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Happy Teachers' Day! Thank you for taking the time out throughout the year thus far to clarify my understanding :) Really appreciate that additional effort!

Marcus Neo

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"Happy Teachers' Day!" Explain whether governments should be worried about the use of joint provision to correct for the underconsumption of Mr Sunderaj's lessons [10m]

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"Happy Teachers' Day!" Explain whether governments should be worried about the use of joint provision to correct for the underconsumption of Mr Sunderaj's lessons [10m]

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The governments' objectives are to maximise efficiency and equity - in this case governments wish to achieve allocative efficiency at a given level of technology to ensure the efficient allocation of scarce resources and establish productive efficiency so society produces on the PPC.

Firstly, there is market failure due to the underconsumption of Mr Sunderaj's lessons. Self-interested rational students aim to maximise their utility and will consume additional units of education upto the point where MPB=MPC at the free market equilibrium quantity Qe. In this case, students consider the MPB from education (higher earning potential and future salaries) and Mr Sunderaj incur MPC (e.g. implicit opportunity cost in terms of lost sleep). However, students and schools do not consider the benefits to the government when the higher-educated labourforce is more productive and boosts the economy's productivity, allowing the government to earn greater revenue from corporate and income taxes. Thus, there is postiive externality of consumption in the market for Mr Sunderaj's lessons (MEB>0 hence MSB=MPB+MEB>MPB). As such, referring to figure 1, the MPB curve lies to the left of the MSB. Thus, there is underconsumption of Mr Sunderaj's lessons QsQe where Qs is the socially optimal level of output where MSB=MSC. This causes an underallocation of resources for the production and consumption of Mr Sunderaj's lessons. This causes a deadweight loss ABC due to the foregone net societal benefit from consuming beyond Qe to Qs where MSB>MSC. The market is allocatively inefficient.

Governments will be worried due to the misallocation of scarce resources. Particularly, the MEB from Mr Sunderaj's fun and enjoyable lessons is very significant causing large divergence of MPB from MSB and thus large dead-weight loss of ABC.

Joint provision can be utilised by the government to correct for the market failure. In this case, governments will supply amount AB of Economics lessons to shift the supply curve up by AB units, that is, the MEB at Qs. Then, economics lessons will be consumed at the socially optimal level and allocative efficiency will be achieved as the deadweight loss is corrected for.

However, due to the large MEB, the amount AB will be very large. This places heavy burden on taxpayers and the government's limited budget. This in turn also incurs heavy opportunity cost on the part of the government as the large amount of resources used for joint provision could have been used for the net societal benefit from the next best alternative foregone (e.g. subsidised healthcare and education).

More fundamentally, joint provision cannot be used as Mr Sunderaj's lessons are perfectly non-substitutable due to their highly differentiated nature. As such, PED is 0 as represented by the demand curve D' on the diagram. This is because of the dedication Mr Sunderaj displays in teaching the lessons and patience in answering the students' questions.

As such, governments should be worried about the magnitude of market failure due to the underconsumption of Mr Sunderaj's lessons as well as the inability for joint provision to correct for it as it is very ineffective.

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Thank you for being so nice with us during econs lessons, and for being so patient whenever we ask questions!
Thanks for tolerating my lame jokes and/or puns, and for not giving up on me even my econs was bad :))))
- sheryl

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Hi Mr Sunderaj! Happy teachers day! Thank you for your clear economics lessons and patient teaching :)

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Hi Mr Sunderaj, thanks for letting me walk into your class to take my things :)
Warm regards,
Jerome

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Just for the brief moment we meet before the start of econs lesson, I can already feel ur econs aura. Thanks for imparting in me your invaluable econs knowledge even though I don’t take econs 😅

~Ady

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HAPPY HAPPY TEACHERS' DAY!!!
You make our worries go away!
Why are you so slay!
I look forward to econs everyday!
With you our days are never gray!

but for real though, thank you so much for inculcating in me a love for Econs and for always being so willing and patient in answering my questions at consults! your dedication deserves a standing ovation and nothing short of appreciation!

<3, cheyenne

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happy teacher’s day! thank you for the effort you put into your lessons and the detailed explanations you give in class, really appreciate it!
- chantel

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dear mr sunderaj, thank you for your fascinating and engaging econs lessons! they are the highlight of my week - a brief respite; an oasis in the blazing desert of dry and mundane lessons. thank you and happy teachers' day mr sunderaj!!! love, cheyenne and ellena

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HAPPY TEACHERS DAY! Thank you for your patience and for imparting your knowledge into us!

Andre :)))

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Thanks for being such an understanding and encouraging teacher. Your explanation also make it much easier to understand the new concepts! Hope you have a Happy Teachers' Day!
-Xingling