Intro to Austrian Economics – 2 of 4 – Supply and Demand

Austrian Economics: An Introduction, presented at New York Polytechnic University in 1972.

2. Supply and DemandIn this lecture in 1972, supply and demand concepts included: preferences of consumers, prices, quantity, quality, elasticity, equilibrium, marginal utility, present goods, and production processes.

Source: Intro to Austrian Economics – 2 of 4 – Supply and Demand – YouTube

http://www.readrothbard.com/intro-to-austrian-economics-2-of-4-supply-and-demand

TRANSCRIPT
00:00
hey proceeding islet supplying demand he
00:04
had our falling demand curve and the
00:06
vertical supply line and so and
00:12
intersecting at the market equilibrium
00:15
price price of the y axis on the knee of
00:18
the x axis and Ally come to a second
00:23
figure figure2 where you now see what
00:27
happens when how we get to the famous
00:30
for its nothing supply curve all of you
00:32
probably familiar with the force
00:37
something supply curve in the texture is
00:39
really strictly mathematically incorrect
00:43
well it really does this presents you a
00:47
long run locus of what’s going to happen
00:50
after adjustments can be made no with
00:52
after months and years of adjustments
00:54
and production system for example
00:56
supposing we have our widgets which is
00:59
our great hypothetical a product of some
01:02
somebody economists I could all go back
01:05
nonexistent hypothetical therefore live
01:08
oak properties all right and well this
01:11
is the man curve for widgets and the
01:13
supply line for widgets the two million
01:16
would just reproduce every year this is
01:17
the Librium price and then something
01:20
happened all of a sudden is a big
01:21
increase I’ll saying as a man for
01:23
widgets it could be because the leader
01:29
the social leaders of the country of the
01:31
world all of a sudden take two widgets
01:34
in a big way and willie stargell says i
01:37
smoke widgets or i wear whatever is and
01:39
a queen of england like support so long
01:42
as a big increase of the math allegiance
01:43
so what you have then is a increase the
01:47
man curve upward and the man curve
01:51
shifts to the dotted line here B prime
01:57
which means there’s any given price more
02:00
the widgets will be purchased and before
02:02
but everybody wants more widgets now
02:04
imagine scales of a higher of most
02:07
people all people have a higher ranking
02:09
if religious and they have a forum so
02:11
listen
02:13
the other words when the initial push
02:14
comes for widget demand are only this
02:17
million widgets around on million cases
02:19
whatever that’s so good and the pie
02:22
suddenly goes up because of the old
02:24
price as a member at number four month
02:27
market quote mechanizing unquote which
02:31
the only prize clear the market before
02:32
now we suddenly find a situation where
02:35
at the old price is the man is much
02:37
greater than supply but then as a man’s
02:39
curve is shifted upward into the right
02:41
so let us finish Sudden insured you
02:43
would just develops of the old price
02:45
we’ll just leave the shells right
02:47
quickly enough sellers and businessman
02:49
raise the price and as the price of wood
02:51
just goes up the shortage eliminated the
02:55
finally be a blue equilibrium price say
02:58
e2 ok that’s always what we mentioned
03:02
last week where you mean increasing the
03:06
man will give this initial question will
03:10
people evaluate the widgets mean you’re
03:12
highly and if low price will go up the
03:14
next step that’s phase one so to speak
03:17
and legit twice question the next step
03:20
is what happened now well some things of
03:23
course nothing happens now thing and so
03:25
then products where there’s only where
03:26
you can’t have any increase in supply
03:27
because because all of us were possible
03:31
supply would produce 100 years ago and
03:34
sell for example Rembrandt’s it’s
03:36
impossible increase the supply Rembrandt
03:37
plus you’re a really really good forger
03:39
and forgery remains undetected forever
03:41
borrowing that supply Rembrandt remain
03:44
forever same it was a supply curve will
03:47
be fixed and the only possible way that
03:50
goes go downward from with Rembrandt
03:53
gets lost or something like that so in
03:56
case of Rembrandt’s they’ll be an
03:57
increasing demand for Rembrandt’s
03:59
increasing price of Rembrandt’s not be
04:01
it and remember i said i’d be allocated
04:03
again to our most value holder so to
04:06
speak those will be willing to pay me
04:07
more more for one of them so in case
04:12
Rembrandt cuz I’m not much more you can
04:14
do and you just say this is a supply
04:18
line around Branson that’s the end of it
04:20
in the case of any product it can be
04:22
increased the production such as widgets
04:24
then widget manufacturers
04:26
start getting very busy and all of a
04:28
sudden seen increasing America widget
04:29
say old boy you’d be Wow widgets are
04:32
here again and so fortunately it’s not
04:34
increasing they start tooling up and
04:36
increasing a supply of widgets now how
04:38
long this will take depends on the data
04:40
of the individual product ah the e for
04:45
example in the late unlamented meat
04:48
shortage the spring one of the problems
04:51
there whether it takes a couple of years
04:53
to increase the supply of beef because
04:56
cows the production process for house
04:58
takes a couple of years whereas for
05:00
chickens it only takes a few months this
05:02
is a technological production process so
05:06
in case of wages whether it’s a couple
05:07
months or a couple years depending on
05:09
situation new manufacturers enter the
05:12
widgets feel all manufacturers expand
05:15
their production repair that roughly
05:18
locks and on with the business itself or
05:19
what and over the years that are over
05:21
the months will begin to have a shift in
05:23
the supply lines vertical file out of
05:25
widgets right word so after a few months
05:28
we may have this much mattress some more
05:30
month that much so forth so let us say
05:35
that after a couple of years we now have
05:39
this little asf final tip line Oh
05:43
presumptuous a final supply line we now
05:46
have current situation of face after
05:49
faith to know where that early supply is
05:52
increased and responsive rate increase
05:55
in widget demand we now have a new
05:56
equilibrium point III which is the
05:59
intersection of the new demand curve
06:01
beep I’m with finals of vertical supply
06:05
line in other words after a few years
06:10
after widget prices at the widget
06:13
manufacturers retool enter the widget
06:15
business what’s more we have an increase
06:17
in the supply of widgets and responsibly
06:19
increasing the man so in this way the
06:22
man I think will occur forth its own
06:23
supplier so to speak in a sponsor the
06:26
incentives do the higher prices business
06:30
might expand that production in this
06:31
particular product and the price then
06:33
thurs back from each chillin on to some
06:36
intermediate point III
06:39
first rubbing supply cover which were
06:40
most of us familiar takes the locus of
06:43
all these changes all these responses of
06:46
supply and connects them all together
06:50
this is the thing that I’m famous
06:52
subscriber s SL thinking women in other
06:59
words with a lot know what we’re dealing
07:01
here with the forward supply cover the
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long run supply curve which answers a
07:05
very different question than the man
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curve man curve says how much of any of
07:10
any particular product will lookin fo
07:12
consists of consumers by any given time
07:15
the man curve freezes the freezes of the
07:18
market at anything like a free shot in
07:22
the movies at any given moment and at
07:25
that moment how much will be bored and
07:26
given hypothetical prices so the main
07:29
curve instance is instantaneous snapshot
07:31
kind of figure well as the supply curve
07:34
for sloping supply curve is really a
07:36
long-run curve incorporating timing
07:38
within it which says how much honey
07:43
widgets will be produced we call forth
07:46
on the market given the sticker price
07:48
and was given a very low price I only
07:50
have a few widgets being produced given
07:52
a higher price mortgages be produced
07:54
giving a very high price enormous amount
07:56
of wood is reproduced so forth so we
07:59
have with a supply curve is something
08:02
which really technically should not be
08:04
on the same graph of the man curb that’s
08:06
what it tells us this incorporates time
08:09
with it and it says given time for
08:10
adjustment given time for a response
08:12
given time for the widget I factually
08:14
would either get out of the industry if
08:16
prices are too low or get in if prices
08:18
are high this is we have much production
08:21
will be called forth but it’s so great
08:24
even though it’s technically incorrect
08:25
it’s still interesting contemplate it
08:27
because it’s a valid way of looking at a
08:29
situation because it shows that how
08:32
supply responds to the changes in demand
08:35
and similarly of course is the man fools
08:37
people get sick of widgets of Queen
08:40
Elizabeth or Willie Stargell fire so you
08:42
know down to the faculty hate widgets
08:44
now and the demand curve religious drops
08:46
in the exact opposite situation we have
08:49
a sudden drop in prices
08:51
followed by people getting out of the
08:53
widget industry and winding up with a
08:56
price is going back to some extent and
08:59
and winding up just a few widget
09:01
manufacturer it’s like the horse and
09:03
buggy manufacturers are still a few
09:04
horse and buggy manufacturers left
09:05
obviously it’s way way less than the
09:08
heyday of the old you know but the pre
09:10
automobile heyday of the buggy industry
09:11
so so this way consumers why they’re
09:15
changes in demand are even with a leader
09:18
to direct and redirect product factors
09:20
of production land labor capital
09:22
investments energy and so forth directly
09:26
redirect them into those areas where
09:28
consumers would might want products
09:31
whether demand the most virgin our
09:33
highest such as say widgets and out of
09:36
the area for the consumers no longer
09:37
wish to buy stuff such as whatever hula
09:40
hoops and and so this way consumers are
09:45
able to direct production out of those
09:48
areas presume nautically interested in
09:50
into those areas where they are
09:51
interested they’re all they do want to
09:53
acquire as much product as they can in
09:59
the case of the case of example beef
10:06
important to get it gets to a minute
10:07
again because it’s oily income elastic
10:15
in other words that people got more
10:16
affluent as people get more affluent
10:19
demand for beef relatively increases and
10:22
if people get more iphones at a map of
10:24
pork relatively declines they might want
10:26
to still want to have more pork by the
10:28
proportion of income they want to spend
10:30
on portents the full the shift from work
10:34
and into beef there’s other which is
10:37
again in the long run the sources have
10:39
shifted farmers begin to shift their
10:41
resources from pagan into cows in
10:43
response to this this general change and
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this is why we could say that that
10:51
consumers really direct production
10:53
seniors are really in charge of
10:55
production rather than the entrepreneurs
10:58
who lives as if superficially in the
11:00
short-run are in charge sumers have to
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pay for the product
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so if for example with this vertical
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supply line represents a current cod
11:11
fish catch and fish it down there on the
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dock and this there so fairly quickly
11:17
etc as the paisas the man for cod fish
11:19
goes up and next year’s the fishermen of
11:21
the line let’s shift more of the
11:22
competition out of other fish out of
11:24
other things and so the next season or
11:27
two seasons later bring in more cod fish
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as demonstrated by the shifts and supply
11:33
curve and they will have an increase in
11:35
permanent increase in quantity pond fish
11:37
and a drop back to the somewhere in the
11:40
middle of a by structure ah let’s see
11:46
what we can do let’s see the sort of
11:48
thing anything but you kind of much how
11:50
I condescending predict or explaining
11:51
your given price for example you can
11:56
predict what’s going to happen on the
11:57
auction market we can’t make a
11:59
quantitative prediction we can make a
12:00
qualitative prediction this is i think
12:02
is indicative of what axiology so to
12:04
speak and say a few option mark on the
12:07
auction market we have a supply curve of
12:09
1.1 supply long as they won a case of
12:12
Rembrandt’s are chipping the other
12:14
that’s it there’s no way of increasing
12:15
it aside from me I should be increasing
12:17
it we have a supply line of one and we
12:21
can say that the price of the auction
12:23
will be set at the park when I gr8 or
12:26
wherever somewhere slightly above the
12:31
maximum buying price of a second highest
12:33
value work that’s what we can say ah so
12:38
that if ifs rockefeller and Vanderbilt
12:41
bidding for the next Rembrandt and rock
12:43
color we get down to we saw with 100
12:45
bitters as we work our way up we have we
12:47
won’t drop out of the demand curve up a
12:49
knock on Vanderbilt Rockefeller Zabel
12:53
out then Vanderbilt in that case Wacha
12:56
fall will be bidding will be paying just
12:59
a little bit higher than the highest
13:00
price of Annabelle is going to pay
13:01
that’s what you can say I mean it’s not
13:04
the one sense is not very much on that
13:07
basis we can’t predict tomorrow’s
13:08
auction morgan lee on how we can say
13:09
something that’s that’s a routine check
13:12
we can we can analyze the basis Tyson
13:15
basis of supply line and
13:17
do scales there is a another area
13:24
another room for supplies for supply for
13:27
us for sloping supply curves and only
13:28
get into too much but just to mention
13:31
enough speculation the influence of
13:33
speculation and markets when we can have
13:36
specula you can’t always have
13:37
speculation shoppers you know k you
13:39
usually have speculation say in wheedies
13:42
market because it’s speculation is
13:46
usually a commodities which not brand
13:47
names ensure certain fixed property so
13:51
far and so on ah in markets we do have
13:55
speculation you have the influence of
13:57
speculations that enormously speed up
13:59
with the adjustment process authority
14:01
calabria so that instead of having and
14:04
the man curve regular falling demand
14:06
curve and flavor takan supplier on your
14:08
hive up a very flat curve both the man
14:10
and supply because since the speculator
14:13
usually a prettiest student knowing
14:14
what’s going I was going to happen not
14:16
perfect but they can easily fairly well
14:18
guess where the intersection points then
14:21
be then if the device is considerably
14:24
below if they really think it’s going to
14:26
be they’re going to buy a lot of it and
14:29
salad very little of it because they
14:31
expect the price to go up and this in
14:33
this way I heavily and have a big gap
14:35
between demand and supply a big shortage
14:37
so to speak if I stood up or very
14:39
quickly in the other hand the price is
14:43
above it they think is going to be
14:45
equilibrium price they’re going to sell
14:47
a lot of it and they going to buy very
14:49
level as well as that’s gonna be a big
14:51
surplus and love and the ice and the
14:54
scoop back down equilibrium very quickly
14:56
so the result of speculation even authen
14:58
very malign occupation usually most
15:02
people don’t understand understand
15:03
economic function speculation the
15:05
economic function speculations to speed
15:07
up the adjustment process on the market
15:11
to the equilibrium level those
15:14
speculators get caught and little
15:16
guessed incorrectly of course lose out
15:18
on find themselves of unsold stock
15:20
separate and so there was other this is
15:22
to those people who are allowing
15:24
speculators drop out of the mark and
15:27
those people good speculators continue
15:28
and Tennessee does that have so a
15:31
crackerjack speculators feeling very
15:32
well and adjusting I system also
15:39
speculator to do things like buying a
15:43
fine when something is in relative
15:47
abundance like Molly’s relative
15:49
abundance now holding it until it’s
15:51
going to be in short supply later and
15:54
saying some say the strawberry season or
15:56
something like that only until it’s out
15:58
of season and then selling it at that
16:00
point by doing this the speculator it
16:02
has to see that the fluctuation prices
16:05
by raising the price during the abundant
16:08
love on the under the season and lower
16:10
and during the motherly scare season and
16:13
every by shifting the supply the
16:14
consumers more demanding than was the
16:16
tumors or actually to get us they doing
16:18
out of season so specular to hold on to
16:21
it and then sell it at that point and
16:23
smoothes out the process there so the
16:26
speculators perform very important
16:27
function okay all right there are five
16:36
types this is essentially the economics
16:39
of the individual price both an
16:42
immediate run for the vertical supply
16:45
line and the molar run as that Ford
16:48
sloping biker takes you a cattle ranch
16:50
adjustments you now get to the question
16:53
of relationships between prices in
16:56
different products the first place is a
16:59
general relationship between oil prices
17:00
that are all goods are competing for the
17:02
consumer dollar and that sense all goods
17:04
compete with each other and all the
17:06
other substitutes in a way for each
17:08
other and we can say that if the demand
17:13
for hula hoops one thing you can say
17:14
something I think I mentioned last times
17:16
when the man for hula hoops goes up the
17:18
demand for something else has gotta drop
17:20
because as you’re paying more we you’re
17:24
buying more hula hoops or more widgets
17:26
means you’re spending your money on me
17:28
in this product I think that somehow you
17:30
have to offset this by spending lots of
17:31
money on something else cuz it consumer
17:33
incomes consider given
17:36
so that’s one one way in which will all
17:39
products interrelated on the market
17:42
let’s get a little closer closer
17:45
relationships than just and there’s just
17:47
general competition for consumer dollar
17:49
basically there are two kinds
17:51
substitutes and complements substitutes
17:55
are close substitutes in this case not
17:57
just a competition for the consumer
17:59
dollar that beef and pork butter and
18:03
margarine no substitutes we saw the
18:06
influence on substituting the light late
18:09
unlamented each shortage when be for
18:13
this is extremely scarce the price of
18:14
either going way up and responsible
18:16
scarcity and people began to shift to
18:19
substitutes with beef lamb I am chicken
18:24
soybeans or whatever so the only things
18:27
began to go up and demand and
18:28
responsibility increased scarcity of
18:32
elvia of a substitute product so they
18:34
only begin to see that important
18:35
relationships will clean them okay with
18:38
substitute products the two kinds of
18:41
interrelationships one of the demand of
18:44
one changes and the other that supply of
18:46
one changes after the man changes
18:49
relatively to the other is a problem
18:51
it’s very easy to see what happens
18:52
example a beef lamb case that i
18:55
mentioned before before case if the as
18:58
people get more affluent usually the man
19:00
for beef goes up on the man for pork
19:02
drops and then what simply happens is
19:04
the types of beef tends to go up the
19:06
quantity tends to go up and the
19:08
resources shift into it for the price of
19:10
pork comes to fall in quantity and
19:12
resources go to the poor tends to fool
19:14
so it’s very simple as you have a shift
19:17
on value scales from Port de Beach the
19:20
man changes respond reflect that and
19:23
pipes changes and quantity changes and
19:25
one learn like that old salt so that
19:27
that’s simple a couple of more
19:29
complicated relationships and substitute
19:32
field and the case is a change in supply
19:35
for example beef pork
19:39
this is figure 3 here we have two to
19:45
substitute supply demand curves say even
19:50
port now we’re dealing with Sephora
19:52
selling supply curves we’re figuring
19:53
it’s a long run allowing some time for
19:56
relationships to change here’s the beef
20:03
and pork aah now let’s say we have the
20:10
are late unlamented meat shortage and
20:12
supply curve of beef shifts radically to
20:15
the left laia ship to the left is
20:16
another story see and it could be in the
20:22
case of our bee shortage this year is
20:24
because the government mess everything
20:25
up could also be a lot of possible
20:27
reasons a beef hoof and mouth disease
20:30
strikes the middle of west or whatever
20:33
so the big shifts in the supply curve
20:35
beach to the left in that case of course
20:38
would the quantity of beef so Rob summer
20:42
price goes up and response to that since
20:46
beef is now scarce ER and more expensive
20:48
people shift as a man for port now those
20:51
increases in other words of the man
20:53
careful port shifts to the light so the
20:56
man for the man cover for pork can be
20:59
response to either the values report
21:02
shifting in relation to these relation
21:05
anything else or response to the
21:07
substitutes relationship or price the
21:09
fact that the beef prices are getting
21:11
either cheaper and more expensive the be
21:13
fine we fight is getting more expensive
21:14
then man perfect what will come to go up
21:17
we saw it happen and result of this will
21:20
be eventually increasing the pork price
21:22
and increasing the quantity of pork and
21:24
so you want end up after all this is
21:28
happiness with both be fighting and pork
21:33
prices going up the eventual result of
21:35
the list the difference being at least
21:37
the resources of the voter to be four
21:39
going down supply of beef is going there
21:40
that’s a five quarters going up because
21:43
more resources of shifting the pork area
21:46
put the quantity here doesn’t have to be
21:49
the same those ever be saying
21:50
increase that will depend on them
21:54
finalists or sickness or elasticity is
21:56
it school of these two these four curves
22:01
so and and the same thing happened
22:04
infinitely with lamb and chicken and set
22:06
relevant and soybeans anybody eat soy
22:09
beans and in the I can 73 shortage the
22:14
Tennessee is show all these things the
22:16
man curves to go up and response to the
22:18
higher prices are they all have
22:19
substitute in from the other hand
22:21
usually is usually a habit of the
22:23
markets things get cheaper as
22:25
productivity increases a new hormone to
22:27
discover it or whatever in that case the
22:30
opposite happens pi of these shifts to
22:32
the right the price of beef gets cheaper
22:35
as if I see beast gets cheaper that cuz
22:37
more competitive than pork the man cover
22:39
for pork shifts to the left the clines
22:41
in other words the price of pork supply
22:43
of immediate the result is a shifting
22:45
resources out of court and in the beef
22:48
erratic Miami into beef so so the result
22:55
that was only price change is that
22:57
similar but the thing is the impetus is
22:59
very different here you have the impetus
23:00
coming from the change in supply and
23:02
there you have a necessity to meet the
23:05
kind of price the other the substitute
23:08
ah podcast the beef pork and substitute
23:16
late early sometimes I portugee
23:21
different producers try to get the
23:24
government to change the rules of the
23:25
game so to speak in other words see two
23:27
of the substitutes don’t show up or are
23:29
crippled for example for many many years
23:31
of butter industry was trying to keep
23:33
modular matures because a big substitute
23:35
for butter on a hub only production of
23:37
margarine sale of margarine they can’t
23:39
have laws passed outlawing the yellow
23:41
recurring of margarine yellow because
23:44
monitors originally stock whiter than
23:46
people like it we use the idea of
23:48
spreading yellow on bread so this is a
23:53
big beach are the people in by yeah than
23:55
by module for many years so they look
23:56
icky Vicky the butter interests have
24:00
pass the law preventing them from
24:01
coloring in yellow finally after a
24:03
titanic struggle of the modular interest
24:05
against the butter interests modular so
24:07
i finally allow the color of the module
24:09
in yellow on the rest is history
24:10
speaking Mandarin is everywhere now took
24:12
many years to break margarine through
24:15
this this was a local barrier okay
24:21
that’s that substitutes the the other
24:28
big relationship between products as
24:30
those subsidized i watch the stuff
24:32
that’s all over it didn’t imagine just
24:34
all over the place also in production as
24:38
well as consumption aluminum and steel
24:40
looks like it’s absolutely gela
24:42
partially at least producing a lot of
24:44
things so there are substitutes which
24:48
were later than this way it also also
24:50
complements with a couple of us with an
24:52
e that is composing products that go
24:56
together in some way two types of
24:58
complementary products each of which are
25:00
completely different one of the products
25:03
and joint demand the other products and
25:06
joint supply that’s a completely
25:08
different joint demand product is a
25:12
product which goes together in other
25:14
words one or two or three or four two or
25:16
three or four side products and for
25:19
somebody had demanded together the go
25:20
together in consumption and this can be
25:24
our example bread and butter all
25:25
excellent example usually even if you
25:27
have any case in the demand for
25:28
sandwiches and both bread and butter add
25:30
Amanda together that’s not that’s not an
25:32
absolute correlation is there’s also
25:33
mayonnaise and stuff but they sit as a
25:35
certain is a certain high correlation
25:37
there between the mansard rather than
25:40
land for butter also example when a
25:43
whole activity has increasing the man
25:45
for example is a piece of man for
25:46
baseball means the neckpiece in man for
25:49
baseball gloves bats or boys umpire
25:53
services stadia the hope of hot girl of
25:56
the whole business is an enormous serie
25:58
the company does it go together with the
26:00
whole baseball package so these are the
26:06
products and joint the man now again
26:08
it’s easy to see what relationship out
26:09
of the man’s side
26:11
Samantha baseball goes up the demand
26:13
curve for baseball for baseball gloves
26:15
or bats the ball boys for pitchers all
26:19
these things amantha lease oh my that’s
26:21
a number of things I NE n number thing
26:24
goes up and the place will tend to go up
26:27
and equality open to go up contra Leia
26:32
the man for the whole thing for example
26:34
bullying rate disrepute for many years
26:36
before the big post-war come back and so
26:39
the man for bullying fouls down to this
26:41
method Man 4 pin pin boys found a
26:43
babbling equipment and bulls and alleys
26:46
and lower estimates and the onus the man
26:49
felony impact of this 40 risers in
26:52
depends on line on the steepness so to
26:55
speak of a different supply courage to
26:57
get to later but because easy to see one
27:01
for the impact of changes on the man
27:03
side for joint the man product a tricky
27:07
singer the complicated thing comes and
27:08
changes us supply side for example let’s
27:11
take better than butters this is figure
27:13
for pricing the y-axis on any x axis and
27:20
we have bread and butter and ice losing
27:27
there’s a big increases the supply of
27:30
butter some reason is long there’s a
27:33
bigger increase and butter product
27:35
productivity some some new invention or
27:37
some new way of producing but which
27:39
causes an illness increasing supply so
27:41
here a big increase in supply curve with
27:43
butter and the price is better than
27:46
fool’s stock light what then happens on
27:49
the what’s the influence of the pipes of
27:51
the math of bread on the influences all
27:54
not only is very cheaper but now
27:55
sandwiches are cheaper so sandwiches are
27:57
cheaper this will induce people to buy
27:58
more bread that they want to buy more
28:00
sandwiches the result an increase in
28:02
demand curve for bread be prime so this
28:09
means that the man curve for bread is
28:10
induced by what why what happen to
28:12
supply changes make her regret are
28:14
induced by what happens it changes the
28:16
supply of complement its joint the mayor
28:19
compliment in this case butter is much
28:21
cheaper this means that would be a big
28:24
increasing they have
28:25
this means that bread becomes more
28:26
expensive as know people eat sandwiches
28:29
supply the quantity produced and soul of
28:31
butter increases the quantity producer
28:33
solar but increases more people end up
28:35
eating sandwiches or the net result of
28:38
this whole business is the place of
28:40
butter for my to break those up there
28:42
nothing’s happening to you supply of
28:43
bread we don’t the no increase in blood
28:44
productivity a technology anything let
28:47
us stop cooking along the same way I
28:49
have them before it over happens now has
28:52
an increase in there for bread so you’re
28:53
going up the given supply curve and get
28:55
this kind of relationship and again vice
28:59
versa if there’s a is a big guy how
29:02
shortage of some leaving for the big you
29:04
have very very cattle are struck by the
29:06
dread brucellosis disease or something
29:08
on half of every kind will wiped out
29:10
supply co or butter shifts to the left
29:12
butter comes more expensive and people
29:14
then cut down in their pictures of
29:16
sandwiches as they do that the man code
29:18
for red drops a place of bread will fool
29:21
that’s the other side of the coin of the
29:24
butter bread relationship so that’s the
29:29
joint demand caper and I think Kenneth
29:33
easy to see one foot once it’s pointed
29:35
out what the lationship SAR between
29:37
products and joint demand its changes
29:42
for the supply side well then we down
29:44
see what the result will be a up as a
29:46
change no the man sure man for the other
29:50
compliments and the same thing what
29:52
happened in and saying baseball over
29:54
there the effect of quantitatively so
29:56
small because with the ludicrous but so
29:58
we’re me for example if there’s a
30:00
tremendous increase in back productivity
30:02
the bat making hardly know how they make
30:04
that spittoon as a machine that does it
30:06
it was a big increase in bat
30:07
productivity and faster kind much
30:09
cheaper supply crystalloid code for back
30:11
shifts to the right is a big drop of
30:13
supply on the price of bats this induces
30:16
and let people play baseball and the man
30:18
curves all the other things goes up as I
30:19
mean I of the effect is obviously so
30:21
snow over the place of bachelor than
30:22
mean much the whole baseball picture
30:24
solely just be a tee increase in the
30:26
manner of these other things for
30:27
uniforms for boys and somewhat so on a
30:30
qualitatively neotec will be there since
30:32
economics is a qualitative
30:34
one off a science so to speak you should
30:37
mention that okay it’s the joint demand
30:44
situation enjoyed the man by the way
30:47
also of course applies two factors of
30:50
production with me when widgets are
30:51
produced or beef is produced or whatever
30:53
it all sorts of factors of production
30:55
different types of labor capital won’t
30:57
land and cetera are jointly demanded to
31:00
produce this thing in there just so a
31:01
lot of the joint the man analysis could
31:03
apply there too if the increase of the
31:06
man for steel increases demand curves
31:09
also for steel producers the only steel
31:11
equipment Worf steel steel factory the
31:14
whole book field workers and so on and
31:16
so on so all these things are planned it
31:19
together okay next exes joint supply
31:23
joint supplies very differently joint a
31:26
minute joint supply is when two products
31:28
are more product or more products are
31:31
produced a joint demand situation with a
31:34
producer for the same market you know
31:36
the baseball market the sandwich market
31:37
or whatever joints appliance two things
31:39
which are having a completely different
31:41
markets it’s just a technological you
31:43
wrapped up together there’s no way to
31:44
get around that in other words joint
31:47
supplies a purely technological question
31:50
for example uh right now the silver mine
31:54
especially some of my the United States
31:56
silver and copper wrapped up together
31:58
some of your mining more silver you’re
31:59
also money more copper my subversive
32:01
well this means that you have peculiar
32:05
kind of market relationship again in the
32:10
case of a case of joint supply is very
32:13
easy to see what happens is when as a
32:14
change this time its supply something in
32:17
other words the people that look should
32:19
bash copper miners go down of them
32:21
murata or Connor over and mine more
32:24
silver and copper that’s easy to see
32:28
what happens in the supply curve of
32:29
silver gold one could increase the price
32:31
of several for a supply curve a copper
32:34
will increase in quite a couple what
32:35
I’ll be it it was Libya supply closed in
32:38
both markets will increase the again the
32:42
here Lee the complicated question comes
32:44
so what happens with a man cook for one
32:46
of these things goes up for example say
32:48
this is this is copper and silver
32:51
actually the famous cases is beef and hi
32:55
there we go you know the cow was a meat
32:59
Niko’s to the beef market the highs go
33:01
to the weather market and it comes to
33:04
completely different market there’s no
33:05
relationship me the letter o beef market
33:07
just so happens with the same thing that
33:08
supply it so ah let’s see how the man in
33:14
supply curves again for the tuna they
33:17
are for two joints applying items
33:21
whether it’s copper or silver or beef
33:23
and highs let’s say is a big let’s let’s
33:25
take me and Hans make this more
33:27
spectacular difference there cover until
33:31
they’re both lying material let’s say
33:35
there’s a big increase in there for beef
33:36
so often it’s okay so man for beef goes
33:38
up and in response to this and the paisa
33:42
be covertly responsiveness and long run
33:44
supply for a quality of beef increases
33:47
we have this secret money going to
33:49
point to another okay that’s fine but
33:51
what happens here is a response of
33:54
releasing more cattle and getting more
33:57
cows than marketing tenders and
33:59
responding an increase in beef
34:00
production Rizzo this is a willy nilly
34:02
an despite the best efforts of the
34:05
producers more hives come on the market
34:07
more or less of a market result of this
34:10
is a big increase in supply curve 11
34:14
when we were an increase and quantity
34:18
responding than increasing demand curve
34:19
for beef willy-nilly the press of the
34:23
letter market or lease or for supply of
34:26
it a lot of people like gnash their
34:28
teeth or whatever that’s not much they
34:29
can do about so this is so again we see
34:33
something opposite situation here the
34:34
increase in the man evoking a greater
34:38
supply which in turn increases the
34:42
supply curve of a compliment the joint
34:44
supply compliment which lowers the price
34:47
of that compliment as the same way of a
34:48
copper and silver just to hear this more
34:51
dramatic difference again contrary wiser
34:55
there’s a drop in demand for beef
34:57
and Brazil this is I could be fallin
35:02
mortal well if calves are being produced
35:04
there’s other that’ll be an increase in
35:06
supply curve accumulated a foreign
35:08
supply curve and the leather industry
35:09
and a shift of leather prices upward
35:12
because of this joint supply current
35:14
situation I’ll cast the joint supply a
35:19
business again on the case of joint
35:22
supply their attempts sometimes
35:23
successful businesses to create their
35:25
own demand for the joint supply for the
35:27
for the byproducts Oakland and crooks I
35:32
products are often waste wasted
35:35
resources which go I have no use so you
35:38
know use what would have to be produced
35:39
as part of a regular production oh the
35:43
famous point least as far as I’m
35:44
concerned is a case of a sort of
35:49
fluoridation water supply I had econ
35:53
attended Lee I wouldn’t say cynics some
35:56
people could say so like other people
35:57
say realists analyzing government action
36:00
we tend to look for the economic motive
36:02
involved and we kind of check if
36:04
economic motive is consistent with what
36:06
happened also the lobbying activity we
36:07
tend to say one seems to be a pretty
36:09
good case here as this tool in case of
36:12
fluoridation setting aside or the
36:13
argument the house arguments both
36:14
warning s Florida hazy fluoridation we
36:20
had a unwanted byproduct of aluminium
36:24
production aluminium aluminium
36:27
production also produces along with it
36:30
sodium fluoride unwanted on weapon on
36:34
sign which is originally dumped you know
36:37
where a rubber industries dumped their
36:39
waste then importation movement comes in
36:42
and lowing the whole we have a happy
36:44
happy by-product happy increasing demand
36:46
for the droid supplied waste product
36:49
sodium fluoride which now gets dumped
36:52
mcknight michelle gets purchase from our
36:53
coli he gets dumped that everybody’s
36:55
water supply continually it’s a
36:57
containing market might not seem so much
36:59
but it’s because it’s a study thing
37:00
because people always making were always
37:02
dumping with some water supply okay now
37:06
looking at the economist looking at this
37:08
situation will tend to lease hi
37:10
saga maybe there’s a certain
37:12
relationship of me that’s the end for
37:14
fluoridation was suddenly appeared upon
37:16
us in late 40s and early 50s and alcohol
37:21
was need her for extra back for extra
37:23
the man for it’s only waste product and
37:30
all son I don’t want to get into
37:32
technical for them I’m sure people here
37:34
know more about chemistry and I did that
37:35
the there’s also peculiar thing that
37:37
that the those areas where an inverter
37:41
supplies naturally Florida the kids have
37:43
less cavities these are areas where
37:46
calcium fluoride is discovering the
37:47
water enough sodium fluoride and the
37:49
question arises why isn’t calcium
37:51
fluoride dump them well first of all
37:52
maybe calcium is the thing is stops the
37:55
cavity not before flowing at any rate
37:57
why is in calcium fluoride number on the
37:59
water instead of sodium fluoride at
38:01
perhaps the answer is county employee
38:03
ain’t no byproduct of aluminum
38:05
production getting to the punch line of
38:08
this the manor guy who really pushed
38:10
this whole thing which fluoridation very
38:12
heavily as the front was I believe the
38:14
first secretary of health education and
38:15
Welfare Truman administration mr. Oscar
38:17
Ewing was known as a great progressive
38:19
leader of America’s of democratic action
38:21
so forth after pushing fluoridation
38:25
getting a whole thing launched and
38:26
getting old medical profession public
38:28
health profession behind etcetera he
38:30
then left the government to return to
38:32
his little practice but you also happen
38:34
to be a chief counsel of partially chief
38:37
counsel of aluminum Corporation of
38:38
America now nearly have it is the black
38:42
box I either this is depending on your
38:46
general philosophy in point of view
38:47
either this is a computer coincidence
38:50
but also we tend a little more little
38:52
join us I on the so-called public
38:55
welfare operation okay that’s
39:01
let’s say i’ll kohler k / the one food
39:10
market economists are accused of being
39:12
apologist for big business as a good I
39:14
think we’re only a positively business
39:16
as in their activity on the market not
39:17
their activities in government or
39:18
completely different set of rules and
39:21
consequences follow before I press on
39:25
some more with the may encourage and set
39:27
supply curve analysis I just say
39:29
something about the benefits of exchange
39:31
should mentioned before exchange system
39:36
is a sale system where both parties each
39:40
exchange benefit actually the free
39:41
market economy may looks to be very
39:43
complex and since is because it’s the
39:46
millions of participants literally it’s
39:48
sort of consistent it’s really a network
39:50
or latticework of human exchanges of two
39:52
people or two groups or two parties so I
39:55
buy my newspaper 15 cents I’m and
39:59
there’s me a newspaper dealer or if
40:02
somebody works for a corporation as him
40:03
on a corporation were bickering for
40:06
their suffering services so what you
40:08
have is a whole network of unit of these
40:10
unit exchanges each each case in each
40:12
unit both party to the exchange think of
40:14
their better off by making the exchange
40:16
other words my newspaper 15 cents I
40:21
value the newspaper more highly than I
40:23
Rio fifteen cents on my value scale in
40:25
New York Times say is higher rid of the
40:28
fifteen cents the other hand and lose
40:30
deal or have plenty of New York Times is
40:31
upload up to hear it in your conscious
40:33
15 says obviously worth more to him than
40:35
New York Times so we have a double
40:37
inequality of values a reverse
40:38
inequality value which sets up the
40:41
conditions for exchange peculiarly not
40:44
for long classically commas cleaning
40:46
especially call Mark’s let that exchange
40:50
system with the prices of aha because
40:52
let’s say a newspaper of fifteen cents
40:54
or whatever therefore must be some sort
40:57
of equality of value between a newspaper
40:58
and fifteen cents of or between
41:00
newspaper and some other things cost
41:01
fifteen cents and you looked around for
41:03
what is the same which makes these two
41:05
two things equal and value is it wait
41:08
not obviously is he the newspaper
41:10
doesn’t weigh as much as half a loaf of
41:11
bread or whatever
41:12
or is it volume couldn’t be that he
41:15
finally wound up with a crazy
41:16
labor-hours doctrine but but the problem
41:19
was really the beginning of his
41:21
questions troopers an analyst which is
41:23
it must be something eat more value
41:24
between two things that you have the
41:25
same price there’s a whole point of
41:27
exchanges is Neville you exchange them
41:29
in or unless they were unequal imagine
41:31
if I really tomita fifteen cents was
41:34
exactly equal evaluative newspaper I
41:36
wouldn’t bother buying a newspaper
41:37
because it’s you know it’s a certain
41:38
costliness certain costly wrong buying a
41:41
newspaper and going there and stuffing
41:42
there etc similarly you notice an order
41:45
changes would ever take place at all if
41:47
everything is equal in value and whole
41:48
point also if it’s a new deal i prefer
41:51
that the types of 15 is sat for some
41:54
reason you know be no basis for exchange
41:57
either has to be reversed inequality and
41:59
so the situation were those of us of the
42:01
reverse value scale for the product so
42:05
because of this because of these
42:06
reversal value scale we have exchanges
42:11
all over the place where we will have so
42:13
quick who say with a surprise fish or
42:15
whatever exchanges who are friday so
42:17
puff lumbo and so points on the whole
42:19
way down the line okay for heating on
42:25
over the man I curve etc there’s one
42:28
famous property and I think it’s
42:30
important which land curves as if I
42:33
closed both have which is important and
42:37
analyzing them look at look at very
42:40
simplistic we can be called a flatness
42:42
of steepness in other words if this
42:45
recur vez it’s the supply curve saying
42:48
very steep and the man curve increases
42:52
then you have a red-hot look huge
42:54
increasing fight and the very small
42:56
increase in quantity it takes a run Brad
42:58
you have no increase in quantity the
43:00
other half supply crothers quite flat
43:02
thing nails speaking produce a lot more
43:05
nails very quickly then a given increase
43:08
in demand because of snow increasing
43:11
frightened a large increase in quantity
43:12
so the flatness or the steepness of the
43:15
man of supply curve is a evidence of how
43:20
it will well how much of the reaction
43:22
takes place in will take place in the
43:23
quantity area how much will take place
43:25
in pricey area
43:28
the usual definition in textbook
43:30
definition of you this is called
43:32
elasticity is rather flatness of course
43:35
one very important point is that depends
43:38
you can’t just say flat our speakers of
43:40
it depends on what the scale is here
43:42
look what’s the ordinal scale that’s a
43:45
given scale if we can talk about
43:48
relative platanus any rate this is this
43:53
relevant fact that is called elasticity
43:55
the tourney elasticity once again is it
43:57
people up everything physics where the
44:00
we can all make slices you can I cashola
44:04
Jorgen attemping ate the physical
44:06
sciences the office leaks out by Daniel
44:08
through your extending of spring and how
44:10
much this thing jumped back the
44:11
dependencies always a lead human action
44:13
out of a picture leave people out of the
44:16
picture talking about springs and and
44:18
weights and stuff like that so I feel
44:21
legitimate that’s the use any lifestyle
44:23
good luck with a caveat keep using it my
44:27
usual textbook definition of the Arts
44:29
the city is percentage change in
44:33
quantity divided by the percentage
44:34
change in price in other words it’s a
44:36
the quantity changes a great deal on
44:39
relationships price and it’s a very
44:41
elastic elastic if it’s a quantity
44:44
changes that want a small amount
44:46
election change bike that’s very in our
44:47
life now I press they don’t like this
44:49
definition if I don’t think for various
44:51
reasons for one thing which is something
44:55
we have to repeat again and again in
44:57
this court or any other economic
44:59
lectures is that nobody knows what the
45:02
ethnicity is what you have when you
45:04
begin to have if you’re playing around
45:05
these curves the Kurds pick on a
45:07
fascination of their own they got a life
45:10
of their own people actually begin to
45:11
think of the curves of their everybody
45:12
knows what they are they stop trying to
45:13
measure them it can’t make it over
45:15
somebody owes what they don’t want
45:16
nobody else are they are until they keep
45:19
changing a little time so this you can’t
45:22
you can’t really measure them you can
45:24
try to approximately trying to figure
45:26
out how elastic is a man curve for sugar
45:28
and it sort of stuff as a lot of time
45:32
and energy and resources and general a
45:33
lot of other than waste in that sort of
45:34
stuff people come up here with an anchor
45:37
for cotton
45:38
that is impossible to figure out the
45:40
demand for cotton azimuth of the metric
45:42
is instantaneous the mayor it keeps
45:44
changing a long time the the support of
45:46
measurement always assume that a man
45:48
curve stays the same for about 20 years
45:50
then if it stays the same way you can
45:52
plot the various production points on a
45:56
so-called demand curve this gives you
45:57
the man curve it’s a pure nonsense for
46:00
the macro keeps changing of the whole
46:01
basis of the subjective evaluation of
46:04
people and subjective angulations keep
46:05
changing so nobody knows where they are
46:08
nobody can measure them and therefore
46:10
using snot using percentages the Sun
46:13
exchanges gives us furious precision of
46:15
the whole language you’re really doesn’t
46:16
deserve this leads book you know public
46:18
the second award another thing this
46:21
definition of the elasticity does it
46:23
doesn’t focus on our I’ve maintained as
46:25
an important harm on the ice icity
46:28
because it makes a supply curve in the
46:30
man curve some more in other words it
46:32
looks at the steepness or flight another
46:34
vote whereas the man curve elasticity is
46:40
much more important question if i carry
46:41
on listening then it’s a very different
46:43
question see the supply curve quantity
46:47
and price are always moving together no
46:49
words of the quantity a little point of
46:51
supply curve a for sloping supply curve
46:53
prices low and quantity is low and up
46:56
here bike is high quantity is high so
46:58
the two things are always moving the
46:59
same direction but whether the may occur
47:01
simply different the two things are
47:04
always moving on to the direction and
47:05
price forever a quantity demanded
47:08
increases my subversive so here whether
47:10
the man Currie have very important kind
47:12
of question which isn’t the area under
47:15
the demand curve keeps changing and
47:17
responsibly to forces moving out of the
47:19
directions in this area it has to be
47:23
very important that’s a total revenue
47:24
the business of mystery gets extremely
47:27
important to a firmer industry to figure
47:30
out whether a price change will or the
47:32
drop in revenue are increasing revenue
47:34
for example ah
47:43
here’s a well let’s say we have a column
47:46
say this is widgets by some widgets
47:50
quantity of widgets and the fight
47:54
religious is ten dollar the case qty
47:57
widget says a thousand people sell a
47:59
thousand the pipe drop tonight out of
48:01
the case let’s say they saw some more we
48:04
don’t know how much more i say 1100 i’ll
48:07
take 1209 case the total revenue is
48:11
equal to the fight time of the quantity
48:13
obviously if you keep selling a thousand
48:16
widgets of having cases of widgets for
48:18
10 all of the widget your total income
48:19
at eleven you week ten thousand dollars
48:23
in this case you’re selling 1200 nine
48:30
dollars and it’s a it has an
48:33
eight-hundred-dollar 11 you alright so
48:36
in this case you have a situation for
48:38
the price is falling and the quantity
48:40
using freezing of quantities in creating
48:42
more than the prices falling
48:43
proportionately was of which as the
48:46
total revenue is going up in other words
48:47
the area under the curve ice and polling
48:52
places one of these the area of the
48:55
lower prices is larger than the area of
48:57
higher price okay this is important for
49:00
a businessman who knows this if he can
49:02
estimate is important figure out that’s
49:04
going to happen when the price falls on
49:06
the other hand the pricing for theta
49:09
nine dollars instead of going out 2,000
49:12
or to 1200 it make me be goes up in a
49:15
thousand in their 50 only the quantity
49:18
increases only a little bit in that case
49:20
total revenue would be 9,000 ah the
49:33
total revenue is now dropped from 10,000
49:35
then I have a foreign and 50 with a form
49:37
and price so he have a situation where
49:40
the area’s less the holy man curve was
49:43
steeper and the result of a fallen price
49:46
of the Robin holy revenue so the so the
49:50
thing that will
49:51
it’s not just sort of a playing around
49:52
with measurements you got a probable
49:54
question is what happens the total
49:55
revenue as the Pyke’s changes the
49:58
forward case I call us elastic for the
50:02
price of the destination with an elastic
50:03
demand curve my view is when when the
50:07
price toys hulu loving you goes up on
50:11
the other hand if the PI school is
50:13
helenium the client at my definition of
50:16
inelastic demand curve so the difference
50:18
point of this definition between a wife
50:21
the commander of an inelastic demand
50:22
curve centers around not the percentage
50:25
is one way or the other centers around
50:26
whether co review is going up or going
50:28
down as if I schools the point is that
50:42
this is not this is not a given plane
50:44
throughout the whole demand curve in few
50:47
same continuing over the main curve is
50:49
just because it’s the elastic or
50:51
inelastic in one’s own doesn’t even a
50:53
catena be elastic or inelastic
50:54
throughout the whole area on the other
50:56
mark the contrary but will happen as you
51:01
keep raising the price you know wind up
51:04
probably gonna wind up a much lower
51:06
total revenue curve the operation is
51:10
finalized it will be on the other side
51:12
of a point of saying when till total
51:15
review when total revenue increases as
51:18
high school that need to have an elastic
51:20
demand curve the other side of the point
51:23
of that is going to review decreases as
51:25
the price rises you have an elastic
51:27
demand curve so the elastic demand curve
51:34
or you like the area tomorrow should say
51:37
is when total revenue increases the
51:41
price falls or to love you decreases of
51:48
the price rises the same thing and
51:53
inelastic demand curve is when
52:01
11u decreases in high schools and two or
52:09
a total of you increases as price rises
52:12
and even the most in elastic demand
52:16
curve and everything I can get situation
52:18
we can raise the price indefinitely it
52:21
still have an increase in total revenue
52:22
obviously you’ll eventually wind up an
52:24
Eli fix own new demand curve so even if
52:29
everybody’s lately family when you push
52:31
the pipe of weed eat up to ten dollar
52:32
the box you got falling off at all
52:35
around you the wheaties relative how
52:38
inelastic that the makeover we give
52:40
might be if is indeed an elastic now
52:44
this is the speciality laxity any likes
52:47
to see them come extremely important for
52:49
businessman or industry to figure out
52:51
what’s going to happen when I change
52:53
well what were the pipes are raised the
52:54
price what’s going to happen a total
52:55
income a revenue in this case now for
53:01
example many disputes we’ve had in new
53:05
york city several taxi strikes in a few
53:07
years began to blend of them begin to be
53:09
a blur in my memory but anyway each of
53:13
these cases usually dispute between the
53:15
taxi industry and Mayor Lindsay is
53:16
revolver out of your life sissie the
53:18
demand curve of taxis the taxi industry
53:21
has said we need a higher prices the
53:24
word so on and therefore we should have
53:26
fifty percent increase or twenty percent
53:28
increase or whatever and Lindsay
53:29
administration claimed at the land cover
53:31
for taxis with the elastic acclaim was
53:34
no no if you increase your price by
53:36
fifty percent or twenty percent you can
53:37
have a more proportional dropping off of
53:39
the mansio total revenue all decline it
53:41
was essentially means the argument and
53:46
then we were playing back and forth and
53:47
then they get the fare increase and so
53:49
far Lindsey in this race didn’t correct
53:51
the word so far we’ve had a new hello
53:54
we’ve been an elastic and inelastic
53:57
demand zone so there’s a total as the
54:00
fair the price is going up total of you
54:02
is going up however the last time they
54:07
had a taxi fare increase which we use
54:08
whopper number about fifty percent the
54:10
owner Scott was a beautiful
54:12
aureus laying there walk and you almost
54:13
out of the point you’ll ask you i
54:14
explicitly as a many taxi drivers are
54:18
put up for many months that they’re an
54:21
income went down because there no they
54:23
were they were dropping that the fair
54:25
went up at 52 simpler there a number of
54:28
fares went down like sixty percent or
54:29
whatever so we know the way we were
54:31
almost me a sort of at the critical
54:33
point there you know I realized the city
54:37
and the interesting point here that the
54:42
government or government regulated
54:44
industry in this situation doesn’t know
54:46
what in blazes to do about it will not
54:47
not what in blazes then when I reach
54:49
this glorious the elastic point son
54:52
latest will come something when they
54:53
raised a dollar subway fare to a dollar
54:54
a ten-dollar it’s gonna be they’re going
54:57
to find out when they raise it already
54:59
has gone down because of the tendency of
55:02
most despite my claim upon the
55:04
innovation penalty of most government
55:06
agencies is to assume that the man who
55:09
was murdered that’s really their
55:11
tendency so they want a tiny percent
55:12
increase in revenue they figure I’ve
55:14
were raised the player by twenty percent
55:15
and they tend not to think about a
55:17
falling off in quantity has an almost
55:20
falling off in quantity which I have a
55:21
figures with me pulling all the quantity
55:23
of subway fares new york city since
55:27
nineteen forty eight or whenever lee it
55:29
changed nickel fair other words a number
55:32
of fair you know the population is
55:34
growing up since since some extent
55:36
anyway since nineteen forty eight and
55:37
the number is certainly in the colony
55:39
area and income is going up an inflation
55:42
and all that it’s like that the number
55:44
of sub a subway rides has going back a
55:48
Superboy by many percent with 1948 and
55:51
this is another thing people realize I
55:54
figure well people have to lie to work
55:55
and therefore that can’t be any bumping
55:56
off your subway fare not true there’s
55:58
also it’s a way you can write less in
56:00
the subway you’re shopping once a week
56:02
instead of twice a week or whatever it
56:03
cut down a number of movies outside a
56:04
neighborhood all sorts of suffering and
56:07
marginal ways which the public and cut
56:09
down their subway consumption and then
56:12
result was a big whopping change in the
56:13
number of fares well so far this drop in
56:16
quantities nothing has not reached the
56:17
Atlantic zone yet but my prediction is
56:21
I’ll say something that some glorious
56:23
day will get the situation with the fair
56:26
goes up to a dollar a ride and they’re
56:28
going to find out a drop in total
56:30
revenue ah and then what we gonna do
56:35
question here so the another another
56:42
peculiar area of elasticity and which is
56:46
pretty obvious I think my consumers
56:48
movie in New York a little movie goer in
56:51
a New York I’ve seen a situation of
56:54
Allah for a nowadays you go to I’m not
56:57
talking out League League League the
56:58
super art a leader doing very well mr.
57:01
Avenue movies and sort of fun the little
57:03
labor hood movies where you have 2,000
57:05
seats and we go in there on saturday
57:08
night a friday night ever five people
57:10
are sitting in there and it’s like a
57:11
private showing it would seem fairly
57:18
obvious as i read us a ticket of feet
57:21
all of the p50 and five people sitting
57:24
in the theater the routines of the movie
57:26
exhibitor or maybe you think it is the
57:28
cut the price and I having some place in
57:31
last couple of years and the types of
57:32
the cuts a to a dollar dollar 50 mo on
57:34
the whole theater is flooded obviously
57:37
2,000 people are going on a half a
57:39
ticket and yeah being an enormous
57:41
increase in none of you compared to you
57:43
know five people or the feed all the
57:45
ticket but it’s amazing thing how a
57:46
movie to be exhibited or don’t seem to
57:49
realize this it’s an elementary less
57:52
unless you have to see is a man there
57:55
i’d say they have been in certain cases
57:56
neighborhood theaters are adopted a
57:58
policy of a dollar and a half a dollar a
58:00
seat and bingo place is jammed also the
58:03
quality of the movie okay one left
58:05
thinking it is a less of any of you
58:06
might be on a movie theatre new york cut
58:08
the price okay we can begin to use this
58:20
supply and demand and i will see his
58:22
scepter to start looking at some case
58:25
studies of kinds of prices individual
58:29
kinds of prices
58:33
there is for example the question which
58:36
is the minds and hearts of many people
58:38
in the United States why is it the
58:41
medical and hospital pipes were worn up
58:43
so fantastically aside from we know the
58:46
first place is going up in general so
58:47
we’re going to dealing with a relative
58:49
question of why prices of medical care
58:52
on enormously up mostly greater increase
58:55
than regular prices and the again the
59:01
answer this and i’ve got x prettier be
59:04
the answer this is the area can be found
59:07
by analyzing both with a man silent
59:09
supply-side answer being that have been
59:11
various ways in which the demand curve
59:13
is artificially increased for medical
59:16
care a bar course I think lights up and
59:19
their ways by which the medical supply
59:21
medical service is a water fiercely
59:22
remain of shift to the left I fear what
59:25
they could do you would be there by
59:27
raising the price of medical care that
59:28
way so we have an artificial increase in
59:30
the man artificial restriction and
59:31
supply result as an artificial huge
59:34
increase in height of medical care well
59:40
for example it has been discovered the
59:48
big increase in the big one when they
59:51
prepare really took off spasms biosphere
59:54
with the turn of 66 67 when they have
60:01
this big acceleration and rate of
60:02
increase prices and the floor lab for 66
60:07
67 was going out medical local prices
60:11
going up Chris early faster than the
60:12
general cost of living than that not
60:13
that stratospherically miss Elliot
60:16
almost boggled the mind and to know that
60:18
20 years ago I first took out blue cross
60:21
the paucity average hospital a new york
60:24
city can all the day that’s now
60:26
something like 200 it’s somewhere in
60:29
that area ok so the 1666 5067 there was
60:36
an enormous check the brakes through on
60:39
the rate of
60:40
increase there was a for example lunch
60:47
through june 66 the june 67 but of
60:54
course the living is going out by two
60:55
and a half percent proximately that year
60:58
medical care is going up by ten percent
61:00
compared to four and a half percent the
61:02
previous year doubling of rate of
61:04
increase and hospital prices going up by
61:06
25 percent and that year so that seems
61:10
to be a critical point of critical mass
61:12
so to speak what happened that anything
61:14
happened at 66 is indeed something
61:16
happens with these six namely your
61:18
enormous infusion Medicare Medicaid as a
61:21
medical prof picture so what basically
61:25
has happened since first of all since
61:26
World War two yeah the Blue Cross and
61:29
Blue Shield etcetera and since 66 67 we
61:32
have an enormous increase in Medicare
61:34
Medicaid there’s only wish that was the
61:37
fervor war to almost nobody had medical
61:39
insurance and ten percent of five
61:41
percent population now almost
61:43
everybody’s got it so now they don’t let
61:44
you know the hospital employees see your
61:46
card medical insurance card or the
61:49
result of this situation is it since
61:51
everybody everybody’s medical payment is
61:54
being recouped you don’t know it’s not a
61:56
hundred percent coming close to it by
61:58
the insurer either blue cross blue
62:00
shield of a government and of course as
62:02
well this has been an increase in demand
62:04
curve almost of the stratosphere of the
62:06
government then under under rights
62:07
everybody the man curve for medicine and
62:11
since the governor I serve as a matter
62:12
of medicine result of this we should
62:14
know about as far as an enormous
62:16
increase in the price if in other words
62:18
the four and one for nineteen forty-five
62:20
people could only afford one hundred
62:22
dollars from appendix operations is what
62:23
they paid it’s now they’re going to for
62:25
anything at the government will recoup
62:27
thousand dollars or something then why
62:29
not because the taxpayer picks up the
62:31
tab so the doctor then charges of having
62:33
always 100 so this is
62:37
with us a fantastic increase in the man
62:39
Currie have almost an unlimited
62:42
underwriting as a consumer demand now
62:45
this new doctor can charge on with
62:46
unlimited amounts of hospital even more
62:49
so I feel much closer to to the super
62:54
monopoly situation a lot of cases where
62:57
the medical insurance or Medicaid and
63:00
Medicare on the right hospital course
63:02
but not non hospital costs so then the
63:04
effective this has shown the personal
63:06
hospital as quickly as possible and at
63:07
the insurance rate you have a shift of
63:10
medical care tour the hospital because
63:12
the hospital is authentic certified
63:14
thing there and the government insurance
63:16
will pay it and then there’s a peculiar
63:20
thing is now i have so many years of
63:22
this all of a sudden under the medical
63:24
authorities in a medical professional
63:25
medical medical profession suddenly
63:28
gotten life of this hey hey maybe
63:29
there’s been a relationship of thing
63:30
though that I care prices going up so so
63:33
far yeah by Derna Lee will get up for
63:37
this instead of finding out from
63:39
economist what’s going to happen they
63:41
they’ve run into a hard experience this
63:43
is a result of this situation there’s
63:47
that be of course the patient public and
63:49
I believe that much better offer medical
63:51
may be here because effort either they
63:53
have to pay is enormous amount anyway
63:55
they make it up to taxes that’s
64:00
essentially the demand side and a
64:01
supply-side the other situations were
64:04
going on for many years keeping a supply
64:07
curve that’s the way to the left the
64:12
ruler shed layer of nineteen ten black
64:15
year nineteen ten when the Carnegie
64:18
Endowment corporation Lee Rockefeller
64:22
Institute and generally Rockefeller
64:25
gentle and patient boy the American
64:26
Medical Association co-sponsor the
64:28
famous flex no report after I forget now
64:31
with Abraham Flexner assignment Abraham
64:33
Flexner the weather is intended get the
64:35
mixed up anyway that’s our hams flexing
64:38
she was reporting a medic medical
64:39
education the reports struck a country
64:42
he said that there are most medical
64:44
schools are low body and isn’t they
64:50
didn’t meet his high standards and
64:51
therefore they should be proud of
64:54
business through the system of state
64:55
licensing of medical schools also
64:57
hospital but metal tools with a key the
65:00
word licenses for doctors before this
65:02
they weren’t that importantly this
65:03
license for medical schools put a
65:06
stranglehold medical education the
65:08
differences example team bomb the bar
65:11
association ama is this young have to be
65:15
good at a certified where school in
65:16
order to pass the bar exam you can’t you
65:18
want to be self educated being
65:19
apprenticed to a judge and that’s our
65:21
stuff and take the bar examinations that
65:22
way okay bruh ham like and did not so
65:25
many people do in a blur i still people
65:26
who did do it and this is honored by
65:27
legal profession but in the medical
65:29
profession you can’t just take name in a
65:31
medical exam you can’t study on your own
65:32
or being apprentice of some doctor you
65:34
have to go to a certified medical school
65:36
certified by the state of the hair of a
65:39
state of points of order licenses which
65:42
consists of appointees American Medical
65:44
Association so if you have a state
65:46
partnership of state and mathematical
65:48
association running another
65:49
professionally in every state also this
65:55
is supposed to be of course to ensure
65:57
quality okay i’m at the point of the
65:59
supply curve is limited remember sling
66:01
shifters of the right at the time in
66:05
1919 5 192 medical school in the United
66:09
States shortly after that there were
66:11
much less door I nineteen forty 40 69 on
66:14
the way through half the natural school
66:16
in country you put out of business by
66:17
this process state refusing the license
66:19
these medical schools well let’s push
66:23
the supply curve for the left number of
66:26
physicians the 1900 number 457
66:29
physicians per 100,000 people 1950 732
66:33
physicians it was a loop the
66:35
transitioning shortage comes with that
66:37
obviously through the its limitation by
66:40
state licensing procedure wow I can say
66:43
wow this is a good thing because that’s
66:45
true we have to pay a higher price for
66:46
the quality of hire so we have these
66:48
state boards and think the formation
66:50
really well alright the first place the
66:53
analogy their famous analogy is that
66:56
if the government passed a law saying
66:57
from now on the consumer deserved
66:59
Cadillac automobiles no less than
67:02
Cadillacs we hear my pastor law
67:04
outlawing all cause they’re inferior
67:05
order to catalyzing the construction
67:07
horsepower another and that would mean
67:10
for us than anybody who have preferred
67:12
anybody before it how like we get to
67:14
enjoy Cadillac right any other hand rest
67:16
of us would have to look lesbian gay bi
67:20
cars at all so the simple equality thing
67:25
is in monopoly gimmick in other work
67:26
this isn’t the more expanding rapidly
67:28
gaming since the 17th century whether
67:30
we’re production is outlawed on the
67:32
basis of what was a low quality and
67:34
consumers aren’t deserve low quality
67:36
stuff I mean it’s like saying and what
67:39
we should i walk plastic because really
67:40
the one of non plastic stuff the word is
67:42
much higher quality no sense it is the
67:44
other hand we might prefer there were
67:46
probably a little price why must I go to
67:49
Park Avenue doctor in order to cure my
67:51
egg mail why can’t I go to local local
67:53
herb specialist for something for a
67:57
dollar instead of having it spent 55 off
67:59
of them on Park Avenue position so the
68:01
sewage should not be deprived i think in
68:03
the air will have a simple low quality
68:05
service if you want the cheaper product
68:10
the interesting enough who i am i have
68:15
up anyone have a flexeril himself
68:17
land who decided on all these medical
68:19
school but he’s not a doctor himself
68:20
he’s not a physician he’s not even a
68:22
scientist he’s not a medical educator
68:24
you own the prep school and marijuana he
68:27
was a bachelor of arts what gave him
68:30
what give him hugging him was great
68:31
powerless side etc well we’ll get to
68:33
that in a minute does a teaser okay as a
68:41
result of this other side we have
68:42
situations for example where you can be
68:44
a licensed qualifying position in new
68:46
york and go to medical school in New
68:48
York you’re trying to shift the New
68:49
Jersey you can’t do it but yeah but
68:50
those are the same partners in New
68:52
Jersey can’t just automatically shift
68:53
against a monopoly situation a shift of
68:56
supply curves to the left or a key back
68:58
competition there are other processes
69:05
involved here one of the one of the
69:07
processes that is we’ll see you later on
69:10
control remote controls separately we
69:13
give the producers power over the market
69:16
other supply this means that you have
69:20
all sorts of much much more room for
69:22
discrimination you have a four but than
69:23
others but we the building
69:25
superintendent of power allocate
69:26
apartments rather than PI system these
69:29
are the super kind of allocating a
69:31
quarter of the race or religion he
69:32
prefers the same thing having a medical
69:35
school you have III that’s artificial
69:36
shortage of space spaces in medical
69:38
school the result that he had much much
69:41
greater increase of discrimination
69:42
against me percept level Negro Jewish
69:46
and female applicants so that the number
69:48
number of female doctors blocked
69:51
considerably we’re much fewer female
69:54
physician I mean absolute number not
69:56
just per thousand people much fewer
69:58
women physicians in nineteen forty on
69:59
the war 1910 so you have this crackdown
70:02
than on the Super minority groups as a
70:05
result of this of giving a power over
70:07
the supply of the service to the
70:09
occupation of perfection itself that was
70:13
a given the power to ration spaces and
70:16
you had situations where people who were
70:17
couldn’t get into medical school theatre
70:19
because a lot of no less people who are
70:22
intelligent I good grades could get into
70:23
law school because not get in the
70:25
medical school again and even whether
70:26
the tremendous shortage artificially
70:28
created shortage of supply MP won’t use
70:31
the Switzerland how to get Mindy they’re
70:33
trying desperately to come back here and
70:36
so forth and so on all that’s a result
70:38
of this artificial restriction another
70:42
thing about quality is excuses of course
70:46
the quality of consumer need high
70:48
quality medical care is being protected
70:49
however and every one of these cases not
70:52
just forceful physician those are the
70:54
barbers and everything photographers and
70:55
every other licensing law as only the
70:58
so-called grandfather clause just chew
71:01
in the medical profession to exempting
71:02
existing doctors from this nice needs
71:05
requirements in other words when the
71:07
thing was passed 1910 that you have to
71:09
go to such an entry medical school beef
71:10
like this physician it’s not applied a
71:12
Joe Blow a might have been a on the
71:14
phony degree in
71:16
washing or something as this was
71:18
committing surgery in public continue
71:21
doing this for the age of 80 without any
71:23
problem at all so the fact that a
71:26
so-called quality quality protection of
71:30
the consumer never applied for existing
71:32
people in the profession either doctors
71:33
of photographers or whatever see some
71:36
point very clearly to the conclusion the
71:38
object of this whole thing is monopoly
71:40
restriction rather than worrying about
71:42
the consumer seem as the last person
71:45
being worried about this in the
71:46
situation the there’s no recertification
71:53
procedures that without their can public
71:55
forget everything New battling with the
71:56
Bellevue and not need anything for next
71:59
50 years and nobody had done anything in
72:01
balance support all the guidance and
72:04
there was something applies to him
72:06
another aspect of this shara got too
72:09
much into which is price discrimination
72:11
where the because of the Napoli element
72:14
and medical schools and hospitals the
72:18
hospital connected physicians are able
72:22
to suck the rich was able to charge much
72:24
higher prices in the same service to
72:26
rich patients and they are they are too
72:27
poor patients this is not again on the
72:30
name of humanitarian that’s all bushwa
72:31
like a meanness the point is that
72:34
they’re probably free clinics there’s
72:37
nothing to do with free clinic this is
72:39
this is a point where a surgeon for
72:42
example in charge x times as much for an
72:44
appendectomy your rich person’s he does
72:45
the perverse that just doesn’t do this
72:49
usually that is more of the same price
72:51
psychoanalysts don’t do that either
72:53
because then does the second line off a
72:55
non-hospital re-enter the closer you get
72:56
to a hospital with closer you get to the
72:58
monopoly the source of monopoly power
72:59
and the state licensing in hospital of
73:02
medical school and so the studies of
73:04
this showing that those physicians
73:06
there’s Neville practices which are not
73:09
hostile orient and do not price
73:10
discriminate do not soak the rich
73:13
whereas those are our Hospital oriented
73:16
do particularly surgeons
73:18
anesthesiologists if we know it’s not an
73:20
accident that the surgeons are totally
73:22
totally am a for example it’s not one I
73:24
think they’re not one officer the
73:26
American Medical Association is not a
73:27
surgeon
73:29
actually the surgeon that closest the
73:31
source of monopoly power the only
73:33
hostile oriented might Isis criminais
73:39
Chimene list that the usually people
73:40
cannot prices kurma night for example if
73:44
Rockefeller present Robert I was we d no
73:47
no we do use salesman and I see
73:49
Rockefeller walking and are charging
73:50
five thousand dollars for a box went out
73:52
he can afford it the point is that he
73:55
can then upon he could hire somebody off
73:56
the entire speech to come in a buy for
73:58
the usual 35 cents in there or we can
74:01
why I find you know a black market and
74:03
likely he’s not going on the street so
74:05
competition we usually eliminate the
74:08
other possibility of soaking the rich on
74:10
the market and the medical profession
74:12
especially the hospital E oriented
74:14
medical profession the various ways such
74:16
as this such a state licensing of
74:18
hospitals relentless in a particular all
74:23
sorts of ways of so-called 181 area for
74:26
example you can’t economists what we say
74:27
to watch out remember whenever a
74:31
profession has a special code of ethics
74:32
usually this is just one code of ethics
74:34
for people going in or whatever and then
74:37
we have a profession a special epic like
74:39
photographers ethics watch out with
74:41
monopoly little work leasing in the
74:43
public is important though several
74:45
medical ethics reported this is a
74:47
medical ethics of an example but somehow
74:50
unaesthetic are immoral advertise what
74:53
this means is unaesthetic or immoral
74:54
compete will be whether your follow
74:56
doctors take business away from them cut
74:58
prices and so forth it’s not immoral
75:02
advertise look Cross Blue Cross an
75:04
advertiser full-page ad in a times all
75:06
over the place and medical profession
75:07
love is it why because this increases
75:09
the man / for all doctors whereas if
75:13
when each position with the physicians
75:14
advertisers is a cutting of the man of
75:17
others this is nasty and competitive you
75:18
don’t want the only one competition that
75:20
will cut prices and benefit the
75:21
consumers the my game getting back to
75:29
the flexion report and we’re why flexion
75:31
I got all this power you know he was on
75:33
a physician a medical educator or a
75:35
scientist and why he’s able to put a
75:38
medical school going to cut me out of
75:40
business his betters after Simon flex
75:42
their head up
75:43
for instance of the medical research say
75:47
he was sponsored research responsered by
75:49
Carnegie Rockefeller Foundation the
75:53
laconia rod Rockefeller Institute has
75:56
certain bias technological scientific
75:59
ideology will bias and in physical
76:03
medical therapy I don’t want to get a
76:05
medical therapy area and I want to start
76:07
defending one therapy against another I
76:08
do want to say that is it certain innate
76:13
bias of the rocket or incentive for drug
76:16
synthetic drug therapy because they have
76:20
a lot of positive local researchers
76:22
constantly sponsoring since that I drugs
76:23
new you synthetic drugs on the market
76:26
okay fair enough however there was a
76:30
1910 before reflection report to
76:32
competing kinds of medical care beat you
76:35
were illegally respectable on mine and
76:36
now obviously which is now Canseco
76:39
medicine and homeopathy which was pretty
76:43
different kind of doctrine which said
76:45
instead of getting synthetic drugs you
76:46
should give teeny those very very key
76:49
need as natural herbs that of the
76:52
economic point here is the synthetic
76:54
drugs r extremely expensive as we all
76:55
know and also a beautiful feel for
76:58
profit and manufacturer natural herbs
77:01
are very very cheap especially with
77:03
small doses and extremely inexpensive
77:06
and not much more for profit anywhere
77:08
the medical schools will put out of
77:13
business by the flexion report or mostly
77:15
out homeopathic schools we have a point
77:19
hours and almost impossible to find a
77:20
home the Opera this on purpose only
77:23
after this under the age of 75 where
77:25
ain’t no medical school to homeopathy so
77:28
you want to find a homeopathic
77:29
practitioner it looked high and low
77:32
inning leads often half dead but we have
77:36
prevented from enjoying a possible
77:38
benefits of homeopathy by the somebody
77:39
savage should say a putt Surrey
77:42
outlawing of homeopathic method only if
77:44
half a medicine also of course we’ve
77:49
seen the medical profession turn against
77:50
other feeding therapy by acupuncture
77:52
find out more of that so forth
77:56
the punch line here again as of the
77:58
Rockefeller family is heavily invested
78:01
in synthetic drug products for the drug
78:05
companies and Mike I might not be a
78:07
connection there between the fact of the
78:12
Rockefeller Foundation sponsoring our
78:14
phone Institute sponsors research which
78:17
puts the repeating a la pequeña pass
78:20
out of business and then then pushes a
78:23
la pelea feel fairly well so I’m saying
78:26
is that the consumers are not either
78:27
privately of the chief chief herb
78:29
specialist the other part he’s also to
78:32
find a competing salary which may or may
78:33
not be workable because of Lee the pool
78:37
power given the AMA a lotta the– we’re
78:40
totally deprived of the universe number
78:42
of other competing possibilities which
78:44
could be could be there in which free
78:47
market might pop up in the free market
78:48
which outlawed out of existence the
78:51
caballo has been outlawed there’s they
78:53
commerce oxy furby for cancer is I think
78:57
I’m like a cell phone and so on you mean
79:00
you can play the old go home life was
79:03
spent his last years in jail because of
79:06
the layout why we’re going fella p which
79:08
is which is a Food and Drug
79:10
Administration accused of being
79:11
fraudulent it might be my works my 12 an
79:16
incorrect it certainly seems to be a
79:18
consumer thought I’d like to try it
79:19
anything right the pool right was jailed
79:22
because he had he insist on renting has
79:24
all going boxes out for therapy me at
79:27
the a say they don’t work on that for
79:29
John that for you your gearbox
79:30
enterprising far away this is methods by
79:35
which Allah rocks what are some
79:37
restricts the supply a profession
79:38
increases of the mayor of Fort restricts
79:41
competition within especially
79:42
hospital-based areas and outlaws any
79:46
sort of competing approaches whereby we
79:53
see what we see not only how to find the
79:55
man is influenced by government actually
79:57
also see how you have to see what the
79:59
problem monopoly really is we’ll get
80:00
back to that later on
80:02
how monopoly government’s always
80:04
government getting in there restricting
80:05
supply and pushing prices up

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