ShmoopTube

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no macro economics Allah shmoop pricing and tax policies What

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are they What do they have to do with each

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other in wire They living in the same video Well

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let's start with the religious zealots called supply and demand

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Looking atyou guys yes they fight all the time but

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well they really love each other Remember you have supply

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here and demand here and they kiss and make up

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every transaction And that's where they intersect right there So

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when supply is low and there's a lot of demand

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well things were going to get expensive like the New

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Easy's just dropped and they flew off the shelves instantly

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or rather ran off the shelf sold out Yeah it's

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going to be awhile before they can get a new

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shipment in from China So now they're being re sold

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on eBay for more than a 2000% premium over and

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above what they originally sold for Why Well because very

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few people are willing to part with their Kanye branded

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sneakers so supplies always low Meanwhile hordes of people are

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willing to camp outside of stores for days before the

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sneakers actually start being sold So there's I demand well

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If you combine the two factors that's a recipe for

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high prices and so they'll meet somewhere right about here

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on the graft Yet economist still find this notion hard

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to swallow when they tracked consumers hoping to rent a

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one bedroom dive in an awesome city like Chicago or

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San Francisco where the monthly rent is more than what

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most people pay for a car in a whole lot

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of cities Yeah well in most cases the best bet

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is to look for cheaper digs but still close enough

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to the city life that we're all craving sort of

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lee Some of us are yet trade off That's what

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we got trade offs here in some instances while the

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government steps in believing that well and make those trade

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offs a little less painful for the consumer if it

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you know did something about it Well in New York

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City for example a complex system level rent control measures

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exist These regulations attempt to keep rental rates somewhere in

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the vicinity of affordable to people who aren't hedge fund

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managers investment bankers or foreign money laundering Warlords with a

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pita tear with a pink umbrella on the Upper West

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Side For example the market price of a given one

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bedroom might be 5800 bucks a month but the government

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has stepped in and demanded that the landlord not rent

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the place for more than 38 50 Also the landlord

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going forward can not raise prices more than 3% a

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year as long as the same tenant is renting that

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apartment While the result you might think the result is

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that regular people get to live happily in the apartment

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enjoying access to the world's great restaurants and spending their

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weekends tooling around the Guggenheim Museum well unfortunately that's not

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how economics actually works These price controls don't come for

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free In an economic sense there are negative consequences Here

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is well things the politicians did not intend to happen

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when they set the controls or police didn't care about

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For example the landlord will attempt to save money wherever

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she can You'll have more profitable investments elsewhere so she'll

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do things like well pretty much never repair anything in

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the building and use any excess cash to go to

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investing elsewhere Meanwhile the tenant gets stock where he is

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He's getting free money from the landlord in the form

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of under market pricing on his rent so he simply

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never leaves the building Essentially here's what's happening in rent

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control The government has decided that the natural market pricing

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is simply unacceptable It feels it's in the best interest

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of the people You know the people who vote to

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mandate that prices in a given area cannot be above

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a certain level hoping toe Let the service people who

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you know deliver the dry cleaning in the pizza and

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legal drugs to the wealthy have a place that they

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can afford to live in The city government presumes the

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illegal drug delivers who coincidentally pay no taxes can afford

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a nice home You have to worry about them So

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that's rent control and unnatural tax almost literally Robin Hood

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DS in that it takes money out of the hands

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of the quote rich unquote shareholders who owned the building

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and gives that shareholder money to the quote Poor people

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unquote who rented so rent control is a tool The

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government can also use the tools available to them to

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change people's behaviour in game revenue toe fund publicly available

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goods and services or just waste the money like the

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government usually seems to do well One of these financial

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economic tools available to the government Our price controls which

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are measures put in place to regulate What is that

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Oh yeah prices Well these tools can be used to

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benefit both consumers and producers in theory but not necessarily

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both At the same time like when airlines were commercialized

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the government instituted price regulations to keep fares higher than

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it cost airlines to run flights Well this made running

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an airline particularly across states and internationally incredibly profitable for

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the airline companies Yet passengers were being forced to pay

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fares much higher than the natural cost of the flights

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so consumers weren't buying many plane ticket what when the

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tickets were deregulated Teo get prices That is well then

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ticket prices fell dramatically in the number of tickets sold

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skyrocketed And on the other side of the spectrum California

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put a cap on prices for electricity so that almost

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everyone could afford to have power what this meant It

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was much more profitable for energy companies to supply electricity

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in other states So while prices were low for the

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consumers producers weren't willing to supply at high levels in

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California The result Yeah lots of blackouts in California And

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that dear friend is the core of the marriage between

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pricing and tax policies Tax is above and beyond the

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natural price at which supply meets demand unfettered and unshackle

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around our friction there simply additional costs which produces a

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result that has fewer people buying the product that they

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actually want Like yours that supplying demand curves the higher

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cost So it shifts it upward here into left Yeah

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So why do we have these market controlling kind of

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taxes Well think about it Who votes more landlords or 00:06:11.662 --> [endTime] renters Yeah

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