Markets, Efficiency, and Price Signals: Crash Course Economics #19

Adriene and Jacob teach you all about markets. So, in free market(ish) economies like the United States and most of the world, markets are a big deal. Markets work to produce the stuff that consumers want, and that society needs. Today we'll talk about productive and allocative efficiency, skinny jeans, price signals, and more in this information-dense installment of Crash Course.

Thanks to the following Patrons for their generous monthly contributions that help keep Crash Course free for everyone forever:

Mark, Eric Kitchen, Jessica Wode, Jeffrey Thompson, Steve Marshall, Moritz Schmidt, Robert Kunz, Tim Curwick, Jason A Saslow, SR Foxley, Elliot Beter, Jacob Ash, Christian, Jan Schmid, Jirat, Christy Huddleston, Daniel Baulig, Chris Peters, Anna-Ester Volozh, Ian Dundore, Caleb Weeks

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[himynameisnickolas]

The fake ending was the most hilarious thing I've ever seen on any Crash Course series. It was so unexpected.

[Pigoux]

Main outtakes of the lesson
:
1. Central planning is not efficient
2. Two types of efficiency:
a) Productive Efficiency- The idea that products are made at lowest costs.
b) Allocative Efficiency- State of economy in which production represents consumer's preference.
3. Central planners are less likely to be allocatively efficient because they have a harder time getting feedback about what people want.
4. Price Signals tells you what consumers are willing to by at higher prices.
5. Price gouging: When sellers sells essential items (e.g water, food etc) at much higher price than reasonable.
6. Below-Cost Pricing: This is also called Predatory Pricing. It's when a business drive out competitors by charging lower prices even at a short-term loss. Competitors that can't sustain such low prices will be forced out of the market giving the surviving businesses more market share and ability to raise prices.
7. I'm Batman!!

[TheOsamaBahama]

Great message at the end. "Be the change you want to see in the world".

[BlueyMcPhluey]

"There's tons of examples that corporate greed, inequality and disregard for the environment that make people wonder if markets are evil. And they are! Thanks for watching!"

[miguelriesco]

I’m a mathematician from Spain. I just finished my undergrad studies and I’m currently starting a master’s degree in finantial mathematics. This crash course economics has helped me a lot in understanding the basic concepts i need for my master. Thank you so much, it’s all very clear and easy to digest.

[Zestrayswede]

I wish that you would eventually do a series on Language and linguistics (Grammar).

[saeedbaig]

4:32-4:37=I think u misspoke. U said "Competition between businesses keep prices and quality up". I think u meant 2 say "Competition between businesses keep prices down and quality up".

[sullyflynn]

There is a MARKET out there for a Maths Crash Course that YOU need to enter!

[WrathOfMega]

This is cool and all, but what I really need is some CrashCourse: Calculus

[clarasm]

*Main outtakes of this lesson*
1) MARKETS
a. Free market economies - supply and demand determine what gets produced.
b. Centrally planned economies - government agencies decide what gets produced.
2) EFFICIENCY
a. Productive efficiency - the idea that products are being made at their lowest possible cost, so no resources are wasted.
b. Allocative efficiency - state of the economy in which production represents consumer preferences.
*Central markets are less likely to be allocatively efficiency because they have a harder time getting feedback about what people want.*
3) PRICE SIGNALS
a. Price gouging - when sellers raise prices for essential items to a much higher level than is considered reasonable.
b. Below-cost pricing or predatory pricing - a business can drive out competitors by charging lower prices even at a short-term loss.
c. Invisible hand by Adam Smith - a metaphor for how, in a free market economy, self-interested individuals operate through a system of mutual interdependence to promote the general benefit of society at large.
*Although the FTC examines claims of predatory pricing carefully, courts, including the Supreme Court, have been skeptical of such claims.*
Capitalism, with its system of price signals, is basically crowdfunding.

[lvikng]

i read that Rockefeller once said (while being cheeky to the interviewer), "It's strange that the price I charge for oil is both so high I'm gouging consumers and so low I'm driving out competition - if they would just tell me what to charge it would be a lot easier."

[LunarFox__]

Friendly reminder that the "millions of families living in poverty" aren't just in far off countries. They're everywhere, even in "developed" nations like the United States and Europe.

[ruthless]

I'm watching this on my iPad in skinny jeans...

[EnterTheDutch]

You guys just covered an entire chapter of my finance exam. Thanks!

[TheFireflyGrave]

The bit about Walmart leaving Germany fascinated me. From what I looked up, the answer about how this happened may be more complicated.

[levihowell]

Make a video about what a healthcare system could look like with a true FREE market... Price gouging, Insurance exclusion, and refusal to treat. Another real life free market problem that is never mentioned in the United States in any Econ class I've ever taken

[ocampoawsome]

I haven't laughed so hard in a long time. That false ending was fantastic.

[matthewgilpincom]

6:23 "Oh this crucial medication/equipment is too expensive for me to buy. It's cool. Guess I'll just die, then."

[ironsmith]

Money is amazing. What we do with it, the information it can carry, the lives it saves cannot be done in any other way yet experienced. Never give (except to show that you care for a person) and never take, always buy and sell. Let everything be a transaction in appreciation of work and goods of your fellow man.

[amandarichardson]

Others "Where'd yo get your degree?"
Me " YouTube"