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Hong Kong's English Language Industry
A problem of severe market distortion
economic modelling (index | the market for high-level english language competence)

Graphs 7 and 8
Change in net social benefit associated with a fall in demand

 
Color code     current market
social surplus
    current market
social loss
  diminished demand
social surplus
  diminished demand
social loss
Graph 7 - Current market

Graph 8 - Current and adjusted markets

Click on the colored diagram for further clarification

graph 2a (graph | the provision of high-level competence in a distorted market | index)

    Social suplus at current demand level (graph | index)

Adgh

The amount of surplus achieved when government, industry, and households pay only the high-level competence premium at the current level of market demand.

    Social loss at current demand level (graph | index)

Ahlm

The amount of social loss incurred when government, industry, and households pay only the high-level competence premium at the current level of market demand.

   Social surplus with decrease in demand (graph | index)

Adgh

The amount of social surplus achieved when government, industry, and households pay only the high-level competence premium at a reduced level of demand.

   Social loss with decrease in demand (graph | index)

Ahlm

The amount of social loss incurred when government, industry, and households pay only the high-level competence premium at a reduced level of demand.

Summary (graph | index)

Adgh - Ahlm < Adgh - Ahlm

With market distortion there will always be social loss. Whether that loss is greater or less than the correponding social benefit depends upon the position of the demand curve relative to supply. A decrease in demand will always lead to greater social loss and reduced social benefit. Thus, a fall in demand necessarily leads to reduced net social benefit.

Those who believe that the demand for high-level English language competence is increasing, but fail to take into account what would happen, if the needs myth about low-level language competence were dispelled, are likely to bring about even greater net social loss.

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