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Introduction to Market Failure - Negative Externalities of Production

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This video lesson introduces the concept of market failure and examines one type of market failure, a negative externality of production. If the producers of a good face lower costs than society as a whole, too much of the good will be produced and the market fails to achieve efficiency. In such a case, government may be needed to intervene and promote a more socially optimal level of output through the use of corrective taxes.
Want to learn more about economics, or just be ready for an upcoming quiz, test or end of year exam? Jason Welker is available for tutoring, IB internal assessment and extended essay support, and other services to support economics students and teachers. Learn more here! econclassroom.c...

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26 авг 2024

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Комментарии : 44

@amandagunasinghe2247 9 лет назад

your videos are really helpful, however the welfare loss in this diagram has to be on the other side. (Above the MPB)

@isharana5432 3 года назад

you should've taken this video down after a lot of people in this comment section pointed out how wrong this is, this video came up as one of the top suggestions and i studied for my exam through this and that's just pushing me straight to C grade all thanks to this.

@aGF33RL3SS 11 лет назад

Im an IB student of economics, and it is fair to say that the course as a whole is very challenging. There is a certain limit to what we can learn about all of these subjects within the two years. We are not studying them all at the level of a full university course. and it even states at the beginning of almost every ecos textbook for the IB that what we learn is not reality, in fact it even mentions that we should take into account that the course bases itself of ceteris paribus.

@DADDY557 10 лет назад

like the beginning music a lot...makes me remember when i was behind and found this videos to get ready for exam.....which remind me "one step at a time", heard that all night long and got a good grade yeah!! now is time for market failure

@zka9699 8 месяцев назад

Thank you Jason

@vyaanmilanshah9391 3 года назад

Love the intro music

@JasonWelker 12 лет назад

@lnqusitor I'm not sure what you mean by "market equilibrium theory is wrong". It's not a theory as much as an observation. Markets do achieve equilibrium prices. Whether those prices are "right" or "wrong" is a question addressed in economists study of market failure. (you should watch that playlist for perspectives on efficient and inefficient allocation of resources by different markets).

@JasonWelker 12 лет назад

Definitely Inquisitor, please start making videos on the fundamentals of behavioral economics. I would be interested to see those.

@ForeverOzu 11 лет назад

doing my econ homework right now BEST 15min...

@TheMrMuzzle 12 лет назад

THANK YOU SO MUCH THIS REALLY HELPED!!

@rohankapoor4781 5 лет назад

Is sugar a negative externality of production or consumption? I feel the should be production keeping in mind that negative externality of consumption isn't always necessarily environmental problems because and since sugars production is causing a negative spillover to third parties i.e. the consumer.

@JasonWelker 12 лет назад

Can you explain why it is supposed to be above the demand curve? In fact, either interpretation is correct. It is good that you are checking your facts, but in this case, there is no one correct "factual" interpretation, as both ways of illustrating the welfare loss are valid. The areas are identical, so the amount of welfare loss, if it can be quantified, is identical whether you indicate it as being the area of the triangle above or below demand.

@jjbotha6242 4 года назад

This is excellent! Thanks!

@NorthPol3Productions 12 лет назад

hey there, i have thought your descriptions of the topic is very well explained. However, i have noticed a vital mistake on your graph. You have shown the welfare loss below the demand curve and looking through different sources i have noticed it is supposed to be above the demand curve. Being an IB student it is hard enough just passing the exams, so check your facts before you explain something important. Thank you

@FrancescoSantora 12 лет назад

This is one of the problems I have with IB and AP. They try to teach complex topics to people who are not mature enough to truly understand it. The end result is more indoctrination than education.

@FrancescoSantora 12 лет назад

Of course the problem is, since market equilibrium theory is wrong how does that effect the theory of when to impose and excise tax?

@brianhills7913 7 лет назад

Hi Jason! Just wondering where Market Failure occurs in Income Inequality? And what graphs we would use? and also government intervention to overcome it

@JasonWelker 7 лет назад

Hi Brian, yes. Check out my newest video (from the 1.4 Market Failure playlist) on my channel. I explain what makes income inequality the result of a market failure.

@FrancescoSantora 12 лет назад

@lnqusitor Wow I can make a whole video answering this question. When I say "wrong" I mean is a a predictor of human behavior it is not very accurate therefore is a false efficiency. As Eugene Fama said, it is efficient under conditions that do not exist in real world markets. That being said I am approaching this from the standpoint of a behavioral economist, sadly there are not videos on the fundamentals of that on the web. Maybe that is niche for me to fill.

@emmahashizume7459 7 лет назад

where should the welfare loss be? because my ib textbook says its where the external cost is.

@JasonWelker 7 лет назад

Watch the new version of the lesson for a correct explanation: ru-vid.com/video/%D0%B2%D0%B8%D0%B4%D0%B5%D0%BE-K_vi_10NVHI.html

@jjjkkklll180 7 лет назад

How did you determine where to sketch the line for the tax revenue. Seems like you've chosen a random point--

@JasonWelker 7 лет назад

The are of tax revenue is the vertical distance between the two supply curves multiplied by the quantity demanded after the tax... A tax shifts MC up vertically by the $ amount of the tax... so for a single unit the amount of tax revenue is this distance.

@thesuperchickenwing 11 лет назад

really helpful! thanks so much!:)

@rajveersahni8266 5 лет назад

you are a good citizen

@5AH1LL 11 лет назад

Thankyou.

@FrancescoSantora 12 лет назад

The comments here reinforce the problem I am pointing out. the point is economics is being taught in IB and AP as fact and science instead of a philosophy. Those students then believe they have learned something about how the world works instead of just a flawed opinion. There are many theories in economics, the real question is why is only one taught at that level?

@user-lj4jf8vl6d 4 года назад

Love your videos, thank you so much! But please change that intro music....lol

@delidang1038 10 лет назад

Your loyal follower

@rajveersahni8266 5 лет назад

ily2

@laitanwulf 8 лет назад

??????????????

@pas9ify 12 лет назад

I'm no econ major like the rest of you, but why are the concepts so outdated? Today, the negative externality of consumption is much more critical: take two examples: gasoline & plastics. In fact, it can be argued that the externality actually occurs at the point of disposal.

@brianhills7913 7 лет назад

PLEASE REPLY TO Y COMMENTS JASON!

@JasonWelker 7 лет назад

Yes sir, I'm very sorry sire that I was not immediately at your disposal!

@kimjaok5042 10 лет назад

Of course now it all makes sense! Not :(

@ForeverOzu 11 лет назад

btw not sarcasm... i was so lost..

@suprabheballary 9 лет назад

wrong. Welfare loss.

@idhikasahi4001 7 лет назад

I literally learnt the whole diagram using your video and gave a presentation and it was wrong. If you've realised that your diagram is wrong why dont u make another video and TAKE THIS VIDEO DOWN CUZ ITS BLOODY WRONG. Thought you were a reliable source. CLEARLY NOT.