it matter where point C lies?
+sharifah nuramirah It is the tangent of the dotted line and U0
@ecnerwal999 They only teach you (usually) one school of though, which is usually the neoclassical school. The neoclassicals sought to use math alot in their modelling of the economy. Different schools, such as the Austrian school, spend less time with this, and more on real life
really, really helpful! My teacher sucks!
Jah bless yhu
may you provide some brain storming for that session of C.V and E.V?
Isn't it fucked that we pay for a university class that we teach ourselves in?
or we didn´t pay attention enough
good video but get a new camera guy #shaky
i thought only if its quasilinear
This is helpful, but the mic makes a lot of noise. That is super annoying when watching...
@ecnerwal999 ummm, actually you're wrong, sorry. all these curves tell a story, once you learn the story based on the assumptions you can then apply them to real world and make changes when the assumption don't hold. How do you think policies are devised? As for the GFC, economists were predicting this because of asset prices and bad lending practices, no economic model could've predicted what you former president and fed chairman allowed to happen. This is human behaviour gone wrong not econ!
The writings on the screen are distracting
It is becoming increasingly apparent that you are in desperate need of general prize monies
if you let yourself fall into this way of thinking, everything in life is pointless. economics help you to think about the world in a mathematical sense and reflects the behavior of people. Although these equations and models may not have a precise real world application, they represent complex systems in a formidable way. this sounds more like your own discontent with your lack of math abilities and understanding of the subjects. don't be spiteful and narrowsighted.