Sentence stringlengths 159 3.48k | video_title stringlengths 15 104 |
|---|---|
Maybe I can say it approximately, 0.69, which tells us that we get a smaller percent, at least at this price point right over here, we get a smaller percent change in quantity supplied than our percent change in price. Now let's think about, like we did when we thought about the elasticities of demand, let's think abou... | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
So let's say that price and quantity. So let's take me, for example. I make videos. I love making videos. This is what I want to spend my days doing. And I don't care how much you pay me or how little you pay me. I guess if you paid me enough, that would maybe, I'd spend a little bit more time making videos. | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
I love making videos. This is what I want to spend my days doing. And I don't care how much you pay me or how little you pay me. I guess if you paid me enough, that would maybe, I'd spend a little bit more time making videos. But let's just assume that I don't. I'm completely, whether you pay me a penny a video or 0 pe... | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
I guess if you paid me enough, that would maybe, I'd spend a little bit more time making videos. But let's just assume that I don't. I'm completely, whether you pay me a penny a video or 0 per video, or whether you pay me $1,000 per video, I'm going to just make the same number of videos every day. So this right over h... | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
So this right over here is videos per day on average. And this is the price per video. And let's say, no matter how much you pay me, whether you pay me nothing or you pay me $1,000, I am just going to produce, on average, let's just say, three videos a day. So then you have this right over here. You have a perfectly in... | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
So then you have this right over here. You have a perfectly inelastic supply curve. So this is perfectly inelastic supply curve. Now, you could have the other scenario. You could have the other scenario where you are a farmer. So let me do price and quantity. Now, you have the other scenario where you're a farmer. | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
Now, you could have the other scenario. You could have the other scenario where you are a farmer. So let me do price and quantity. Now, you have the other scenario where you're a farmer. And you can either do crop A or crop B. Maybe it's corn and wheat. And you can easily swap between the two. | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
Now, you have the other scenario where you're a farmer. And you can either do crop A or crop B. Maybe it's corn and wheat. And you can easily swap between the two. And let's just assume for simplicity, it costs you the exact same to produce one or the other. So in that situation, so let's say that the price of wheat pe... | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
And you can easily swap between the two. And let's just assume for simplicity, it costs you the exact same to produce one or the other. So in that situation, so let's say that the price of wheat per, and let's say we're using comparable units. So the price of wheat is, adjusting for units and all of that, let's say it'... | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
So the price of wheat is, adjusting for units and all of that, let's say it's $10 per bushel or something like that. We just want to simplify it for the sake of our model right over here. But this right over here, we're thinking about corn. And so if corn is right at $10, and they're both at $10, I will produce, so let... | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
And so if corn is right at $10, and they're both at $10, I will produce, so let me make this clear. So price of corn is $10. And the quantity of corn, maybe I produce 2,000 bushels. And I know these prices are way off for what the real price per bushel of corn or wheat is. And same thing, my quantity for wheat right he... | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
And I know these prices are way off for what the real price per bushel of corn or wheat is. And same thing, my quantity for wheat right here is 2,000. Now, if the price of corn were to go marginally up, if the price of corn, so let me put this. This is our graph for corn. So this is $10, and this is 2,000 bushels per y... | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
This is our graph for corn. So this is $10, and this is 2,000 bushels per year or something. So let's say that's where we are right over there. Now, if the price for corn goes marginally up, if the price for corn goes up to even $10.05 per bushel, all of a sudden, I'm going to shift all my wheat production to corn prod... | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
Now, if the price for corn goes marginally up, if the price for corn goes up to even $10.05 per bushel, all of a sudden, I'm going to shift all my wheat production to corn production. So this is going to go to 0, and then this is going to go to 4,000. So then we're going to go, so just $10.05, we're going to go all the... | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
And likewise, if this price were to go down, if this were to go to like $9.95, I would shift all my production to wheat, and I wouldn't produce any corn. And so there you see that we have a very, the demand curve is getting very flat. And you can see, based on very, very small percent changes in prices, I have very lar... | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
So this right over here is approaching perfect elasticity, huge changes in quantity supplied elasticity for small percent changes in price. Now, the cool thing about elasticity of a supply is it's actually much easier to make a curve that has unit elasticity, or even if you want to think about it, constant elasticity. ... | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
Well, actually, this is the curve for unit elasticity. It will literally be a curve that looks like that. And the reason why it works in this case is because it's upward sloping. As price increases, so does quantity increase for the supply curve. So at any point here, the two are going to be proportional. So a given ch... | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
As price increases, so does quantity increase for the supply curve. So at any point here, the two are going to be proportional. So a given change in quantity and a given change in price, they're going to represent the same percentages. Because as price is increasing, when you have large price or when you have medium pr... | Elasticity of supply Elasticity Microeconomics Khan Academy.mp3 |
Now in this video, we're going to extend that analysis by starting to think about profit. Now profit, you're probably already familiar with the term, but one way to think about it very generally, it's how much a firm brings in. You could consider that its revenue minus its costs, minus its costs, and a rational firm wi... | Profit maximization APⓇ Microeconomics Khan Academy.mp3 |
So regardless of how much this firm produces, the incremental revenue per unit of what it produces, maybe this is a donut company, the incremental amount per donut is going to stay the same regardless of how much this firm in particular produces. So let's say that the marginal revenue in this industry, in this market, ... | Profit maximization APⓇ Microeconomics Khan Academy.mp3 |
So let me put that right up there, marginal revenue. Once again, for every incremental unit, how much revenue are we going to get? So it would just be the price of that unit. So how much would a rational firm produce in order to maximize its profit? If the marginal revenue is higher than the marginal cost, well, that m... | Profit maximization APⓇ Microeconomics Khan Academy.mp3 |
So how much would a rational firm produce in order to maximize its profit? If the marginal revenue is higher than the marginal cost, well, that means every incremental unit it produces, it's going to bring in some net money into the door. So it's rational for it to do it. So it would keep producing, keep producing, kee... | Profit maximization APⓇ Microeconomics Khan Academy.mp3 |
So it would keep producing, keep producing, keep producing, keep producing. Now, it gets interesting as the marginal cost starts to approach the marginal revenue. As long as the marginal revenue is higher than the marginal cost, it's rational for the firm to produce. But right at that unit where the marginal cost is eq... | Profit maximization APⓇ Microeconomics Khan Academy.mp3 |
But right at that unit where the marginal cost is equal to the marginal revenue, well, there on that incremental unit, the firm just breaks even at least on the margin. It might be able to utilize some of its fixed costs a little bit. But then after that point, it makes no sense at all for it to keep producing. Why is ... | Profit maximization APⓇ Microeconomics Khan Academy.mp3 |
Why is that? Well, if the marginal cost is higher than the marginal revenue, that would be like saying, hey, I'm gonna sell a donut for a dollar even though that incremental donut costs me a dollar 10 to produce. Well, no rational person, if they wanna maximize their profit, would do that. So a rational firm that's try... | Profit maximization APⓇ Microeconomics Khan Academy.mp3 |
So a rational firm that's trying to maximize its profit will produce the quantity where marginal cost intersects marginal revenue. It will produce this quantity right over there. Now, a natural question might be how much profit will it make from producing that quantity? Well, all you have to do is think about, this is ... | Profit maximization APⓇ Microeconomics Khan Academy.mp3 |
Well, all you have to do is think about, this is the marginal revenue that it gets. And another way you could think about it, because this is constant, it's also going to be the average revenue that it gets per unit. And this right over here is the average total cost per unit. And so what you could do is, this is how m... | Profit maximization APⓇ Microeconomics Khan Academy.mp3 |
And so what you could do is, this is how much it's getting on average per unit, and then multiply that times the number of units. And what you get is the area of this rectangle. So for those of you who are more visually inclined, one way to think about it is a profit-maximizing firm, a rational profit-maximizing firm, ... | Profit maximization APⓇ Microeconomics Khan Academy.mp3 |
Think about what would happen if they only produced this much. Well, then they're giving up a ton of area. Then the rectangle would only be this big. This would be the profit that the firm is going to be making from those units. And then if it decides for some irrational reason to produce more than this quantity that w... | Profit maximization APⓇ Microeconomics Khan Academy.mp3 |
And on the left you can see that this equilibrium price which is set by the intersection of the supply and demand curves, that that's just going to be the price that the firms have to take. And we've talked about that at length in other videos. That's going to define that the firm's marginal revenue, not just this firm... | Long run supply when industry costs are increasing or decreasing Microeconomics Khan Academy.mp3 |
In other videos we've talked about the fact that the rational quantity for this firm to produce would be where marginal revenue intersects marginal cost. And it's also gonna be the point where you have zero economic profit. Where at that quantity, let's say the quantity for the firm, your average total cost is equal to... | Long run supply when industry costs are increasing or decreasing Microeconomics Khan Academy.mp3 |
If marginal revenue were higher than average total cost at this quantity, well then you would have other entrants into the market because you're having positive economic profit. If marginal revenue is below average total cost at that quantity, well then firms are running economic losses and you will have people exiting... | Long run supply when industry costs are increasing or decreasing Microeconomics Khan Academy.mp3 |
But now let's imagine a shock to the market somehow. Let's say a new research study comes out that says that the apples that this market produces, that it's incredibly good for you, it'll make you live longer, it'll make you happier, it'll make you have more friends. Well then the demand for apples goes up and so you h... | Long run supply when industry costs are increasing or decreasing Microeconomics Khan Academy.mp3 |
Well in that situation what's going to happen? Well now you have a new equilibrium price, you also have a new equilibrium quantity over here, let's call that P prime. This is going to define a new marginal revenue curve for the participants in the industry, so M marginal revenue prime. And now all of a sudden the ratio... | Long run supply when industry costs are increasing or decreasing Microeconomics Khan Academy.mp3 |
And now all of a sudden the rational quantity for them to produce would be out here, at least for this firm to produce, so Q prime for this firm is out here. And you notice at that quantity it is making economic profit. For every unit it gets that much, it costs that much on average for every unit, so it's making that ... | Long run supply when industry costs are increasing or decreasing Microeconomics Khan Academy.mp3 |
And then you multiply that times the number of units, the quantity, this whole area is going to be the economic profit that this firm is getting. And it's likely that all of the firms, or most of the firms in this perfectly competitive market are going to be getting it because they all have the same cost structure. But... | Long run supply when industry costs are increasing or decreasing Microeconomics Khan Academy.mp3 |
And in previous videos we talked about a situation where as firms enter into a market or exit a market it doesn't change the cost structures of the individual firms. But let's imagine for a second that because of everyone entering into this market that seems to have economic profit for the firms that are participating ... | Long run supply when industry costs are increasing or decreasing Microeconomics Khan Academy.mp3 |
Now we're not talking about an increasing cost, perfectly competitive market. Well then firm A and every firm's cost structure is going to change because as more firms come in you're going to have to pay more for maybe apple seeds, pay more for maybe pesticides or wax or maybe pay more for land on which to grow them. A... | Long run supply when industry costs are increasing or decreasing Microeconomics Khan Academy.mp3 |
Maybe the marginal cost curve now looks like this. So marginal cost curve prime. You would also have a new average total cost curve. Maybe it looks, maybe it looks something like this. So average total cost prime. And so you could imagine that firms will jump into the market in order to capture or think that they might... | Long run supply when industry costs are increasing or decreasing Microeconomics Khan Academy.mp3 |
Maybe it looks, maybe it looks something like this. So average total cost prime. And so you could imagine that firms will jump into the market in order to capture or think that they might be able to get some economic profit but they will only do so until the economic profit for all the firms goes to zero. So what point... | Long run supply when industry costs are increasing or decreasing Microeconomics Khan Academy.mp3 |
So what point will the economic profit go to zero? Well that's when the marginal revenue for the firms is equal to our marginal cost, is equal to our average total cost. So it's that point right over there. So we would get to this point right over here. Let's call that marginal revenue prime. And so more and more firms... | Long run supply when industry costs are increasing or decreasing Microeconomics Khan Academy.mp3 |
So we would get to this point right over here. Let's call that marginal revenue prime. And so more and more firms would enter into the market up until the point that the equilibrium price gets us to P prime. And so the supply would increase. Those folks wanna get that economic profit but it would increase until this po... | Long run supply when industry costs are increasing or decreasing Microeconomics Khan Academy.mp3 |
And so the supply would increase. Those folks wanna get that economic profit but it would increase until this point. So it'd shift a little bit to the right and we would get to S prime. As you can see, based on this, we can now start to imagine a long run supply curve in this increasing cost, perfectly competitive mark... | Long run supply when industry costs are increasing or decreasing Microeconomics Khan Academy.mp3 |
As you can see, based on this, we can now start to imagine a long run supply curve in this increasing cost, perfectly competitive market. We were over here. That was our equilibrium point before. Now we are over here. And so our long run supply curve in this increasing cost environment, even though it's perfectly compe... | Long run supply when industry costs are increasing or decreasing Microeconomics Khan Academy.mp3 |
Now we are over here. And so our long run supply curve in this increasing cost environment, even though it's perfectly competitive, might look something like this. So in a constant cost world, this was a flat line. Now in an increasing cost world, as more and more people enter the market, the cost structure, the inputs... | Long run supply when industry costs are increasing or decreasing Microeconomics Khan Academy.mp3 |
Now in an increasing cost world, as more and more people enter the market, the cost structure, the inputs into producing an apple go up. Now long run supply is that. Remember, the long run is enough time to go by for people to enter and exit the market or enough time to go by so fixed costs aren't fixed anymore, that t... | Long run supply when industry costs are increasing or decreasing Microeconomics Khan Academy.mp3 |
Let's say that you own the only hotel that is in a city, and for a wide variety of reasons, maybe all of the city council members are your friends or whatever else, no one else can build a hotel in the city, so there are insurmountable barriers to entry. So in that situation, you would have a monopoly. You are the only... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
Now, this is a typical cost structure and demand curve for a monopoly. We've already talked about your marginal cost might dip down a little initially, but then it might go up, and we could debate whether that would be true for a hotel or not, but this is a typical model we see. And then while your marginal cost is bel... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
And the demand curve for a monopoly looks familiar. When the prices are high, if the prices on the hotel rooms per night are high, very few people will demand them. And if the prices are low, a lot of folks would demand them. Now, something that we've talked about in a lot of detail in other videos is how the marginal ... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
Now, something that we've talked about in a lot of detail in other videos is how the marginal revenue curve is different than the demand curve for a monopoly. And that's because if you were to charge a price of, let's say, $500 per room, you might be able to get one room, one room rented out for the night, but no other... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
So in many monopoly industries, whatever you charge to one consumer, you have to charge to other consumers. Now, I know what some of you are thinking. Hey, that doesn't always happen in a hotel, and that's why I picked this example because we're going to look at the situation where, one, you do have to charge the same ... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
But let's just go with the model where you do have to change the same to everyone. So when you go from one room at 500 to two rooms at 400, your marginal revenue isn't the incremental 400 because this 500 is now 400 as well. So you go from 500 to 800, so your marginal revenue is an incremental 300 as you go from 500 to... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
And that's why, and we go into significant detail in other videos on this, and we do it with tables of numbers, and I encourage you to do that. That is why your marginal revenue curve for a monopoly has twice the slope, the negative slope, than your demand curve would have. So your marginal revenue curve would look som... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
And we've already talked about it in multiple videos. For any firm, it's rational to produce the quantity where marginal cost is equal to marginal revenue. So this monopoly would produce this quantity. And the price they would get, well, that quantity, we go to look at the demand curve, the price would be right over th... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
And the price they would get, well, that quantity, we go to look at the demand curve, the price would be right over there. So this monopoly firm would be able to get that price. And we can think about what its economic profit would be. On every room in this case, it charges that price, and its average total cost is thi... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
On every room in this case, it charges that price, and its average total cost is this blue line right over here, so its average total costs are there. So the difference is how much economic profit per room, and then you multiply that times the total number of rooms, and so this area is the firm's economic profit. Now, ... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
This is benefit that consumers are getting above and beyond what they're paying for it. So the consumer surplus in this situation would be all of this. So that first person who is willing to pay maybe $500 per room is now able to get this market price that everyone is able to get, which is maybe $300 per room. And so t... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
And so this benefit for that one unit goes to the consumer. And we've also seen that there is deadweight loss here. You're allocatively efficient when marginal cost is equal to the demand curve. And so, and we studied that in other videos, this right over here is our deadweight loss. But now let's imagine the other sce... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
And so, and we studied that in other videos, this right over here is our deadweight loss. But now let's imagine the other scenario. Let's say that we are a hotel where we try to capture as much of someone's willingness to pay as possible. And I'll give a little bit of a idealistic scenario that doesn't really exist in ... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
And I'll give a little bit of a idealistic scenario that doesn't really exist in the real world, but just to look at an extreme case. Let's say that you were able to get a computer that can read people's minds, and every time they call for a quote on a room, you know exactly what their willingness to pay is. So if I ca... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
So you quote me. All right, $375. I say, okay, sure. And then when that first person who has a high willingness to pay calls, it says, okay, why don't we quote them $500? And so we quote them $500, and so they get that room. And so in that situation, every incremental room, you don't have to change the prices on all th... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
And then when that first person who has a high willingness to pay calls, it says, okay, why don't we quote them $500? And so we quote them $500, and so they get that room. And so in that situation, every incremental room, you don't have to change the prices on all the other ones causing this marginal revenue curve to s... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
Instead, every incremental room, you get those dollars. And so in that situation, your demand curve is equal to your marginal revenue curve. You're able to discriminate on prices. Let me write this. This is price discrimination. You're able to charge, and price discrimination is a general term for charging different cu... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
Let me write this. This is price discrimination. You're able to charge, and price discrimination is a general term for charging different customers, different consumers, different rates, ideally based on their willingness to pay. And it might sound bad. In normal life, we don't like discriminating against others. But p... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
And it might sound bad. In normal life, we don't like discriminating against others. But price discrimination is a very legitimate thing. And actually, you will see it happen in things like the hotel industry where they're going to try to charge different prices to different people based on their willingness to pay for... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
And actually, you will see it happen in things like the hotel industry where they're going to try to charge different prices to different people based on their willingness to pay for essentially the same room. If you go stay in a hotel, it's very likely that the person in an identical room next to you is paying a diffe... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
Now, they're not going to be able to do it as perfectly as I just described with this magical computer, but they'll do it where, depending on how far ahead or whether you can return the ticket or cancel your reservation, you could get a different price and the prices change over time. And so they're trying to capture a... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
Well, once again, it would be where marginal cost intersects marginal revenue, but the marginal revenue curve is now the demand curve. So it'd be right over there. That's the quantity that this monopoly would produce. And then what's the price it would get? Pause this video and think about that. Well, you might be temp... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
And then what's the price it would get? Pause this video and think about that. Well, you might be tempted to just go horizontally here and say, okay, this is the price it would get like we did here. But remember, it's able to get a different price for every consumer. So there isn't just one price like in this first exa... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
But remember, it's able to get a different price for every consumer. So there isn't just one price like in this first example that everyone is paying. So we can see the quantity it is producing. You can see the average total cost at that quantity. But the profit per room is going to be dependent on what people are will... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
You can see the average total cost at that quantity. But the profit per room is going to be dependent on what people are willing to pay. This first person is going to pay a lot for it. And so they're not going to get much of a, or they're not going to get any consumer surplus in this extreme example. And so all of this... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
And so they're not going to get much of a, or they're not going to get any consumer surplus in this extreme example. And so all of this is going to accrue to the firm. And that's going to be the case for all of these consumers in this extreme circumstance. And so now you have a fascinating situation. Notice, when this ... | Price discrimination for a monopoly Microeconomics Khan Academy.mp3 |
And if price goes down, the quantity demanded goes up. So if you hold all else equal, ceteris paribus, we are just moving along this curve depending on what price. But what we started talking about is what happens when you change some of those things that we've been holding equal. How does that change demand? In the la... | Change in expected future prices and demand Microeconomics Khan Academy.mp3 |
How does that change demand? In the last video, we talked about the price of related goods. And if the price of related goods change, both complements and substitutes, how that might increase or decrease demand, the entire curve, not just one particular scenario. Now let's talk about another one of those factors that w... | Change in expected future prices and demand Microeconomics Khan Academy.mp3 |
Now let's talk about another one of those factors that we've been holding constant and think about how that would change demand, the entire curve, if we were to change that. And that's expectations of future prices. I'll do that in the screen. So expectations of future prices. So let's talk about a first scenario right... | Change in expected future prices and demand Microeconomics Khan Academy.mp3 |
So expectations of future prices. So let's talk about a first scenario right over here, where let's say that this curve, people didn't expect prices to change for my e-book. And now all of a sudden, there's a change in expectation. Now all of a sudden, they expect the prices to go up going forward. So now expect the fu... | Change in expected future prices and demand Microeconomics Khan Academy.mp3 |
Now all of a sudden, they expect the prices to go up going forward. So now expect the future price to go up. What's going to happen? If you expect the future price to go up and the good or the product in question is something that you can store, well, and depending on how much you expect it to go up, you're probably mo... | Change in expected future prices and demand Microeconomics Khan Academy.mp3 |
If you expect the future price to go up and the good or the product in question is something that you can store, well, and depending on how much you expect it to go up, you're probably more likely to buy it now, buy it before the price goes up. So regardless of what point on this curve we're at, regardless of the price... | Change in expected future prices and demand Microeconomics Khan Academy.mp3 |
At $4, more people want to buy it because they think it's going to go up. At any of these price points, because now the expectations have gone from being neutral to now expecting prices to go up, it will shift the entire curve to the right. So this will shift the entire curve to the right. So this right over here is sc... | Change in expected future prices and demand Microeconomics Khan Academy.mp3 |
So this right over here is scenario one. And it depends how much this changes to say how much this shifts to the right. This is just the general idea. This is scenario one. And the shifting of the entire curve, you could say they increased demand. So this is literally demand increasing. And when we talk about demand, r... | Change in expected future prices and demand Microeconomics Khan Academy.mp3 |
This is scenario one. And the shifting of the entire curve, you could say they increased demand. So this is literally demand increasing. And when we talk about demand, remember, and you're probably tired of me saying this, I'm not talking about a particular quantity. I'm talking about the entire curve shifting to the r... | Change in expected future prices and demand Microeconomics Khan Academy.mp3 |
And when we talk about demand, remember, and you're probably tired of me saying this, I'm not talking about a particular quantity. I'm talking about the entire curve shifting to the right because people expect future prices to go up. So the current demand went up. The current demand curve shifted to the right. And now ... | Change in expected future prices and demand Microeconomics Khan Academy.mp3 |
The current demand curve shifted to the right. And now we can just take the other side of that. Imagine what happens in scenario two. Before, people were neutral. That was our curve right there. They didn't have any opinion about whether future prices were going to go up or down. Or maybe they just assumed they were go... | Change in expected future prices and demand Microeconomics Khan Academy.mp3 |
Before, people were neutral. That was our curve right there. They didn't have any opinion about whether future prices were going to go up or down. Or maybe they just assumed they were going to stay the same. And now they expect future prices to go down. Now expect future prices to go down. And this is something that ha... | Change in expected future prices and demand Microeconomics Khan Academy.mp3 |
Or maybe they just assumed they were going to stay the same. And now they expect future prices to go down. Now expect future prices to go down. And this is something that happens in consumer electronics all the time. You see, whenever you buy a laptop or any type of electronic device, we now assume that the prices will... | Change in expected future prices and demand Microeconomics Khan Academy.mp3 |
And this is something that happens in consumer electronics all the time. You see, whenever you buy a laptop or any type of electronic device, we now assume that the prices will go down. Now, what we're talking about is a change in expectations. So you're going from neutrality, or let's say you're going from you expect ... | Change in expected future prices and demand Microeconomics Khan Academy.mp3 |
So you're going from neutrality, or let's say you're going from you expect them to go down, but now you expect them to go down even faster. And if all of a sudden you expect them to go down even faster, you're even less likely to buy them now. So if before you thought prices were going to be roughly constant, and now y... | Change in expected future prices and demand Microeconomics Khan Academy.mp3 |
So that's the willingness to pay or the marginal benefit of that incremental pound. But let's say you decide to set the price at $2 and you are able to sell 300 oranges in that week. What I want to think about is what is the total consumer surplus that your consumers got? And the way to think about consumer surplus is ... | Total consumer surplus as area Microeconomics Khan Academy.mp3 |
And the way to think about consumer surplus is how much benefit did they get above and beyond what they paid? So for example, the person who bought, let's just think about the exact, the hundredth pound. The hundredth pound, they paid $2, but their benefit looks like it was like, I don't know, $3.30. So $3.30, but they... | Total consumer surplus as area Microeconomics Khan Academy.mp3 |
So $3.30, but they only paid $2, so their benefit on that one pound, their benefit, or I should say their consumer surplus, is going to be 330 minus the 230. So that person who bought that hundredth pound, not all the hundred pounds, just that hundredth pound, got a consumer surplus of 330 minus $2, which is a $1.30 co... | Total consumer surplus as area Microeconomics Khan Academy.mp3 |
So that was the hundredth pound, you would find, so essentially that was the, you could view this as the area of this little thing right over here. And let me zoom in just to make sure you understand what's going on. That thing that I just drew, if we zoom in, will look something like this. It was one pound wide, and i... | Total consumer surplus as area Microeconomics Khan Academy.mp3 |
It was one pound wide, and it was this right over here, this right over here was $2, and then we had our marginal benefit curve, or our demand curve, sloping down like that, and this point right over here was $3.30. And so to figure out the consumer surplus for that pound, we said, okay, for that pound, they were willi... | Total consumer surplus as area Microeconomics Khan Academy.mp3 |
Now, we could do that for every one of the pounds. So we could do that for the hundredth and first pound. I'll do that a different color. The hundredth and first pound, we would do it like that. Then the hundredth and second pound, we would do it like that. Hundredth and third pound, like that. We do it for the 99th po... | Total consumer surplus as area Microeconomics Khan Academy.mp3 |
The hundredth and first pound, we would do it like that. Then the hundredth and second pound, we would do it like that. Hundredth and third pound, like that. We do it for the 99th pound, like that. And so you could imagine, if we wanted to find the total consumer surplus, what are we doing? Well, we're essentially just... | Total consumer surplus as area Microeconomics Khan Academy.mp3 |
We do it for the 99th pound, like that. And so you could imagine, if we wanted to find the total consumer surplus, what are we doing? Well, we're essentially just finding the area between our demand curve and this line where the price is equal to two. So we're just going to sum up this area. And if you're familiar with... | Total consumer surplus as area Microeconomics Khan Academy.mp3 |
So we're just going to sum up this area. And if you're familiar with calculus, you might know that you can actually make these things arbitrarily small. You could take smaller and smaller. You don't have to take a one pound wide rectangle. You could take a half a pound wide rectangle or quarter pound wide rectangle. Th... | Total consumer surplus as area Microeconomics Khan Academy.mp3 |
You don't have to take a one pound wide rectangle. You could take a half a pound wide rectangle or quarter pound wide rectangle. Then you'll just have more rectangles. It doesn't matter so much if you have a linear demand curve, but if you had a nonlinear demand curve, then it would matter. You'd want to get smaller an... | Total consumer surplus as area Microeconomics Khan Academy.mp3 |
It doesn't matter so much if you have a linear demand curve, but if you had a nonlinear demand curve, then it would matter. You'd want to get smaller and smaller and smaller or thinner and thinner and thinner rectangles so you could get better and better approximations for the consumer surplus. But needless to say, wha... | Total consumer surplus as area Microeconomics Khan Academy.mp3 |
And so if you want to know this consumer surplus, and I really want you to understand why this was. I mean, just think about it for each pound. It was just how much more value that pound, whoever bought that pound, how much more value did they get relative to what they paid? And we're just summing that up across all of... | Total consumer surplus as area Microeconomics Khan Academy.mp3 |
And we're just summing that up across all of the pounds. So to really figure out the total consumer surplus, we just have to find the area, this area of this blue area, and that's just finding the area of a triangle. So this right over here, you have a base of 300. This length right over here is 300 pounds. And then ou... | Total consumer surplus as area Microeconomics Khan Academy.mp3 |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.