I love you man! You just helped me a zillion times over with your videos. I finally know what welfare loss is now! Its the cost of a market failure, and to reduce market failure, a government has to intervene, through one of various methods i.e. taxation, to reduce the size of the market failure or erradicate it completely. Much love!
Hi, Thank you for all of your videos. I'm taking microeconomics via an online course; so, therefore you are my professor. And I couldn't be happier! Thanks!
Just to clarify folks, even though the tax doesn't equal the MSC, it reduces the market failure and solves the market failure to an extent. If you think about it, the amount of tax the government should put to equal the MSC is very hard to find, and so if underestimated-leads to over production, and if overestimated- leads to under production. Hope this makes sense, great vid, Ally- AS student
@alih15 it is a correction as long as the size of the welfare loss created by the negative externality has been reduced. It does not have to be entirely removed to be a correction. The size of the tax will dictate how much the welfare loss gets reduced. A big enough tax could remove the welfare loss altogether.
There are myriad negative externalities in both production and consumption of tobacco. Healthcare costs, litter, fire damage, forest clearance for tobacco plantations are just a few costs created by the production and consumption of tobacco, yet paid by third parties - not buyers and sellers of the product.
The issue of fire damage is a bit more complex, but essentially very similar. Again, this is a risk taken by the property owner. Since most fires start on government land due to the fact that it is poorly maintained (I know, I live in california where there are wild fires EVERY year), it's a little hard to take the smoking issue seriously (since there are much bigger fish to fry [than smokers] when it comes to fire prevention).
@ErebusTV Hello- no you cannot use D and S curves - they are different things! You really have to think about the purpose of the curves and what points on the curves mean to realise the differenc between the two kinds of curves. Regards, PAJ Holden
I have the same thing in my diagram for negative production externality, MPB instead of MSB. But I think it doesnt really make a difference in this case because as he said in a negative externality there is no distinction for private and social benefits. But I guess you can go with what you were taught. Good luck on monday!
altogether, a great speed and agility to handle them while they're going on, and with great dept so that we can calculate (would you even posit completely?) their full effects. You have to remember, we're talking about gov't here. If they could comprehend externalities on a deep level with tremendous speed and foresight, wouldn't they're budget projections be FAR more accurate and their programs more efficient with little to no unintended consequences? Look at the unintended
As for litter and the cost incurd in it's removal, well... that is not a price covered by a third party. Rather, it is the price a property owner pays for the benefit of allowing smoking on their property. A cost (the cost of litter removal) is being exchanged for a benefit (the freedom to smoke).
Hello, I was wondering if I could get your opinion on what would be the more preferable alternative policy with regard to externalities. Should the gov't tax (not so much regulate what can be built or bought) those goods and services that have an externality effect in order to seek to correct this "market failure" or, more properly put imo, failure of traders to realize the full scope of ripple effects on their trades. I can guarantee you a producer who has a positive externality on a group
you can see his much recent videos on negative and positive externalities. For me, he's the teacher that explains everything very clearly, it's almost magical. Shame he stopped making videos, best bloke on TH-cam for Economics imho.
Hi, it's a great tutorial. I don't really understand when to use the MSC and MPC curve... As in I'm not sure if we're supposed to use it together when we're talking about externalities? Thank you so much!
WoW Professor Phil, Thanks for your lessons. They are such a great way to brush up on all that economic stuff from years ago that we have all forgotten. Love your style and clarity. Cheers Andy PS have you sorted out the "Greek Crisis Problem" yet?
Your videos have been used in my economics AS level class in London, England. They have been really helpful. My Microeconomic module is in 2 weeks and i still have questions about how you know which linear line is MPC or MSC for example. If you could give me a example question and explain this theory to me, i would be more than greatful. Thank you.
market eventually compensates when the time comes. What externality taxation seeks is an unattainable amount of market knowledge. This is the very same reason why centrally-planned economies underproduce because there is an overreliance on the ability of a man or small group to understand the price system, profit signals, and the infinite amount of information sent back and forth instantaneously from such a consolidated position.
A question about socially optimal size, this is really puzzling me!: Say that the PMB and PMC curves have equal elasticities and the the SMC and SMB curves are shifted out by the same amount (the negative externalities are equal to the positive externalities). Socially optimal size would then have output at the same as the free market size, yet the price would be higher, indicating a loss of consumer surplus and thus welfare? Wouldn't this be less preferable than the free market size? Thanks
Thank you very much on such big help you have been giving us, if I might, do you teach an IBO school there in Athens, I went there for my easter holidays, it was great, pretty similar as Lisbon from where i am.. do you teach IBO schools? Looking forwards to see more of your videos on Public Provision, Private Subsidies and vouchers ... thank you very much for such big help here!
Love your videos! I'm taking IB economics and we were told that there are two different graphs for negative externalities of consumption and production, you only have one...? which is it? i'm confused
would like to see reimbursement for that; it's not just the creators of negative externalities who don't want something done about it. But, my question to you is is it preferable to put this power in the hands of gov't, deal with their infamous miscalculations, and pray that there is no crony capitalism going on or Do we just deal with the complex nature of complex market ripple effects and find solace in the fact that capitalism will eventually deal with accumulations of negative
k, after finishing the video, I don't think you can say that the market completely ignores externalities indefinitely. You will have trades being made by traders who don't comprehend full effects, but the market does know the full effects as the conditions affected by externalities are the very same conditions that arrange costs of production, prices, and profits. You may get to a point where you have overproduction via distortion in information from an externality, however, the
Question- If a tax is introduced, does that also raise the marginal social benefit, as the tax is (thoretically) in turn spent on society by the government. For example, the high tax on tobacco not only tries to reduce consumption but also provides a large income for gov which is good for everyone. exam tomorrow afternoon lol a bit late :p
they need not be parallel. Many texts draw them diverging at higher output levels. I draw them parallel for simplicity's sake - that's how I teach students at my college.
Hi Paj I understand why the curve showing consumption ( the benefit curve) is labeled MSB as it shows the benefit to society however I always thought that the first benefit curve that is drawn should always be MPB. Is this the case or is the MSB curve be = to MPB. Thanks so much for your videos they are really helpful, can you please get back to me as soon as you can because my exam is on monday. Thank you
I'm doing GCSE Economics and i am a bit confused :( the costs that separate social costs and the entire costs from private costs. What does that mean? Can someone give me a watered down definition with a simple example? Economics doesn't come easy to me -.-
just a question for somebody who wants to explain, is the vertical axis Costs OVER Benfits? Or is it Costs AND Benifits, if its the latter, then Im confused haha
As for forest clearance, I'm not sure what you are referring to, but I do know that tabacco companies do not have the power to force people to pay for tabacco production. It's probably safe to assume that you are really referring to an externality caused by government (and trying to blame it on tabacco companies). Just a guess...
So you determine what is "socially optimum" by something other than what society chooses? That's fascinating. I wonder what the external costs of a criminal gang imposing itself on society are? You should do a chart for that. You could show us the failure of coercive monopolies to provide the proper amount and type of goods and services to society. Then you might conclude that such monopolies ought to be abolished by society since they are anti-social.
This time last year i used your videos to get me through A levels, Ended up with an A.
Now at university, still use your videos.
Amazing videos.
I love you man! You just helped me a zillion times over with your videos. I finally know what welfare loss is now! Its the cost of a market failure, and to reduce market failure, a government has to intervene, through one of various methods i.e. taxation, to reduce the size of the market failure or erradicate it completely.
Much love!
Thanks, I am still teaching, in Athens Greece. I am available for birthdays, parties and economic crises.
lol, this video isn't just for A2 students. It has helped me revise negative transport externalities for my MSc Transport Degree. So thanks!
this guy is an original G
Again a superb video. As a teacher you're videos are priceless to get across difficult topics to students.
Thanks Again
THANK YOU SO MUCH, this question came out in my paper today. you really are my savior. looking forward to more videos from you!
Thank you very much, I found this and your other videos on externalities ( these are the ones I have watched so far) extremely helpful.
Hi, Thank you for all of your videos. I'm taking microeconomics via an online course; so, therefore you are my professor. And I couldn't be happier! Thanks!
tomorrow i have AS level economins exam..!dese videos are best for revision..
My friend got pass only by viewin dese videos!
ThANKS for sharing!
THank you so much for helping me survive finals. all of your videos are very easy to understand.
Jessie Dinh sup
omg paj i love you. you save my life for every test. my teacher is nothing compared to you.
never stop making videos:) hope to meet you one day
Thank you very much pajholden. Extremely helpful for a quick refresh before my exam tomorrow.
Thank you very much for all the vids, they have helped me heaps for my degree.
Just to clarify folks, even though the tax doesn't equal the MSC, it reduces the market failure and solves the market failure to an extent. If you think about it, the amount of tax the government should put to equal the MSC is very hard to find, and so if underestimated-leads to over production, and if overestimated- leads to under production. Hope this makes sense, great vid, Ally- AS student
Thank you! You make much more simply to understand! Even if I have to watch you video more than once.
i love this guy, he's so good
@alih15 it is a correction as long as the size of the welfare loss created by the negative externality has been reduced. It does not have to be entirely removed to be a correction. The size of the tax will dictate how much the welfare loss gets reduced. A big enough tax could remove the welfare loss altogether.
Amazing - thank you SO much - you are a great teacher.
There are myriad negative externalities in both production and consumption of tobacco. Healthcare costs, litter, fire damage, forest clearance for tobacco plantations are just a few costs created by the production and consumption of tobacco, yet paid by third parties - not buyers and sellers of the product.
thanks holden you are my vertual teacher
usman from
Pakistan
i really feel like i love you ! lol, you're saving me from failing with all your videos ! you should come to brazil and teach me :)
TF THIS GUY IS AMAZING, SIMPLIFIED IT MUCH MORE THAN MY TEACHER THANKS ALOT MAN
Your videos are extremely helpful! Thank you for making them!
you're a good friend to microeconomics. thanks again. :)
The issue of fire damage is a bit more complex, but essentially very similar. Again, this is a risk taken by the property owner. Since most fires start on government land due to the fact that it is poorly maintained (I know, I live in california where there are wild fires EVERY year), it's a little hard to take the smoking issue seriously (since there are much bigger fish to fry [than smokers] when it comes to fire prevention).
Great explanation of welfare loss, it helped me a lot... thanks
Clear and concise, very good. Thank you.
@ErebusTV Hello- no you cannot use D and S curves - they are different things! You really have to think about the purpose of the curves and what points on the curves mean to realise the differenc between the two kinds of curves. Regards, PAJ Holden
this is so good for revision....your voice is so soothing btw like my dads.x
I have the same thing in my diagram for negative production externality, MPB instead of MSB. But I think it doesnt really make a difference in this case because as he said in a negative externality there is no distinction for private and social benefits. But I guess you can go with what you were taught. Good luck on monday!
please do a video on merit and de-merit goods, just in general. thanks your videos are quality. helps alot.
altogether, a great speed and agility to handle them while they're going on, and with great dept so that we can calculate (would you even posit completely?) their full effects.
You have to remember, we're talking about gov't here. If they could comprehend externalities on a deep level with tremendous speed and foresight, wouldn't they're budget projections be FAR more accurate and their programs more efficient with little to no unintended consequences?
Look at the unintended
Darn you're good! I wish you were my Economics teacher!
Thanks for the excellent video ! Would appreciate if you could post a video on positive externalities too
Phil explains it so well i feel like i am cheating on my exam when i watch his videos! hehe! :)
Thank you so much!!!!!!!!1 Got exam resit 2moro. good luck to anyone who does as well
my saviour
my daddy
wowo was lost but now i am found, thanks alot i am gonna pass my exam now..!!
thank you for your video! it was really useful for my revision!
thank god i found this vid, my teacher couldnt explain this at all
Thank you so much. I appreciate your work.
As for litter and the cost incurd in it's removal, well... that is not a price covered by a third party. Rather, it is the price a property owner pays for the benefit of allowing smoking on their property. A cost (the cost of litter removal) is being exchanged for a benefit (the freedom to smoke).
You saved me! Thank you!
Text and professor's lecture sucked!
Hello, I was wondering if I could get your opinion on what would be the more preferable alternative policy with regard to externalities. Should the gov't tax (not so much regulate what can be built or bought) those goods and services that have an externality effect in order to seek to correct this "market failure" or, more properly put imo, failure of traders to realize the full scope of ripple effects on their trades. I can guarantee you a producer who has a positive externality on a group
thankyou soo much didn't have a clue in class what this was
good video, very simply explained !
IB eco exam tomorrow :P this guy is brilliant!
Really helpful videos, but would be much appreciated if the camera quality was a little higher so it would be easier to read the board. Thanks.
you can see his much recent videos on negative and positive externalities. For me, he's the teacher that explains everything very clearly, it's almost magical. Shame he stopped making videos, best bloke on TH-cam for Economics imho.
You sir are a king. Thank you!
one of our economics teachers is leaving at the end of this year, fancy coming and teaching us?
thanks for this, hopefully should help me to get an A
you are just awesome. thanks for the videos...
Hi, it's a great tutorial.
I don't really understand when to use the MSC and MPC curve...
As in I'm not sure if we're supposed to use it together when we're talking about externalities?
Thank you so much!
@pajholden what a come back :)
WoW Professor Phil,
Thanks for your lessons. They are such a great way to brush up on all that economic stuff from years ago that we have all forgotten. Love your style and clarity.
Cheers Andy
PS have you sorted out the "Greek Crisis Problem" yet?
Your videos have been used in my economics AS level class in London, England. They have been really helpful.
My Microeconomic module is in 2 weeks and i still have questions about how you know which linear line is MPC or MSC for example. If you could give me a example question and explain this theory to me, i would be more than greatful. Thank you.
market eventually compensates when the time comes. What externality taxation seeks is an unattainable amount of market knowledge. This is the very same reason why centrally-planned economies underproduce because there is an overreliance on the ability of a man or small group to understand the price system, profit signals, and the infinite amount of information sent back and forth instantaneously from such a consolidated position.
A question about socially optimal size, this is really puzzling me!:
Say that the PMB and PMC curves have equal elasticities and the the SMC and SMB curves are shifted out by the same amount (the negative externalities are equal to the positive externalities). Socially optimal size would then have output at the same as the free market size, yet the price would be higher, indicating a loss of consumer surplus and thus welfare?
Wouldn't this be less preferable than the free market size?
Thanks
Thank you very much on such big help you have been giving us, if I might, do you teach an IBO school there in Athens, I went there for my easter holidays, it was great, pretty similar as Lisbon from where i am.. do you teach IBO schools? Looking forwards to see more of your videos on Public Provision, Private Subsidies and vouchers ... thank you very much for such big help here!
Can you kindly post a video on positive externalities diagram? Tks & happy new year.
Love your videos! I'm taking IB economics and we were told that there are two different graphs for negative externalities of consumption and production, you only have one...? which is it? i'm confused
are single-use plastic bags negative externalities in consumption or in production?
awesome u make a-level economics easier from london woooop!
Absolute genius
would like to see reimbursement for that; it's not just the creators of negative externalities who don't want something done about it. But, my question to you is is it preferable to put this power in the hands of gov't, deal with their infamous miscalculations, and pray that there is no crony capitalism going on
or
Do we just deal with the complex nature of complex market ripple effects and find solace in the fact that capitalism will eventually deal with accumulations of negative
k, after finishing the video, I don't think you can say that the market completely ignores externalities indefinitely. You will have trades being made by traders who don't comprehend full effects, but the market does know the full effects as the conditions affected by externalities are the very same conditions that arrange costs of production, prices, and profits. You may get to a point where you have overproduction via distortion in information from an externality, however, the
thank so much,wonderful videos.
paj. you are a god!
Thank you very much..great prof !
Question- If a tax is introduced, does that also raise the marginal social benefit, as the tax is (thoretically) in turn spent on society by the government.
For example, the high tax on tobacco not only tries to reduce consumption but also provides a large income for gov which is good for everyone.
exam tomorrow afternoon lol a bit late :p
can you use supply and demand to show this? and just say that ''if we include external cost the supply curve will shift to the left''?
Mr. Holden, could you do one on positive externalities? Thank you.
@pajholden Thank you sooo much i have been watching your vids and they have helped me soo much. cheers again
they need not be parallel. Many texts draw them diverging at higher output levels. I draw them parallel for simplicity's sake - that's how I teach students at my college.
Do u have a video on inflation?
@pajholden amazing economics teachers with a sense of humor, brilliant :')
Would you then concede externality taxation to be merely wishful thinking?
beautiful lad!
Oh thanks man, really helped.
you need to explain what underlies both curves, especially the marginal benefit one
Hi Paj I understand why the curve showing consumption ( the benefit curve) is labeled MSB as it shows the benefit to society however I always thought that the first benefit curve that is drawn should always be MPB. Is this the case or is the MSB curve be = to MPB. Thanks so much for your videos they are really helpful, can you please get back to me as soon as you can because my exam is on monday. Thank you
omg thats mr. holden, now hes headmaster in my school.
THANk YOU U DA REAL MVP I HV A QUIZ TMR
i have a report about market externalities and i don't understand it at all! specially the graph. :[
i need help. :-/
I'm doing GCSE Economics and i am a bit confused :( the costs that separate social costs and the entire costs from private costs. What does that mean? Can someone give me a watered down definition with a simple example? Economics doesn't come easy to me -.-
do u go to langley park
Good job,
Thanks
can you pls explain free market forces, i don't understand it.
can you please do a video on msb and mpc
any negative spillover effect imposed on a third party
just a question for somebody who wants to explain, is the vertical axis Costs OVER Benfits? Or is it Costs AND Benifits, if its the latter, then Im confused haha
Thanks!
Thank you so much!!! :)
@TheMitchmaestro Paj > every economics teacher.
thank you thank you thank you
As for forest clearance, I'm not sure what you are referring to, but I do know that tabacco companies do not have the power to force people to pay for tabacco production. It's probably safe to assume that you are really referring to an externality caused by government (and trying to blame it on tabacco companies). Just a guess...
So you determine what is "socially optimum" by something other than what society chooses? That's fascinating.
I wonder what the external costs of a criminal gang imposing itself on society are? You should do a chart for that.
You could show us the failure of coercive monopolies to provide the proper amount and type of goods and services to society. Then you might conclude that such monopolies ought to be abolished by society since they are anti-social.
i'll be reporting about market externalities and i don't understand it at all ! especially the graph. :[ can someone please help me?? :-/
YOU ROCK hahaha thank you!
u r the best Thank u