[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,0:00:00.00,0:00:05.60,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,0:00:09.21,0:00:11.77,Default,,0000,0000,0000,,- [Tyler] In the last lecture,\Nwe showed that the legal incidence
Dialogue: 0,0:00:11.77,0:00:15.02,Default,,0000,0000,0000,,of a tax does not determine\Nthe economic incidence.
Dialogue: 0,0:00:15.02,0:00:16.43,Default,,0000,0000,0000,,In this lecture,\Nwe're going to talk
Dialogue: 0,0:00:16.43,0:00:20.70,Default,,0000,0000,0000,,about how the economic incidence\Nof taxes actually is determined.
Dialogue: 0,0:00:20.70,0:00:22.75,Default,,0000,0000,0000,,Who bears the burden of a tax?
Dialogue: 0,0:00:28.26,0:00:31.83,Default,,0000,0000,0000,,Here is the rule for the economic\Nincidence of a tax.
Dialogue: 0,0:00:31.83,0:00:34.40,Default,,0000,0000,0000,,The more elastic side\Nof the market will pay
Dialogue: 0,0:00:34.40,0:00:37.89,Default,,0000,0000,0000,,a smaller share of the tax,\Na smaller burden.
Dialogue: 0,0:00:37.89,0:00:40.99,Default,,0000,0000,0000,,Similarly, the less elastic side\Nof the market
Dialogue: 0,0:00:40.99,0:00:44.34,Default,,0000,0000,0000,,or rather the more inelastic side\Nof the market will pay
Dialogue: 0,0:00:44.34,0:00:46.30,Default,,0000,0000,0000,,a greater share of the tax.
Dialogue: 0,0:00:46.30,0:00:49.80,Default,,0000,0000,0000,,So more elastic\Npays a smaller share,
Dialogue: 0,0:00:49.80,0:00:52.99,Default,,0000,0000,0000,,less elastic pays a greater share.
Dialogue: 0,0:00:52.99,0:00:55.33,Default,,0000,0000,0000,,I'm going to show you this\Nin a couple of diagrams
Dialogue: 0,0:00:55.33,0:00:58.61,Default,,0000,0000,0000,,and then give you the intuition\Nfor why it's the case.
Dialogue: 0,0:00:58.61,0:01:00.70,Default,,0000,0000,0000,,Let's suppose\Nwe can't remember the rule.
Dialogue: 0,0:01:00.70,0:01:03.70,Default,,0000,0000,0000,,Is it the more elastic side\Nwhich bears the smaller share
Dialogue: 0,0:01:03.70,0:01:06.07,Default,,0000,0000,0000,,of the tax or the greater share\Nof the tax?
Dialogue: 0,0:01:06.07,0:01:09.20,Default,,0000,0000,0000,,Say we can't quite remember.\NWell, no problem.
Dialogue: 0,0:01:09.20,0:01:12.95,Default,,0000,0000,0000,,Let's just draw the diagram\Nand read it off as it happens.
Dialogue: 0,0:01:12.98,0:01:15.00,Default,,0000,0000,0000,,For instance, let's draw a diagram
Dialogue: 0,0:01:15.00,0:01:17.47,Default,,0000,0000,0000,,which has a pretty elastic\Ndemand curve
Dialogue: 0,0:01:17.47,0:01:21.51,Default,,0000,0000,0000,,and relatively speaking\Na pretty inelastic supply curve.
Dialogue: 0,0:01:21.51,0:01:23.99,Default,,0000,0000,0000,,Here's the price\Nwhen there's no tax.
Dialogue: 0,0:01:23.99,0:01:26.33,Default,,0000,0000,0000,,Now let's look at what happens\Nwhen there is a tax
Dialogue: 0,0:01:26.33,0:01:28.47,Default,,0000,0000,0000,,and we'll use our wedge method.
Dialogue: 0,0:01:28.47,0:01:30.96,Default,,0000,0000,0000,,Here's the tax and the height\Nof the wedge gives us
Dialogue: 0,0:01:30.96,0:01:32.83,Default,,0000,0000,0000,,the amount of the tax.
Dialogue: 0,0:01:32.83,0:01:34.07,Default,,0000,0000,0000,,What do we do?
Dialogue: 0,0:01:34.07,0:01:35.92,Default,,0000,0000,0000,,We drive this wedge\Ninto the diagram
Dialogue: 0,0:01:35.92,0:01:38.40,Default,,0000,0000,0000,,until the top of it\Nhits the demand curve
Dialogue: 0,0:01:38.40,0:01:40.94,Default,,0000,0000,0000,,and the bottom of it\Nhits the supply curve
Dialogue: 0,0:01:40.94,0:01:43.82,Default,,0000,0000,0000,,and then we just read\Nthe answer off our diagram.
Dialogue: 0,0:01:43.82,0:01:47.34,Default,,0000,0000,0000,,Point B, this tells us the price\Npaid by the buyer.
Dialogue: 0,0:01:47.34,0:01:51.54,Default,,0000,0000,0000,,Point D, this tells us the price\Nreceived by the seller.
Dialogue: 0,0:01:51.54,0:01:53.00,Default,,0000,0000,0000,,Let's compare.
Dialogue: 0,0:01:53.00,0:01:55.80,Default,,0000,0000,0000,,When there was no tax,\Nthe price paid by the buyer
Dialogue: 0,0:01:55.80,0:01:58.70,Default,,0000,0000,0000,,was at A, and with the tax\Nthe price to the buyer
Dialogue: 0,0:01:58.70,0:02:01.03,Default,,0000,0000,0000,,goes up a little bit to point B.
Dialogue: 0,0:02:01.03,0:02:03.72,Default,,0000,0000,0000,,The buyer isn't paying much\Nof a higher price.
Dialogue: 0,0:02:03.72,0:02:06.99,Default,,0000,0000,0000,,On the other hand the seller\Nis receiving a lot less.
Dialogue: 0,0:02:06.99,0:02:10.73,Default,,0000,0000,0000,,In this case, when demand\Nis more elastic than supply,
Dialogue: 0,0:02:10.73,0:02:13.62,Default,,0000,0000,0000,,the demanders pay\Na smaller share of the tax
Dialogue: 0,0:02:13.62,0:02:16.40,Default,,0000,0000,0000,,and the suppliers\Npay a larger share.
Dialogue: 0,0:02:16.40,0:02:19.40,Default,,0000,0000,0000,,Therefore we can just read\Noff the diagram what happens
Dialogue: 0,0:02:19.40,0:02:22.23,Default,,0000,0000,0000,,when demand\Nis more elastic than supply.
Dialogue: 0,0:02:22.54,0:02:24.14,Default,,0000,0000,0000,,You don't have\Nto remember the rule,
Dialogue: 0,0:02:24.14,0:02:26.57,Default,,0000,0000,0000,,you don't have to memorize it\Nbecause I'm going to give you
Dialogue: 0,0:02:26.57,0:02:29.48,Default,,0000,0000,0000,,some intuition to make it easy\Nin just a moment.
Dialogue: 0,0:02:29.48,0:02:32.69,Default,,0000,0000,0000,,You simply have to draw the diagram\Nand be able to read
Dialogue: 0,0:02:32.69,0:02:34.62,Default,,0000,0000,0000,,the answer off the curves.
Dialogue: 0,0:02:34.78,0:02:36.43,Default,,0000,0000,0000,,Let's look at another case.
Dialogue: 0,0:02:36.43,0:02:38.47,Default,,0000,0000,0000,,In this case, we've drawn\Na supply curve
Dialogue: 0,0:02:38.47,0:02:41.03,Default,,0000,0000,0000,,which is very inelastic\Nand a demand curve
Dialogue: 0,0:02:41.03,0:02:44.05,Default,,0000,0000,0000,,which is less elastic\Nthan the supply curve.
Dialogue: 0,0:02:44.05,0:02:46.34,Default,,0000,0000,0000,,Once again we're going\Nto take our tax wedge,
Dialogue: 0,0:02:46.34,0:02:49.71,Default,,0000,0000,0000,,we're going to push it\Ninto the diagram and what happens?
Dialogue: 0,0:02:49.71,0:02:51.13,Default,,0000,0000,0000,,You can see it right here.
Dialogue: 0,0:02:51.13,0:02:53.29,Default,,0000,0000,0000,,We just have to read it\Noff the diagram.
Dialogue: 0,0:02:53.29,0:02:56.42,Default,,0000,0000,0000,,Now we see that compared\Nto when there was no tax,
Dialogue: 0,0:02:56.42,0:02:58.94,Default,,0000,0000,0000,,the price to the buyer\Nhas gone up a lot
Dialogue: 0,0:02:58.94,0:03:01.17,Default,,0000,0000,0000,,and the price to the sellers\Nhas gone down
Dialogue: 0,0:03:01.17,0:03:03.04,Default,,0000,0000,0000,,by just a little bit.
Dialogue: 0,0:03:03.04,0:03:05.53,Default,,0000,0000,0000,,When the supply\Nis more elastic than demand,
Dialogue: 0,0:03:05.53,0:03:08.02,Default,,0000,0000,0000,,buyers pay the greater share\Nof the tax,
Dialogue: 0,0:03:08.02,0:03:10.55,Default,,0000,0000,0000,,that is the price to the buyer\Ngoes up more
Dialogue: 0,0:03:10.55,0:03:13.07,Default,,0000,0000,0000,,than the price\Nto the sellers goes down.
Dialogue: 0,0:03:13.07,0:03:15.65,Default,,0000,0000,0000,,The buyers pay more of the tax\Nwhen the supply curve
Dialogue: 0,0:03:15.65,0:03:17.32,Default,,0000,0000,0000,,is more elastic.
Dialogue: 0,0:03:17.32,0:03:18.88,Default,,0000,0000,0000,,Let's give some intuition.
Dialogue: 0,0:03:18.88,0:03:21.79,Default,,0000,0000,0000,,You can always get the right answer\Nby drawing the curves.
Dialogue: 0,0:03:21.79,0:03:24.83,Default,,0000,0000,0000,,And let's consider the intuition\Nfor why that's the case.
Dialogue: 0,0:03:24.83,0:03:27.76,Default,,0000,0000,0000,,So here's the intuition\Nfor remembering the rule.
Dialogue: 0,0:03:27.76,0:03:31.04,Default,,0000,0000,0000,,Think about elasticity\Nas a kind of escape.
Dialogue: 0,0:03:31.04,0:03:34.00,Default,,0000,0000,0000,,The side of the market\Nwhich is the more elastic
Dialogue: 0,0:03:34.00,0:03:36.49,Default,,0000,0000,0000,,can escape the tax more easily.
Dialogue: 0,0:03:36.49,0:03:40.33,Default,,0000,0000,0000,,Why does that makes sense?\NRemember what elastic demand means.
Dialogue: 0,0:03:40.33,0:03:42.66,Default,,0000,0000,0000,,It means that demanders\Nhave good substitutes
Dialogue: 0,0:03:42.66,0:03:46.13,Default,,0000,0000,0000,,for the taxed good\Nand so they can escape the tax.
Dialogue: 0,0:03:46.13,0:03:48.50,Default,,0000,0000,0000,,When the tax is high,\Nthe demanders are going to say,
Dialogue: 0,0:03:48.50,0:03:50.93,Default,,0000,0000,0000,,"We're just going to go buy\Nthe substitutes.
Dialogue: 0,0:03:50.93,0:03:53.25,Default,,0000,0000,0000,,We have plenty\Nof good substitutes."
Dialogue: 0,0:03:53.25,0:03:55.30,Default,,0000,0000,0000,,On the other hand,\Nthink about what it means
Dialogue: 0,0:03:55.30,0:03:57.32,Default,,0000,0000,0000,,when the demand is inelastic.
Dialogue: 0,0:03:57.32,0:03:59.62,Default,,0000,0000,0000,,It means that there\Nare no good substitutes
Dialogue: 0,0:03:59.62,0:04:02.06,Default,,0000,0000,0000,,so it's hard to escape the tax.
Dialogue: 0,0:04:02.06,0:04:05.38,Default,,0000,0000,0000,,What about the supply side,\Nelastic supply?
Dialogue: 0,0:04:05.38,0:04:07.91,Default,,0000,0000,0000,,Well, that means the resources\Nwhich are used to produce
Dialogue: 0,0:04:07.91,0:04:10.21,Default,,0000,0000,0000,,the taxed good,\Nthey can easily be moved
Dialogue: 0,0:04:10.21,0:04:11.73,Default,,0000,0000,0000,,to other industries.
Dialogue: 0,0:04:11.73,0:04:14.02,Default,,0000,0000,0000,,The resources\Ncan move around easily.
Dialogue: 0,0:04:14.02,0:04:17.56,Default,,0000,0000,0000,,If you try to tax the industry\Na lot then the land, the capital,
Dialogue: 0,0:04:17.56,0:04:19.82,Default,,0000,0000,0000,,the workers in that industry\Nwhich were used
Dialogue: 0,0:04:19.82,0:04:21.79,Default,,0000,0000,0000,,to produce the good,\Nthey're just going to flow
Dialogue: 0,0:04:21.79,0:04:24.42,Default,,0000,0000,0000,,to other industries\Nand so the suppliers
Dialogue: 0,0:04:24.42,0:04:26.96,Default,,0000,0000,0000,,can relatively easily\Nescape the tax.
Dialogue: 0,0:04:27.72,0:04:30.46,Default,,0000,0000,0000,,On the other hand,\Nif supply is inelastic
Dialogue: 0,0:04:30.46,0:04:33.36,Default,,0000,0000,0000,,that means the resources used\Nto produce this good,
Dialogue: 0,0:04:33.36,0:04:36.59,Default,,0000,0000,0000,,they really can only be used\Nto produce this good.
Dialogue: 0,0:04:36.59,0:04:38.89,Default,,0000,0000,0000,,They're fixed, they're hard\Nto move around,
Dialogue: 0,0:04:38.89,0:04:40.73,Default,,0000,0000,0000,,and those factors\Nare not that useful
Dialogue: 0,0:04:40.73,0:04:43.47,Default,,0000,0000,0000,,for producing other goods,\Nso that makes it difficult
Dialogue: 0,0:04:43.47,0:04:46.62,Default,,0000,0000,0000,,for the suppliers\Nwhen the supply curve is inelastic.
Dialogue: 0,0:04:46.64,0:04:48.96,Default,,0000,0000,0000,,That means it's difficult\Nfor the suppliers
Dialogue: 0,0:04:48.96,0:04:50.84,Default,,0000,0000,0000,,to escape the tax.
Dialogue: 0,0:04:51.05,0:04:52.96,Default,,0000,0000,0000,,What if the demanders\Nand the suppliers
Dialogue: 0,0:04:52.96,0:04:54.75,Default,,0000,0000,0000,,are both pretty elastic?
Dialogue: 0,0:04:54.75,0:04:55.98,Default,,0000,0000,0000,,Well, here's the thing.
Dialogue: 0,0:04:55.98,0:04:59.99,Default,,0000,0000,0000,,Somebody has to pay the tax,\Nboth sides can't escape the tax
Dialogue: 0,0:04:59.99,0:05:02.62,Default,,0000,0000,0000,,at least if the good is going\Nto be bought and sold,
Dialogue: 0,0:05:02.62,0:05:07.30,Default,,0000,0000,0000,,therefore the burden is determined\Nby the relative elasticities.
Dialogue: 0,0:05:07.30,0:05:11.31,Default,,0000,0000,0000,,It's about which side has it easier\Nto escape the tax
Dialogue: 0,0:05:11.31,0:05:13.55,Default,,0000,0000,0000,,and that side will pay\Nless of the tax.
Dialogue: 0,0:05:13.55,0:05:16.51,Default,,0000,0000,0000,,The side which is less elastic,\Nthey're going to pay
Dialogue: 0,0:05:16.51,0:05:19.58,Default,,0000,0000,0000,,more of the tax\Nbecause that side finds it harder
Dialogue: 0,0:05:19.58,0:05:21.69,Default,,0000,0000,0000,,to escape the tax.
Dialogue: 0,0:05:21.69,0:05:25.52,Default,,0000,0000,0000,,So let's do an application,\Nsay social security taxes.
Dialogue: 0,0:05:25.88,0:05:28.62,Default,,0000,0000,0000,,Last time we showed\Nthat the legal incidence
Dialogue: 0,0:05:28.62,0:05:31.35,Default,,0000,0000,0000,,of social security taxes\Nhas no bearing
Dialogue: 0,0:05:31.35,0:05:33.90,Default,,0000,0000,0000,,on the economic incidence,\Nbut we didn't say
Dialogue: 0,0:05:33.90,0:05:36.44,Default,,0000,0000,0000,,what the economic incidence\Nactually is.
Dialogue: 0,0:05:36.44,0:05:38.27,Default,,0000,0000,0000,,So let's do that now.
Dialogue: 0,0:05:38.27,0:05:41.16,Default,,0000,0000,0000,,We're going to have the price\Nof labor up here, the wage,
Dialogue: 0,0:05:41.16,0:05:43.71,Default,,0000,0000,0000,,and the quantity\Nof labor down here.
Dialogue: 0,0:05:43.71,0:05:46.20,Default,,0000,0000,0000,,The whole question\Nnow boils down to
Dialogue: 0,0:05:46.20,0:05:48.38,Default,,0000,0000,0000,,is the demand for labor,\Nmore elastic
Dialogue: 0,0:05:48.38,0:05:51.17,Default,,0000,0000,0000,,than the supply of labor\Nor vice versa?
Dialogue: 0,0:05:51.17,0:05:53.56,Default,,0000,0000,0000,,Think about the demanders\Nof labor, businesses,
Dialogue: 0,0:05:53.56,0:05:56.22,Default,,0000,0000,0000,,what substitutes\Nfor labor do they have?
Dialogue: 0,0:05:56.22,0:05:59.86,Default,,0000,0000,0000,,If the price of labor goes up,\Nwhat can those businesses do?
Dialogue: 0,0:06:00.16,0:06:02.57,Default,,0000,0000,0000,,What about the supply\Nof labor, the workers?
Dialogue: 0,0:06:02.66,0:06:05.79,Default,,0000,0000,0000,,If their wage goes down,\Nwhat can they do?
Dialogue: 0,0:06:05.79,0:06:07.79,Default,,0000,0000,0000,,If you think about it,\NI think you'll see
Dialogue: 0,0:06:07.79,0:06:10.69,Default,,0000,0000,0000,,that for most workers,\Nespecially full time workers,
Dialogue: 0,0:06:10.69,0:06:13.78,Default,,0000,0000,0000,,they don't really have a lot\Nof good substitutes for work.
Dialogue: 0,0:06:13.78,0:06:16.42,Default,,0000,0000,0000,,Most workers need some kind of job.
Dialogue: 0,0:06:16.42,0:06:19.91,Default,,0000,0000,0000,,Even if their wage goes down,\Nthey're going to continue to work
Dialogue: 0,0:06:19.91,0:06:22.18,Default,,0000,0000,0000,,because they need to pay the bills.
Dialogue: 0,0:06:22.18,0:06:24.94,Default,,0000,0000,0000,,On the other hand,\Nthe demanders of labor
Dialogue: 0,0:06:24.94,0:06:26.66,Default,,0000,0000,0000,,if the wage were to go up,
Dialogue: 0,0:06:26.66,0:06:29.37,Default,,0000,0000,0000,,they could substitute\Ncapital for labor,
Dialogue: 0,0:06:29.37,0:06:31.84,Default,,0000,0000,0000,,they could move their investments\Nto other countries.
Dialogue: 0,0:06:31.84,0:06:34.10,Default,,0000,0000,0000,,They have quite a few\Ngood substitutes.
Dialogue: 0,0:06:34.10,0:06:35.78,Default,,0000,0000,0000,,So if that's actually how it works,
Dialogue: 0,0:06:35.78,0:06:38.13,Default,,0000,0000,0000,,we should probably draw\Nthe diagram like this
Dialogue: 0,0:06:38.13,0:06:40.61,Default,,0000,0000,0000,,with a fairly inelastic\Nsupply of labor
Dialogue: 0,0:06:40.61,0:06:43.78,Default,,0000,0000,0000,,and a fairly elastic\Ndemand for labor.
Dialogue: 0,0:06:43.78,0:06:46.85,Default,,0000,0000,0000,,Economists have done studies\Nof this and on average
Dialogue: 0,0:06:46.85,0:06:48.68,Default,,0000,0000,0000,,this is what they find.
Dialogue: 0,0:06:48.68,0:06:52.65,Default,,0000,0000,0000,,So now think about your FICA taxes,\Nthat's a tax on labor.
Dialogue: 0,0:06:52.65,0:06:54.13,Default,,0000,0000,0000,,What's the effect of that?
Dialogue: 0,0:06:54.13,0:06:56.37,Default,,0000,0000,0000,,Well, it's going to look\Nsomething like this.
Dialogue: 0,0:06:56.37,0:06:59.16,Default,,0000,0000,0000,,Notice that the wage\Npaid by buyers of labor,
Dialogue: 0,0:06:59.16,0:07:01.21,Default,,0000,0000,0000,,that's the wage paid\Nby the firms --
Dialogue: 0,0:07:01.21,0:07:03.25,Default,,0000,0000,0000,,that goes up only a little bit.
Dialogue: 0,0:07:03.25,0:07:05.21,Default,,0000,0000,0000,,On the other hand,\Nthe wage received
Dialogue: 0,0:07:05.21,0:07:07.59,Default,,0000,0000,0000,,by the suppliers of labor,\Nthat is the wage
Dialogue: 0,0:07:07.59,0:07:11.50,Default,,0000,0000,0000,,which the workers end up with,\Nthat goes down by a lot.
Dialogue: 0,0:07:11.50,0:07:14.94,Default,,0000,0000,0000,,And this makes perfect sense\Nwhen we have a very inelastic
Dialogue: 0,0:07:14.94,0:07:16.44,Default,,0000,0000,0000,,supply of labor.
Dialogue: 0,0:07:16.44,0:07:19.05,Default,,0000,0000,0000,,The laborers can't escape\Nthe tax and, therefore,
Dialogue: 0,0:07:19.05,0:07:22.34,Default,,0000,0000,0000,,they end up bearing\Nmost of the burden of the tax.
Dialogue: 0,0:07:22.34,0:07:24.60,Default,,0000,0000,0000,,This doesn't mean, by the way,\Nthat we shouldn't have
Dialogue: 0,0:07:24.60,0:07:26.46,Default,,0000,0000,0000,,social security taxes.
Dialogue: 0,0:07:26.46,0:07:29.18,Default,,0000,0000,0000,,It may in fact be a good way\Nof forcing people to save
Dialogue: 0,0:07:29.18,0:07:31.33,Default,,0000,0000,0000,,for their own future,\Nbut this does mean
Dialogue: 0,0:07:31.33,0:07:33.83,Default,,0000,0000,0000,,it is not a free lunch\Nfor the workers.
Dialogue: 0,0:07:33.83,0:07:37.08,Default,,0000,0000,0000,,The workers' wages will drop\Nbecause of the tax.
Dialogue: 0,0:07:37.08,0:07:39.59,Default,,0000,0000,0000,,If we didn't have\Nthe social security tax,
Dialogue: 0,0:07:39.59,0:07:42.68,Default,,0000,0000,0000,,wages for most workers\Nwould in fact be higher.
Dialogue: 0,0:07:42.68,0:07:46.44,Default,,0000,0000,0000,,Here's one more application,\Nhealth insurance mandates.
Dialogue: 0,0:07:46.44,0:07:48.90,Default,,0000,0000,0000,,Suppose that the government\Nrequires employers
Dialogue: 0,0:07:48.90,0:07:51.53,Default,,0000,0000,0000,,to provide health insurance\Nto their workers
Dialogue: 0,0:07:51.53,0:07:53.90,Default,,0000,0000,0000,,as is now the case\Nfor many employers
Dialogue: 0,0:07:53.90,0:07:55.96,Default,,0000,0000,0000,,under the Affordable Care Act.
Dialogue: 0,0:07:55.96,0:07:57.38,Default,,0000,0000,0000,,Who's going to pay for this?
Dialogue: 0,0:07:57.38,0:07:59.12,Default,,0000,0000,0000,,Who will end up paying for this?
Dialogue: 0,0:07:59.12,0:08:02.92,Default,,0000,0000,0000,,Is it primarily the employers\Nor primarily the workers?
Dialogue: 0,0:08:02.92,0:08:06.34,Default,,0000,0000,0000,,It's really just the same analysis\Nas we had before.
Dialogue: 0,0:08:06.34,0:08:09.83,Default,,0000,0000,0000,,A health insurance mandate\Nis quite similar to a tax.
Dialogue: 0,0:08:09.83,0:08:13.18,Default,,0000,0000,0000,,A health insurance mandate\Nsimply means that the employers
Dialogue: 0,0:08:13.18,0:08:16.51,Default,,0000,0000,0000,,have to pay a higher wage,\Nbut that's just, then,
Dialogue: 0,0:08:16.51,0:08:18.30,Default,,0000,0000,0000,,the same as a tax.
Dialogue: 0,0:08:18.30,0:08:20.85,Default,,0000,0000,0000,,What we just saw\Nis that if labor supply
Dialogue: 0,0:08:20.85,0:08:24.90,Default,,0000,0000,0000,,is less elastic than labor demand,\Nwhich in many cases makes sense,
Dialogue: 0,0:08:24.90,0:08:27.33,Default,,0000,0000,0000,,then in that case most\Nof the mandate
Dialogue: 0,0:08:27.33,0:08:29.96,Default,,0000,0000,0000,,will actually be paid for\Nby the workers.
Dialogue: 0,0:08:29.96,0:08:31.83,Default,,0000,0000,0000,,Real wages will fall.
Dialogue: 0,0:08:31.83,0:08:35.84,Default,,0000,0000,0000,,Again this doesn't necessarily mean\Nthat the mandate is a bad idea
Dialogue: 0,0:08:35.84,0:08:37.67,Default,,0000,0000,0000,,but it does mean\Nit's not a free lunch
Dialogue: 0,0:08:37.67,0:08:38.81,Default,,0000,0000,0000,,for the workers.
Dialogue: 0,0:08:38.81,0:08:41.19,Default,,0000,0000,0000,,The workers end up paying\Nfor their health care
Dialogue: 0,0:08:41.19,0:08:43.68,Default,,0000,0000,0000,,through the medium of lower wages.
Dialogue: 0,0:08:44.03,0:08:45.99,Default,,0000,0000,0000,,Taxes have a couple\Nof other effects
Dialogue: 0,0:08:45.99,0:08:48.79,Default,,0000,0000,0000,,including the raising of revenue\Nand also creating
Dialogue: 0,0:08:48.79,0:08:50.25,Default,,0000,0000,0000,,some dead weight loss.
Dialogue: 0,0:08:50.25,0:08:53.23,Default,,0000,0000,0000,,Those are what we're going\Nto look at in the next lecture.
Dialogue: 0,0:08:54.45,0:08:56.12,Default,,0000,0000,0000,,- [Narrator] If you want\Nto test yourself,
Dialogue: 0,0:08:56.12,0:08:58.53,Default,,0000,0000,0000,,click Practice questions.
Dialogue: 0,0:08:58.53,0:09:01.65,Default,,0000,0000,0000,,Or if you're ready to move on,\Njust click Next Video.
Dialogue: 0,0:09:01.65,0:09:05.63,Default,,0000,0000,0000,,♪ [music] ♪