Introduction to Microeconomics – 1 of 14 – Demand and Supply – Murray N Rothbard

INTRODUCTION TO MICROECONOMICS
Presented by Murray N. Rothbard in 1986 at New York Polytechnic University. Recorded by Hans-Hermann Hoppe.

1. Intro to Micro: Demand and Supply

Micro means dealing with the individual action. Macro deals with larger pictures of business cycles. Macro is screwed up. Micro is in pretty good shape. Study it first. Every individual has goals they wish to achieve.You use means to achieve goals. Economic theory is based on this deductive fact that the individual wants to arrive at goals – the means-ends objective.

Part 1 of 14. Presented in 1986 at New York Polytechnic University.

This lecture as a Podcast: http://enemyofthestate.podomatic.com/

Sourced from: https://mises.org/library/introduction-microeconomics

Source: Introduction to Microeconomics – 1 of 14 – Demand and Supply – Murray N Rothbard – YouTube

http://www.readrothbard.com/introduction-to-microeconomics-1-of-14-demand-and-supply-murray-n-rothbard

TRANSCRIPT

00:00
reasons core microts is this typically
00:03
an attempt by economics 28 the physical
00:06
sciences to follow the procedure physics
00:10
where the term micro means something a
00:12
really completely different than a means
00:13
here I mean why micro means and
00:15
economics is dealing with the individual
00:17
with the individual level individual
00:19
action the market prices quiet please
00:24
dealing with the man supply production
00:29
the oil the oil price thing which is
00:32
happening somewhere it’s only these
00:33
things are part of micro like you and
00:38
macro which is the other basic course
00:40
deals with a larger picture sort of like
00:43
inflation unemployment business cycles
00:45
that’s where everybody forecast what
00:47
kind of us forecast every you know we’ve
00:48
got always get it wrong or guys always
00:50
way off the beam that’s macro micro is
00:53
in pretty good shape i think it’s
00:54
basically a sort of a consensus about
00:58
micro macro is pretty screwed up and for
01:03
good reasons any rate this is the we’re
01:06
dealing now much the sort of the basic
01:09
economics the macro is is even good
01:12
macro is essentially based on micro so
01:15
it’s best to take micro 1st battalion
01:18
both courses you can take both make it
01:20
either sequence I think it’s a better
01:22
better to start with this ah alright we
01:26
deal in economics with we don’t the only
01:28
with numbers and graphs that’s only as
01:31
usually happens with an economics the
01:35
graphs came in and the numbers came in
01:37
and whatever simplified it was a simple
01:40
basis of love the theory and what
01:43
usually what usually happens is the
01:45
everybody got enchanted with a graph
01:46
they thought of the graphic him and then
01:48
end of themselves an economist began to
01:51
lose sight of the actual of actual
01:52
people what’s going on in the world so
01:54
that’s a that’s been a danger and the
01:57
higher stratospheric reaches of economic
01:59
theory any rate where we’re dealing with
02:02
economics really deals with an
02:03
individual and starts with a very simple
02:06
fact simple basic fact namely everybody
02:08
every individual has goals which they’re
02:10
trying to achieve he or she
02:12
trying to achieve the goal can be a very
02:13
simple log eating a ham sandwich in one
02:17
hour simple short run go can be much
02:20
longer ago graduating from poly of
02:23
getting a job and I prefer engineering
02:24
or whatever the whole structure of goals
02:27
and in order to achieve these goals you
02:30
have to employ resources of some sort
02:33
have to do something in other words by
02:36
having goals of the sort you’re assuming
02:38
of people can achieve them at least can
02:41
take measures to take steps to buy a ham
02:44
sandwich other find a newspaper to buy a
02:46
hi-fi set or whatever order to graduate
02:49
from poly these things are at least
02:52
presumably accomplished a ball so in
02:56
other words everybody has an objective
02:57
have different has different objectives
02:59
in mind and has an idea of how to arrive
03:01
at how to go about it and that’s just
03:04
basically the source of economic theory
03:07
you know my theory is a deductive system
03:09
built on this and this basic fact when
03:12
he come let’s call action other words
03:14
the fact that people act in the world to
03:18
accomplish something let’s say the
03:19
accomplishment gonna be very short run
03:20
can be really simple can be eating the
03:23
sandwich or can be very complex a whole
03:25
series of things it doesn’t matter the
03:27
point of view economics it doesn’t
03:28
matter what the goals are left up to
03:31
some other discipline to worry about
03:32
what we deal with is that the fact that
03:34
people employ resources of different
03:37
sorts to live at goals okay this is an
03:40
action that you have goals and you’ve
03:44
got resources the try to achieve them
03:49
this is also called a means ends
03:52
relationship you have an end or an
03:53
objective and you employ a mean the
03:56
different means are trying to achieve it
04:02
okay what are some of the resources well
04:05
first place we kind of like to deal with
04:08
those Crusoe economics Robinson Crusoe
04:11
familiar with us the tale of ultimate of
04:16
the movies where a guy ship-wrecking
04:18
wind up on island somewhere in South
04:20
Pacific and he’s got no resources of
04:22
himself and he’s trying to first he has
04:24
different goals is that she wanted got a
04:25
key
04:26
alive he could be the basic before you
04:28
accomplish anything else so the case of
04:31
Crusoe reason why we like to use as a
04:33
stark situation where we can isolate one
04:35
person you take one person these are
04:39
being nature bringing other people later
04:41
on what’s up that’s how you sort of
04:43
dealing economic should take one simple
04:46
situation and you add on a more complex
04:48
situation if you analyze it so if you
04:50
have crew so they’ve got different goals
04:54
or objectives food and it looks around
04:59
fast to find out what the sort of the
05:01
food or shelter and clothing or whatever
05:06
so that’s this is yes some of those
05:09
priorities enlist them a certain rank
05:11
and get to that little later on uh what
05:14
it was me what are the resources that he
05:15
had like looks around of inventory we go
05:17
firstly got himself he’s got his own
05:19
leave energy own personal energy so
05:28
resources energy and he’s got his own
05:37
technological knowledge he resumed he
05:39
doesn’t have amnesia he knows how to
05:41
fish or you know chop down trees or bill
05:44
a bow and arrow or something like that
05:45
technology is low tech high tech doesn’t
05:48
make it on desert island or kusa iowa
05:50
knowledge about fortunately of knowledge
05:52
about how to construct a computer or
05:54
something how to use it not gonna do
05:55
much good but low-tech of tech never
05:58
left lower well even if it’s road pack
06:00
it’s an important text for him namely
06:02
how to fish and how to hunt and it sort
06:04
of stuff so how do i construct a log
06:06
cabin so all right these got
06:09
technological ideas our recipes can be
06:15
called technological knowledge knowledge
06:20
ah and it’s also got different natural
06:24
resources he’s got looks around class
06:25
let’s say this tree EES or as fish in
06:28
the stream or whatever looks around find
06:31
out the national resources are and
06:32
that’s what he starts off with dr. off
06:33
with technological ideas own personal
06:35
energy and natural resources
06:39
this is basically what we have in the
06:41
world in general the world starts off
06:43
you look at the caveman caveman start
06:46
over just a person some kind of ideas of
06:48
what to do and then resources that
06:50
person’s resources economics really
06:55
begins of discipline early 19th century
06:58
or late 18th century anyone Britain and
07:01
for the language we’re sort of stuck
07:03
with a little language a lot of language
07:05
of the concepts we’re still stuck with
07:08
even though they’re kind of the words
07:10
are a little different now we have to
07:11
adjust to that you can’t change the word
07:13
just have to explain why it’s a little
07:15
different the same certainly here
07:17
personal energy used to be cold labor so
07:20
this is cold labor labor energy and
07:24
nowadays when we think of labor oh you
07:25
think I’m appalled at area type since
07:27
marks Marxism can’t really think of
07:28
labor somebody was working a steel mill
07:31
or something like that and this this
07:33
concept of labor means anybody who works
07:35
in production we I’m in the five
07:36
reduction means doing something in the
07:38
world of transform it what the consumer
07:41
goods will get for that later so
07:43
everybody is a labor and that’s anybody
07:45
who works in production labor in the sex
07:46
the president of General Motors is labor
07:48
just as a guy works on assembling line
07:51
that’s who isn’t a labor about people
07:53
who are cooking coupon it doesn’t mean
07:54
they’re not important is there not
07:56
laborers people stockholders per se or
07:59
bond holders are not engaging in
08:01
personal labor in the plant so or in
08:05
production those is less labor labor and
08:08
purse which really means here personal
08:09
energy ah natural resources since the
08:16
18th century agricultural Britain is
08:20
cool and famous land and labour so we
08:25
use a royal Atlantic so we use what
08:26
we’re stuck with the world language
08:27
stuff with the world labor but again it
08:28
doesn’t quite mean what we think of a
08:30
common sense terms now land and
08:32
economics means brown land means Natural
08:35
Resources me but doesn’t mean other
08:36
words this building here we think of
08:38
when we think of the billing Brooklyn
08:40
Polly isn’t probably shooting it
08:41
probably Tecna university right now
08:43
notice that like name changes we don’t
08:46
we think of it I hear we think of as the
08:48
building here we don’t but lantus is
08:50
considering economic only the ground on
08:52
underneath in other words natural nature
08:54
of made and not man-made sole and also
08:58
includes fish whose natural resources on
09:00
the water includes water see when they
09:03
were making out the economic 19th
09:04
century water was not considered a
09:06
scarce resource just super consider
09:08
superabundant I have plenty of plenty of
09:10
wet honey wet agriculture so nowadays we
09:14
you know better water is scarce so what
09:17
are the sched REITs are Fisher scarce
09:19
resource also other things like TV
09:22
channels frequency things like that are
09:24
also land and that’s set that was the
09:26
natural resources space is land ocean
09:31
the ocean has lots of resources in the
09:33
ocean which haven’t been tapped yet ACK
09:35
on metal shop there’s minimal zone in
09:39
the in the bottom of the sea and things
09:40
like that it’s all a land on a quote
09:42
unquote other words Natural Resources
09:45
soul and means Natural Resources labor
09:48
means personal energy ok what else is
09:51
there what else is everything else
09:53
everything else in other words people
09:54
man take natural resources and transform
09:58
them in order to get to what the
10:00
consumer goods so you can use it in
10:02
other words who sighs got to eat you’re
10:04
going to take the resources you gotta
10:06
shoot them shoot the deer or catch the
10:08
fish and eat it so we’ve got you’ve got
10:11
to do various things to get the consumer
10:12
goods the objective of doing working
10:16
hard to do this as a wine up a consumer
10:18
good lineup with food shelter clothing
10:20
high five sets or whatever or buying our
10:23
music coming out of the stereo these
10:25
things are consumer goods this is what I
10:28
use as an end of themselves so the
10:30
objective of action is all about so the
10:34
tumor guys are coming off the assembly
10:35
line so to speak everything else which
10:39
is not labor or natural resources called
10:42
capital a capital goods that’s a little
10:48
bit Miller but this is almost catalysis
10:52
of everything used in production which
10:55
is not land or late
10:56
that means could be the net fishing and
10:59
nephews for fishing pole due to fish bo
11:02
an hour at a hunt every anything like
11:05
that anything right now it can be can be
11:06
roads trucks tires on the truck and all
11:12
these things are factories of course
11:14
goods and process all these things are
11:17
part of capital until you get to the
11:18
consumer for example if you just ate a
11:23
ham sandwich and Michelangelo take that
11:25
on my favorite examples that was the end
11:30
process of millions of people engaged in
11:33
production was it by what is production
11:35
production is the transformation the use
11:39
of labor working on natural resources
11:42
that transform into capital different
11:44
types of chemicals finally you wind up
11:46
with consumer goods the production is
11:49
don’t with this whole process of
11:51
starting a land and labour and winding
11:53
up a consumer goods different degrees of
11:55
capital different stages so for example
11:59
take a ham sandwich I’m like a rental if
12:01
you have an enormous amount of
12:02
cooperating factors in there factors of
12:06
production gun okay it’s a whole
12:14
production tree structure production
12:17
starting with a farmer and Monte mineral
12:21
might minor and so forth going for about
12:23
30 years at least you get the hang of
12:25
sandwich ham sandwich okay what do you
12:27
got you got different ingredients going
12:29
into it to produce the hands now just
12:31
sell it to the consumer you got to have
12:33
a ham of course you have to have the
12:35
bread the hero whatever you have to have
12:39
forgot cheese or I have that cheese
12:42
butter and yeah tomato right les okay at
12:51
least things got to be brought together
12:52
on the retail level and you have to have
12:54
workers doing you have to have the
12:55
workers and eight brings encounters okay
13:00
counters ya gotta have kind of a
13:03
refrigerated units and lots of stuff and
13:05
chairs somebody’s gotta produce the
13:08
chairs and sit on it so at least I
13:11
these are all these things have to be
13:15
produced they all have to be combined to
13:17
get to the 11 ham sandwich have to be
13:18
free for many years you got somebody
13:20
working at the ham goes back see that
13:26
goes to a so buy wholesale are probably
13:28
on the Brooklyn ham division or over the
13:31
Brooklyn or more ham you know where they
13:33
get it from a job or it’s like eastern
13:35
seaboard they get it for Chicago you got
13:37
the meat packer a meatpacker gets it
13:39
from the meat pack up the package the
13:42
meetings as a slaughter houses go ahead
13:44
get something a farmer raises the pigs
13:47
FF stockyard you have trucks in every
13:49
step of the way and gasoline for the
13:50
trucks and tires and stuff going on
13:52
metal and all sorts of stopping me on
13:54
and on I was only for the ham okay it
13:57
has a the hands of pigs have to eat when
13:59
I grow an easy porn equality grown and
14:02
on and on on the machinery every step of
14:05
the way and this is and all of the
14:07
searches from one unit this takes 30
14:09
years involved millions of people for
14:10
one lousy ham sandwich that’s incredible
14:12
and every country in the world probably
14:15
is involved in this people growing ebony
14:17
for pencils and Africa and so forth so
14:20
on because then they have that paper a
14:21
knife that petrol to record all this
14:23
stuff and figure out what’s going on
14:24
always oh Lisa every step of the way
14:26
have that land needs to grow on you have
14:29
to have different kinds of capital and I
14:32
have to have labor and all these things
14:34
are involved this each step of the way
14:37
each unit somebody’s got to put it all
14:39
together nature’s take things that works
14:41
at every step of the way one of the
14:43
amazing things about the market a free
14:44
market economy is it all works you don’t
14:47
have to have comedian a ham sandwich
14:49
right today you don’t have to have some
14:51
world planning board aight guys and the
14:54
plan works sitting around 30 years ago i
14:57
said i’d seen on january twenty what is
15:00
it 26 today 28th january 28 1986 we got
15:04
you have to get Ross what about ham
15:06
sandwich there for you guys go raise the
15:07
pigs you over there go raise the corn
15:09
and so forth get raw fired hams now
15:11
nobody does that there’s a world
15:12
planning board kind of figure this out
15:14
if there were we will be in big trouble
15:16
and yet it all works at every step of
15:19
the way all these things happen
15:20
every step of the way with no shortages
15:22
and those surpluses everything fits
15:24
together like a latticework structure
15:26
the market economy like a lattice work
15:28
like a spiderweb when we look at
15:30
something that so that the rocket or a
15:32
metaphor like Atlantis work like a lace
15:34
singer or fit then how come an old Fitz
15:37
and what there’s no magic there’s no
15:39
Planning Board the cathedral and the
15:40
market itself does it and really what
15:43
micro economics is the study how the
15:44
thing works and what happens when the
15:46
government’s intervenes in the process
15:47
and screws everything up basically what
15:50
Michael you can always roll back ah
15:53
excuse me okay the big the big factor
15:56
here which is true Bothan crew selling
15:58
for us the big factor is this we
16:02
contrast the world whether we’re told
16:04
about the KT manner we saw her right now
16:06
for the guard when I call a Garden of
16:08
Eden model some people believe some of
16:12
us believe mankind used to be in the
16:14
Garden of Eden was then kicked out for
16:15
various transgressions whether it’s true
16:18
or not it’s interesting model look at
16:19
the Garden of Eden everybody gets
16:21
unlimited satisfies his or her wants an
16:23
unlimited fashion no work no nothing you
16:27
snap your fingers and Pepsi quickly now
16:29
your throat nobody has to work out a
16:32
ways to produce it why is that cause
16:33
there’s no scarcity there’s no not no
16:35
scarcely if there’s no scarcely don’t
16:37
need private property only laboring out
16:38
the work that’s it unfortunately we were
16:42
kicked out of the Garden of the user
16:43
they’ve ever existed and so in the world
16:45
as it exists human history is tremendous
16:49
stare so you don’t have unlimited
16:49
abundance of all factors of production
16:51
world goods the Garden of Eden while is
16:54
unlimited abundance of all desired for
16:56
good something want to hear a symphony
16:57
they snap their fingers and get it right
16:58
right there and we haven’t got down have
17:01
got somebody working to produce it and
17:02
so we have the ever-present pack of
17:05
scarcity Dara Singh meaning seriously
17:08
resources relative to a goal that we
17:12
haven’t got the final accomplished
17:14
seriously resources seriously when we
17:16
will see in a minute what the resources
17:17
are obviously the scarce of land labor
17:19
and capital once it’s all of scarce
17:21
scarce in the sense that we would like
17:23
to have more of if we had more we can
17:25
produce more consume more higher
17:26
standards of living we had no scarcity
17:30
of everything is super abundant and we’d
17:32
have to run up to
17:33
we have to worry about i think you have
17:34
pepsi trickling out throat just like
17:36
that or whatever equivalent okay so up
17:41
what happens is the caveman has
17:44
everything is extremely scarce they’re
17:46
in bad shape krusell with a bad shape
17:48
everything is very skills gonna die
17:49
tomorrow he doesn’t get food immediately
17:51
we are in better shape we have less
17:52
scarcely and we have the human races a
17:55
progress of the human race the progress
17:56
of civilization is essentially the
17:58
alleviating of scarcity sissy is still
18:01
layer just a lot less of it well that’s
18:03
further from the brink and crew so
18:05
where’s or the caveman was a lot more
18:09
fat so to speak for a higher living
18:11
standard process of the progress of
18:13
human race essentially the the
18:16
progressive the minutia nor alleviation
18:19
of scarcity seriously stole Eva’s it
18:21
alot loss of it now a bath and
18:23
intellectual life in lecture world
18:26
there’s sort of fashions 11 you know one
18:29
of the few good things about me and my
18:30
advanced days I’ve seen them all off you
18:32
know all the fashions come and go every
18:33
five years some new nut comes on the
18:36
news theory everybody adopts it for
18:38
about five years and forgets it five
18:39
years later one nutty theory that came
18:42
in about nineteen seventy but there’s no
18:45
more scarcity economics microeconomics
18:47
might have been correct the old days uh
18:49
no scarcity alamos scarcely it’s called
18:52
we live lately set in a post-scarcity
18:53
world I’m scarcity world ah what does
19:02
that mean Walter steak / I know a lot of
19:03
names but I really would means we’re
19:06
back in a garden to be nobody if the
19:07
work of a to produce no not obviously
19:10
we’re not in that situation I remember I
19:12
had a debate with some turkey I think I
19:17
think the American University in
19:18
Washington Royce’s odd place any wife
19:21
and I was on the question about do we
19:23
live in a post-scarcity world he was
19:25
maintaining we live whoever posted a
19:27
world a for weed off the work and
19:28
therefore I don’t know what was
19:30
therefore wasn’t all very murky and my
19:32
question was if that were really true a
19:35
professor someone selling up he said
19:37
even his his conclusion we should ever
19:38
have socialism I’m not sure why that was
19:40
the conclusion presumably is no scarcity
19:43
you can have any one deuces are wild so
19:46
I said well
19:46
if it’s true the professor soma though
19:49
is right we live in a post-scarcity
19:51
world why does he wasn’t me tear up his
19:52
paycheck why do they least pair up his
19:55
razors and he gets every year and when
19:58
his answer was under the answer but
20:00
that’s because I too have been sucked
20:01
into the capital of ethos and so I was
20:04
interesting everything in her prime in
20:07
other words he said also saying is
20:08
emitting the riskier something he’s
20:10
trying to alleviate as much as everybody
20:11
else so at any rate that has been
20:15
forgotten her that for a long time but
20:17
Posca as a matter of fact the next
20:19
fashion that came in slightly after that
20:21
I think by seven 1975 oh my god is
20:24
scarce we’re gonna run out of resources
20:26
that was as I was that was a big gimmick
20:28
for about five years the mighty 75 1980
20:31
the same jerks who are claiming we live
20:32
in a post-scarcity world and therefore
20:34
we should have socialized I don’t know
20:35
how therefore comes in I can never
20:37
figure that out meaning right announced
20:39
then set from 75 80 we live oil
20:42
resources are running out oil is going
20:43
to run out energy is going to run out
20:45
follow us are going around therefore we
20:47
shop socialism why that that’s also the
20:49
conclusion is always the same and is
20:50
that there’s never any connection but
20:53
any rate they have to run around
20:57
refuting that and it turned out by 1980
20:59
they shut up after that because there’s
21:01
plenty of resources I mean there is
21:03
scarcity like there always has been
21:04
diverse as funny resource nothing ran
21:06
out we’ll get into the oil caper by the
21:08
way shortly are fairly shortly we go
21:11
into the whole energy crisis the alleged
21:12
energy crisis and all the rest of it is
21:14
interesting example of us the stuff in
21:16
action any rate that’s the so we have an
21:21
ever-present sketch of resources people
21:23
left therefore have to allocate their
21:24
resources to the highest values that
21:27
their highest values and try to and try
21:29
to make sure that they don’t waste them
21:30
the sense that they make sure they don’t
21:32
spend their time or their energy or
21:33
whatever and stuff that would read
21:35
figure they really should spend on
21:37
something else so this sort of these
21:39
resources by the way also include prime
21:41
time is a resource of scarce and you
21:45
will know what are you gonna do tonight
21:49
what do you do for the a block of ours
21:51
from say an eco 11 or something you do
21:53
it goes up you have all sorts of choices
21:54
every person has a concrete choice again
21:56
you can go to a whole bunch of movie use
21:58
possible not all at once
22:00
one of them are you see people you know
22:01
homework about you know each of you
22:04
could probably get a list right now
22:05
seven or eight things you can do tonight
22:07
how do you decide what to do I get a
22:09
sign and Great Basin your own personal
22:10
values which you think is most important
22:12
or whatever which he things more fun
22:14
whatever it is it’s either side one way
22:15
or the other doesn’t have to be a
22:16
excruciating it says you have to spend
22:19
10 hours on it you do it like a snap
22:21
judgment economist again don’t care
22:23
about how long it takes to make a
22:24
decision it’s not our bag that’s a
22:25
psychologist or whatever but we’re
22:27
interested in the fact everybody’s got
22:29
scarce resources everybody’s got goals
22:31
are trying to achieve scarce time scarce
22:32
money scarce labor scares capital
22:35
whatever and they trying to allocate as
22:37
best they can a heifer that’s possible
22:39
advantage if you go to a you go to your
22:42
pick a movie a certain movie movie X you
22:45
go to that it turns out I was a bummer
22:48
then you’ve wasted picked them and I’ve
22:50
wasted time and money waster the money
22:52
going to it your wasn’t wasted time he
22:53
could’ve go on to something else you
22:54
could have done something else so you’re
22:56
looking back you figured if you took a
22:58
loss a psychic loss on the other half
23:01
was good movie figures a psychic game
23:03
benefited from this it was good stuff so
23:06
once it’s a you’re looking at everybody
23:08
looks at a prospectively trying to do
23:09
the best he can and she can looking back
23:11
he said well gee I was good or the bad
23:13
action a good action I was through
23:16
cross-layer was a loser and you figure
23:19
out the next time you won’t go to this
23:20
corrector the movie with this director
23:21
on a movie this particular accurate I
23:23
can often same actor usually appears
23:26
that same kind of movies so do you learn
23:28
from experience hopefully and you go to
23:31
do better next time we still early
23:33
demise okay thanks enough for today the
23:36
Miller and you’ll get the syllabus and I
23:40
hope you’ll get a bigger room out of
23:41
this thing no I don’t know the talking
23:47
about crew son also about life in
23:49
general I’m shifting back and forth
23:51
between them we have we have personal
23:56
energy
24:03
which is cool labor you’ve got natural
24:09
resources cool and and everything else
24:18
is our core capital goods everything
24:20
else which transforms where labor works
24:23
on Android versus transport forms are
24:25
finally getting the consumer goods so
24:27
this is couple of the family these are
24:35
the famous the famous triad of labor
24:38
land and capital the economy develops
24:43
and progresses more more capital as
24:45
build up of crew so you have always got
24:47
us a bow and arrow or something we’ve
24:49
got a Norma’s amount of capital
24:51
equipment factories raw material mines
24:54
road tires everything else designed to
24:57
take natural resources transform them
24:59
move them over at vast spaces and
25:02
finally get to the consumers and so on
25:05
consumer goods so that’s the let’s see
25:09
how the whole economy is oriented
25:11
another thing about human action in
25:14
general about Crusoe and about life in
25:18
general is that takes time everything
25:20
takes time something take less time
25:21
others think others take more time and
25:25
so and everybody prefers having stuff
25:28
now than waiting for it so anybody has a
25:31
choice of the size and price change the
25:34
few prices remain this about the same
25:36
you’ve got a million dollars somebody
25:38
saw i’ll give you either give you a
25:39
million dollars an hour or 10 years from
25:41
now what you’re going to pick obviously
25:42
you’ll pick now so this is called time
25:45
preference people prefer getting stuff
25:48
achieving their goals earlier than later
25:52
this can flip conflicts sort of South
25:55
has to be balanced against the front
25:56
people prefer getting stuff now than
25:58
later but the more then save and invest
26:00
the more stuff higher than standard
26:02
living will be in the futures they have
26:04
to choose you eating consuming now and
26:07
or saving up now consuming more later
26:10
those are the basic will get the lat
26:13
more later
26:13
on anyway these are the things take time
26:15
and alter the time preference action
26:19
takes time and also action is risky with
26:22
uncertainly the world and function of
26:25
the enterpreneur is to meet down
26:28
certainly there the risk of uncertainty
26:30
so Chris entrepreneur says he’s he’s
26:33
trying to see hopes he can catch fish
26:35
sure he hopes he can build a cabin like
26:36
like that entrepreneurs right now our
26:38
people everybody’s entrepreneur super
26:40
fuel to become a mechanical engineer you
26:42
hope or expect as you have been able to
26:44
get a good job in it stuff like that the
26:46
other hand other more entrepreneurial of
26:48
a capitalist to invest a lot of money in
26:50
this and certain processes it hope
26:51
they’ll make money out of it so these
26:53
this is collector / nourishing there’s
26:56
no good at English word for it the
26:57
French word is have been incorporating
26:59
English language Adam Smith use the word
27:01
Undertaker that didn’t didn’t fly on
27:03
these for obvious reasons so
27:05
intrapreneur is it which essentially
27:10
means the risk-taking capitalists or the
27:12
person who invest capital and some
27:14
enterprise it hopes to make any hopes to
27:16
make profits and not suffer losses will
27:18
get to them later on to right now is
27:20
sort of surveying the basic situation in
27:22
the economy everybody who’s selling us
27:27
have goals which we want to meet and
27:30
which we prioritize the thermal ward
27:32
anyone we’ve put in terms of priorities
27:35
and we list them in ranked order I
27:38
mentioned just before the in the last
27:39
hour that you have to choose what to do
27:41
for three hours tonight I’ll say you can
27:43
choose between four or five or eight
27:44
different choices and you pick what your
27:46
best choice your most valuable to our
27:48
what you think is gonna be best you go
27:50
to movie a you visit people whatever so
27:54
everybody’s got to rank preferences of
27:57
choices say movie a party party and
28:04
movie be whatever everybody’s got
28:07
different rankings and different choice
28:09
is obviously okay so homework right
28:15
usually low on a rank most people some
28:18
people of course or
28:20
Sports is called biology and white
28:24
homework ok so anyway there’s only
28:26
different visiting people or whatever ok
28:29
so this is something you picked what
28:30
your highest value and you helped us
28:32
will be coke could be improved to be
28:33
correct so this is this is cool I call a
28:39
value scale but it now has has been
28:42
given the name and economics and utility
28:43
and it’s a little unfortunate again
28:45
because utility often means useful i’m
28:49
such a objectively useful so an
28:51
economics has mean subject purely
28:52
subjective evaluation it could be useful
28:55
or couldn’t or not if people think that
28:58
is that’s the goal we care about us and
29:00
economics in other words a lot of
29:04
left-wing intellectuals hate cosmetics
29:05
they think it’s evil thing for a lot of
29:08
women that use cosmetic well most women
29:09
don’t agree with it so they like
29:11
cosmetics and their value scale
29:13
cosmetics ranked pretty high okay so
29:15
this is so this is a purely subjective
29:18
it’s the Preferences evaluations of each
29:21
individual and this is the utility scale
29:26
which is a rank order now the thing
29:28
about utility scales is that it’s their
29:31
ordinal your ranking unfortunately my
29:34
first big disagreement with the text
29:37
every textbook that I know of textbooks
29:40
will give lip service with us I say yes
29:42
it’s ordinal all of a sudden I start
29:43
talking my you goals this margin as
29:46
Google’s this is three you go left to
29:48
you ghouls you don’t being a unit of
29:50
utility okay and they add it up and I
29:53
multiply it there’s no util those are
29:55
saying that you go who’s ever seen a you
29:57
go absurd if you want to choose between
30:00
your movie a and movie be you know say
30:02
to yourself let’s see I value this at
30:04
eight utils right so forget it forget
30:08
you go my first injunction it’s a purely
30:12
ordinal ranking order the mathematics of
30:15
a call lexicographic in other words it’s
30:17
like instead of saying we could say we
30:20
rank it one two three four but it should
30:22
be ranked as lexicographically on the
30:24
with a b c d see the use of the number
30:28
sucks economic of the thing aging do
30:31
something we can add
30:32
subtract views a and B and C nobody
30:35
would say see it twice V okay so this is
30:38
the anyway this is on four it’s one of
30:40
these the sociological phenomenon here
30:42
between million list so the no such
30:45
thing is you strictly ordinal it’s
30:46
strictly ranking and rank order ok but
30:50
so this is uh now get to first important
30:55
law of economics all of us all the laws
30:58
of economics say one thing in a
30:59
qualitative or not quantitative see one
31:01
of the problems with the economist is a
31:02
trying they take a qualitative science
31:04
which is really what this is I’m trying
31:06
to convert it to be quantitative seeking
31:08
they can predict precisely what’s going
31:09
to happen I can’t do that the
31:10
predictions are always wrong they make
31:12
quantitative predictions they always
31:13
pull up what they do is they keep
31:15
flopping they keep saying well we have
31:17
to change the model we didn’t missed out
31:19
on XYZ and they change it as a stove lot
31:22
this has been going on for 20 years some
31:25
economist we’re going to realize also
31:26
customers of economist people who buy
31:28
forecasts corporations or more beginning
31:31
to realize the things this whole thing
31:32
is a scam a beginning in real and I
31:35
think that’s something up here anyway
31:37
one of the reasons why they haven’t the
31:39
customers of economic forecasters
31:41
haven’t turned on them before this is
31:44
again the important economic lesson here
31:46
because of the tax write-off these will
31:48
you consider the legitimate expense to
31:50
hire economist everybody hives economic
31:51
will tell you what the unemployment
31:53
rates going to be next year and if it’s
31:55
if it’s a lousy unemployment rate so
31:56
what you’ve hired a top economist
31:57
everybody else missed the forecast and
32:00
your expenses can be written off the
32:02
legitimate tax write-offs one sort or
32:04
another hey right so even if I they’re
32:07
catching on in the case so we have a
32:10
qualitative disappoint we can think
32:12
there are laws about tenancy and
32:14
direction not about quantitative you can
32:17
the only hunches about corner pet okay
32:19
so we have let’s get back the crew so we
32:21
have you have a gonna take make a couple
32:27
of simplifying assumptions here he’s got
32:29
a bunch of logs chopped down a bunch of
32:31
log me hazard and we’re going to assume
32:34
that one law or one set of logs can be
32:38
used for each of three or four different
32:40
uses which they can adjust we’re going
32:42
to assume it’s about the same amount
32:44
so you can take these log and say okay
32:47
what’s my first priority that he’s got
32:50
an ordinal value scale or no utility
32:52
scale both top priority is true for the
32:55
night the cook to make the logs for a
32:57
fire the cook tonight me and you have a
33:00
question or a point fire for tonight
33:06
he’s me top priority I think in the case
33:09
of crew saw we have been come the much
33:11
more agreement that we would have which
33:12
movie to go through he then the basics
33:14
here down a survival ok so it’s fireman
33:18
tonight the first prior exsec in
33:20
priority might be far more and I can
33:23
keep it for tomorrow I see you this is
33:25
that that oh why not you’ve got a chair
33:34
with you bring your own chair I can’t
33:36
cancel only one number of people with
33:38
more than number of chairs okay third
33:41
priority on say is uh building up not
33:46
while building a shelter okay I’m only
33:48
filling a cabin really an expansion in
33:50
Cabin whatever okay I’m a billion
33:53
extension knows fourth priority might be
33:57
setting a perimeter of logs around Lee
33:59
around a little camp that won’t come in
34:01
or whatever so have a premier and first
34:06
priority is building a brutal walk down
34:09
to the beach with the hell they’re
34:10
obviously a real luxury items todo na
34:13
toh won’t be full of sand I know if you
34:16
saw those of the crew so tight picture
34:18
for Swiss Family Robinson family
34:20
robinson about 40 years ago they had
34:22
this thing to start off with nothing
34:23
after two years then I got a whole they
34:25
got boardwalks thing kind of how much is
34:28
rocking cap oh yeah right boardwalk okay
34:34
i’m not sure they’ve got lessee art yet
34:36
anyway that’s alright so now it has
34:40
these laws assume each one log on one
34:42
set of locks and perform each of the
34:43
different functions the point is if he
34:47
has a supply supply by the way is the
34:51
fine as amount of anna nu
34:57
okay of a homogeneous good meaning that
35:02
each each unit is the same as any other
35:05
of the unit so what you’re dealing it
35:09
was the same lauder the same horse or
35:10
thinking of four more like michael
35:12
purposes they’re interchangeable so
35:16
you’re not dealing with two totally
35:17
different types of wood or something
35:18
like that so supplies any units of a
35:22
homogeneous good if he’s got one long
35:25
I’ve always got or one unit he will now
35:27
we know he will use you satisfy the top
35:30
priority and let the others go go by the
35:32
board he will not satisfy priority three
35:34
and forget about 10 other words he will
35:37
pick his highest priority he has two
35:39
logs will pick us first two priorities
35:41
and so forth looking at another why
35:45
supposing he’s got three logs and he
35:47
loses one a wave comes and wash it away
35:49
or something like that he will give up
35:51
his lowest priority that he’s already
35:53
could have satisfied give up part III
35:55
won’t you won’t forget about food
35:57
tonight because that’s the top priority
35:59
it will rearrange the logs so it’s the
36:02
knockout three and leave one and two if
36:04
on the other hand he’s got five logs
36:06
news is one who’ll give up the boardwalk
36:08
you’re not gonna give up a really tough
36:09
stuff so in other words now what do we
36:12
deduce from this reduce that a the
36:16
greater the supply look good no the
36:19
greater the number of units the person
36:21
has the lower the value of ranking of
36:33
each unit resist what was the value of
36:39
each unit so the more more units he’s
36:47
got he’s got he’s got sort of the value
36:50
now is how much he’s willing to give up
36:51
that was the ranking of how much he
36:52
loses if he loses one one unit he’s got
36:55
to supply a three units and moving one
36:57
the manumission number three or third or
36:59
see you everyone cool you’ve got five
37:01
units the values units five unless a
37:04
lesser value because if he loses one it
37:06
gives up less to go one units much
37:08
higher value so then
37:10
great of the supply the lower the value
37:12
of each unit okay this is cold
37:17
technically the lower the marginal
37:19
utility because utility means value
37:22
marginal means each unit it’s a
37:25
highfalutin jargon again but it’s
37:26
basically a firm these so marginal means
37:29
the next unit 1 log 1 1 pound of butter
37:33
whatever unit happens to be so radio
37:37
supply the lower the value of each unit
37:38
and lower the margin agility vice versa
37:40
and almost every morning and I’ll make
37:42
if you just switch it around okay which
37:44
is simply logic the logic of the
37:48
situation lower the lower the supplier
38:02
good the greater the value of each unit
38:12
explaining the same thing you have a
38:14
fine on the coin this is economics what
38:20
economics really is is a care is this
38:22
simple of spelling out the logic of
38:24
these of action way to the night you
38:27
meet you so this is cold as a name for
38:37
this the law of diminishing marginal
38:38
utility all right happy 9th ward
39:01
okay so that means the greater its
39:06
really same time saying the greater the
39:07
supply or lower the value of each unit
39:10
and we can put this in a little diagram
39:12
Oh banaya grams is supposed to be used
39:16
for any can always make it clearer
39:18
unfortunately most cases they used to
39:20
make it more complicated anyway if you
39:23
take you put margin utility or value of
39:24
each unit on the y-axis and only gimmick
39:28
diagrams and microeconomics the y axis
39:30
has either marginality or price or
39:32
something like that the x axis has
39:34
quantity whatever in this case we have
39:38
quantity of a good this is 0 for both
39:43
and so what they’re saying is your
39:46
increase the quantity of units 1 2 3 4
39:48
whatever the margin utility keeps
39:50
dropping and we don’t know what the
39:52
height is because it’s ordinal and we
39:53
just did somebody say probably shouldn’t
39:56
connect the dots but anyway we know it’s
39:59
falling let’s so that means that if you
40:05
see I obviously have a greater number
40:07
units the lower the value of each unit
40:09
plus a number of years the greater the
40:11
battery so there’s supposed to be a way
40:12
of showing this pay no attention in the
40:14
actual distances of things like that
40:16
because the point all right okay so from
40:29
this we this is a basis of a little some
40:33
of the law of demand or an analysis of
40:34
consumer demand on the market the how
40:39
much will people pay for products
40:43
obviously if you have well if you have
40:45
one chess set you’re not going to pay as
40:47
much for a second one presumably given
40:50
the given the kind of chess set so we go
40:58
on to the next
40:59
next step the next question is how much
41:13
the law and order man which is based on
41:16
more than motioning or utility is trying
41:18
to figure out what consumer behavior how
41:20
much people will spend on different how
41:21
much people by different goods given
41:24
their different prices in other words
41:26
their plate wonder bread when my
41:28
favorite tumor purchases ah I like
41:33
wonder about I buy lots of wonder about
41:34
however if the price of wonder about
41:36
suddenly magically you’ll say something
41:37
from God just the wonder company over
41:39
the name of company is mr. wonder souls
41:43
out or whatever some other guy comes the
41:45
other guys with nut and the other guy
41:46
says I think Wonder Bread is so great a
41:49
consumer to have to pay a lot of money
41:51
for it’s really worth ten bucks all ok
41:55
so the issues in ordered all the Wonder
41:57
Bread people from now on you only saw
41:59
one thing for ten bucks are low now of
42:01
course about a buck elope so what
42:03
happened well it happens this you have
42:05
now you have baked the basic dire I have
42:08
price on the y-axis price of the good
42:10
let’s price me price actually means how
42:13
much you’re willing to pay or what what
42:15
the company but the different terms of
42:17
exchange are in other words this is a
42:22
Crusoe and friday so you’ve got let’s
42:27
say they koo sow fishes and fight any
42:29
hunts and soku so has them it has a lot
42:33
of fishing is sign a one bowel of fish
42:35
per month for two pounds of meat or
42:39
whatever those okay i’m a the size of
42:41
that that’s a pure bargaining situation
42:43
when they do that the price is how much
42:46
you get how much you terms of exchange
42:48
the quantity of 1 Jane when good an
42:50
exchange is compared to the other good
42:52
and in other words the fish price of
42:56
meat is one barrel of fish per half
42:58
pound of meat situation and a per pound
43:02
of meat no not correctly ya know
43:07
oh yeah one pound of meat two pounds of
43:13
meat per barrel officiants have some
43:15
kind of meat for Bauer so you can in
43:18
this case of pricing one of fish in
43:20
terms of me well we have money and we
43:22
have macro with you a hump money how you
43:24
get some money but makes it very
43:26
simplified and everything in terms of
43:28
money price whatever money is answers of
43:30
gold or dollars or whatever so the
43:32
exchanges between the money and the
43:34
specific good ah so he have a situation
43:38
and say what let’s say with Wonder Bread
43:40
it’s a price the assist on ten dollars a
43:44
loaf very few people will buy it let’s
43:46
say this this is one dollar loaf and you
43:48
have this many people this is this axis
43:51
you have quantity again quantity
43:55
purchased so I don’t know how many
43:57
loaves in one a better sold in the
43:58
United States a new york at any given
44:00
time let’s say a hundred thousand loaves
44:02
just as good as any other hundred
44:05
thousand low saying new york in a week
44:07
or whatever for the quantity 100
44:10
thousands of the prices of novel loaf so
44:13
if he’s suddenly assisted mr. wonder
44:15
suddenly says unpinned all that well
44:16
very few people to buy it the only
44:18
people will buy it a very wealthy Wonder
44:20
Bread freaks if David Rockefeller love
44:23
the one that I which wasn’t probably
44:25
probably dubious he might shell out a
44:28
lot of money very other very few the
44:29
rest of us will join them animus so the
44:32
quantity suddenly plummets to say this
44:35
money this much will be purchased and ok
44:41
so the he ain’t will go bankrupt pretty
44:42
early and hey we’ll loses it keeps on
44:44
with us he will lose a fortune whatever
44:45
it is pretty quickly uh the other hand
44:49
supposing and he succeeded by another
44:51
nut and opposite kind of nut who says
44:54
well I think of the window bread is so
44:57
great that people the hope every every
45:00
person in the world may before wonder if
45:02
I’m gonna suffer a nickel a loaf I
45:04
suppose he loses a lot of money for low
45:07
food even see you know he’s also crazy
45:09
so anyway and the nickel of lots of
45:11
people by you hear about a nickel all of
45:12
hey whenever I was like a love you stop
45:14
buying pepperidge farms or
45:15
or tasty wherever you Russia by what
45:17
about the hell why not like it to other
45:18
and make all of us worth it got a huge 2
45:22
million loads of so if there’s that much
45:26
so produce you get something like this
45:28
all right now this is the this is a
45:33
great law of the man and the law of
45:35
demand which is the latest in fact of
45:39
its got later the two things one of them
45:42
mark diminishing margin Philly keep
45:44
increasing a supply and tues the fact
45:46
that some people are poorer than others
45:48
and I can’t afford to spend a lot of
45:50
money on one specific item so many right
45:53
you wind up with oil demand which is
45:56
very simple and but a very important
45:58
probably the most important single or
45:59
microeconomic namely a lower the price
46:01
the more will be purchased more the
46:04
consumers will purchase lower the price
46:09
for any item we don’t know how much more
46:15
that’s what we don’t know where we know
46:17
only more as an absolute law how much I
46:19
thought that’s that depends on the
46:22
specific I don’t have a perfect group of
46:24
people it’s sort of like flied punches
46:27
but we do know absolutely the lower the
46:30
price of more will be purchased and of
46:38
course is called a falling demand curve
46:42
we also know again conversely again
46:44
there’s always the other side of the
46:45
coin the higher the price the less will
46:49
be purchased saying again saying the
46:51
same thing
47:08
that’s all of the man again as I say the
47:11
st. you’re saying the same thing fooling
47:15
a man curve and we don’t know the shape
47:19
as a matter of fact the fashions in
47:23
economics and everything else and
47:25
originally before sainnites is I guess
47:27
the man cars came in about nineteen
47:29
twenty or something like yeah it’s
47:33
falling to the right that’s wrong you’re
47:34
a shoe if you look at it from left to
47:37
right right most of us do we read from
47:40
left to right it’s falling huh what no
47:46
not rising the car that they have hit it
47:49
you’re now hit the key problem in
47:52
microeconomic as I tell what students
47:54
all the time is a key problem every year
47:56
and they always gotta happen have you
47:58
usually get along on exams namely the
48:01
key difference between quantity demanded
48:04
and the demand curve the demand curve of
48:06
the whole curve okay the main curve is a
48:09
locus of given the price how much will
48:13
be purchased given a high price given
48:15
medium priced low price and your map out
48:17
it depends on the subject of so I don’t
48:19
know exactly what it is because it’s in
48:21
the heads of every person but you do
48:23
know the lower the price the more than
48:25
being abandoned okay so this gives you
48:28
the man curve that means if you go down
48:30
the curve the price is lower but the
48:33
greater higher quantity demanded okay
48:35
but the curve as a whole was falling and
48:38
the man curve as a whole is the
48:42
structure depends on how much people
48:43
think of Wonder Bread basically how much
48:45
income they’ve got and what the Python
48:47
but they think wonder about on competing
48:48
products what’s going on competing
48:50
progress with the pepperidge farm bread
48:54
or tasty bread or cut our roles or
48:56
whatever they only think they’re
48:57
competing with Wonder Bread so this
48:59
determines with a man curve accordance
49:01
with a subjective value scale utilities
49:03
the other the people what’s given this
49:05
this gives you the whole demand curve
49:06
and again to this a little bit later
49:08
because the point is he can’t you must
49:12
never confuse the quantity
49:13
Amanda at each point which is let’s say
49:17
this is right other words that fifty
49:21
cents a loaf 200,000 lows will be
49:23
demanding ok that’s the quantity
49:26
demanded at each point you never confuse
49:30
that with the entire demand curve which
49:35
is the locus of all quantities mad at
49:38
every point at every price i should say
49:40
at each price ok what are you mad at any
49:46
given any given price in it you never
49:49
confuse the quantity demanded any given
49:50
price whether the demand curve as a
49:52
whole now the point is that a man
49:56
covereth whole cannot change the price
49:58
changes it’s a key the reason it can’t
50:01
change in other words a falling price
50:03
will not increase the demand curve ever
50:04
can’t because the man curve is defined
50:07
as response to foot the prices price
50:11
change all right the one thing which
50:13
cannot increase the demand curve the
50:15
falling price one thing which can’t
50:17
lower the demand curve is a rising price
50:18
because the whole demand the whole shape
50:19
the demand curve has already been
50:20
incorporated in the definition of the
50:22
man curve whole shape of this thing home
50:24
all the responses the price so the one
50:27
thing which can’t change the prices of
50:28
the curve as a whole is changes in price
50:31
and I’ll explain as moral Warren great
50:33
great at details we go along so we’ll
50:34
get along a test anyway that’s that’s
50:36
the cycle looks like a lot of students
50:39
okay over the years every economics
50:41
professors have the same reaction Dogon
50:43
i will tell you anyway it’s once in a
50:45
while can they get to right all right so
50:48
this is uh in 18 from nike 20 or so in
50:54
the man curve starts until about
50:56
nineteen forty forty-five there’s always
50:58
the same shape in a textbox the shape
51:00
was remain curve remember they don’t
51:02
know the shape we know the scoring right
51:04
on the y-axis one of the x-axis shape
51:07
was this shake was no in Mathematica the
51:11
rectangular hyperbola in other words the
51:14
area under the curve of the same at
51:16
every point this means that
51:29
let’s say Curtis based on our schedules
51:33
on tables price quantity purchased the
51:36
price of ten dollars elope let’s say
51:39
they saw a thousand housing moves from
51:42
total revenue total revenue taken in by
51:45
the wonder of the nothing yet nothing
51:47
that prophet polo revenue taken in by
51:48
the retail stores is price times
51:51
quantity obviously if you’re selling
51:53
your charge ten bucks eloping and sell a
51:56
thousand oh you’re making sense taking
51:57
in ten thousand dollars let’s hold a
52:01
vehicle price times quantity key point
52:04
if the price goes down to five dollars i
52:09
say that sells honey found incompetent
52:11
loaves & Co regulars up to 100,000 and
52:15
so forth but the way to take the
52:18
textbooks used to Mike the curve royal
52:20
occurs is the area always remain the
52:22
same or where the total was always
52:24
10,000 or whatever under bed without was
52:27
adjusted in such a way that the area
52:30
doing the same that’s the definition
52:32
rectangle hyperbola finally by 1943
52:35
George Stigler later learned about
52:38
prizes young professor wrote a textbook
52:40
called theory of pricey so whatever
52:42
there’s no evidence for this why they’d
52:43
all occurred that way what is this
52:45
nonsense so we started going in a
52:46
straight line the lease doesn’t commit
52:49
you to thinking of the area the same
52:50
okay there’s all of us a straight line
52:52
either and so sometimes I think
52:55
McCluskey latest book and apply price
52:57
theory sort of a maverick tightening you
53:01
are the line with wavy why so yeah it
53:03
could be a wavy if easier to make it
53:05
like still prefer the straight line
53:07
provider that you’re holdin ya head a
53:09
little times this is purely convenience
53:11
doesn’t mean advanced thing
53:12
unfortunately most economist don’t hold
53:15
out in their head by the time they get
53:17
to chapter 8 or something the same thing
53:19
isn’t deeply significantly so i’ll talk
53:20
about engine seized you’ll see you know
53:21
your own warm and fluid all sorts of
53:24
crazy conclusions based on tangents
53:26
eaters don’t exist there ain’t no
53:27
straight lines money right straight
53:29
lines least easy to cope whether at
53:31
least doesn’t assume you have a very
53:33
amazing though reason for the area man
53:34
that says no reason why consumers always
53:36
spend the same amount of money
53:36
regardless of price
53:38
so I’ll get back that to what happens
53:43
total spending comes the key thing a
53:44
property of a demand curve the only
53:46
really important property of the curve
53:48
anyway we now have the main current
53:50
straight lines and the next thing is
53:54
dealing with supply all right we now
53:56
having the man code which we know it’s
53:57
Louie we don’t know exactly how much and
54:00
we have supply what supply supply
54:02
despite the text books you see in this
54:05
thing run my discreet attack I’m
54:06
always right he axiom of the courts
54:09
supply is vertical mode words supply of
54:13
everything is how much does around right
54:15
now I think lows it one of the better
54:16
around the store today a hundred
54:18
thousand so you have another word in any
54:20
given time supply as a fixed amount it
54:23
changes over time sure that produce more
54:25
next week or something or less but the
54:27
point is any given time and this the
54:29
demand curve after all is a freeze-frame
54:30
situations how much at any given time
54:32
what comics will be purchased any given
54:35
price by consumers similarly supply
54:37
curve should be a fixed freeze frame it
54:38
any given day how much is that as
54:41
they’re so supply curve is vertical and
54:46
the right now by the way by knowing
54:49
about the phone in macro you right now
54:51
no more economics the most with people
54:53
in country you’re already already after
54:55
one week less than a week you’re already
54:57
very savvy you know more than the jerks
55:00
to run the subway system for example say
55:02
that right now the the way most people
55:05
running utilities particularly Subway’s
55:08
railroads whatever they assume the man
55:12
cave is vertical the input for the side
55:14
they don’t think about the manager but
55:15
they personally assume banker is worth
55:17
huh and which means that people will
55:23
people apparently essentially kick in
55:25
the by the same amount of stuff
55:27
regardless what the prices there’s no
55:30
flowing the matter is no problem on the
55:31
maker only that way so for example I
55:34
read every year or so they keep raising
55:37
a subway fare and because they got a
55:40
deficit for that def the government
55:41
always has a deficit almost by
55:43
definition I’m gonna go away screwed up
55:44
I’m anyway I got a deficit how do we
55:47
cure it up as we raise the fair why not
55:49
you have
55:49
if you have a if you’re suffering from
55:51
um it’s certain deficit you figure
55:55
antigen you can balance the budget if
55:57
you take in whatever if you raise the
55:59
price by twenty percent you keep the
56:01
same number of affairs uh-huh then
56:04
you’ll balance the budget so they raised
56:05
the price i can t % by ghana next year
56:07
they find out as a falling off a number
56:09
of people ride affairs so that’s it
56:12
never again never gets cured and there’s
56:16
a way that we style of this how come we
56:17
didn’t one of the number of fares go
56:19
down why aren’t people riding the subway
56:21
as much they used to gee I don’t know
56:23
maybe it’s because crummy but we’ve
56:25
always coming nothing is this is a fair
56:28
one up okay and it takes it’s a long
56:31
time for six in of these jerks its don’t
56:32
really have my prediction is it some
56:35
finding that features not going to be
56:37
too old from nograkh you see what
56:38
happened was the fair caper is that they
56:44
built a first bill to somebody around
56:46
1919 for an affair was done a nickel
56:48
well nickel with a lot man all right so
56:51
prices were low and I think over Nikoli
56:53
goodbye is over the lunch or something
56:54
Apple lunch so but the fair remaining
56:59
that gold was regulated by the
57:00
government naturally in new york city
57:01
government they kept the fair they froze
57:02
the ferronickel from then I’ll by
57:03
nineteen fifty fifty years the free was
57:07
frozen necklace actually the ferns began
57:08
to lose a lot of money with inflation
57:09
course are going up you can only charge
57:12
a nickel and so the subways began to go
57:13
bankrupt at that point city government
57:17
made a deal with the owners of the
57:18
subway of stockholders of the IRT and
57:20
bmth they were privately owned was the
57:24
eighth Avenue subway came in later
57:25
making the 30s as a government someone
57:28
so they made a deal they both the
57:30
sublights and Scott Hall is at a very
57:32
high subsidy in other words Subway’s a
57:34
quasi bankrupts they really weren’t
57:35
worth much they made a deal with stock
57:38
over they were they I know fifty percent
57:39
bonus it’s not always love that they
57:41
like after he only about business men
57:43
they don’t mind being nationalized or
57:44
state eyes if they make money out of it
57:46
okay so these guys were poignant not
57:49
only that they got paid off in
57:51
government in York City Transit bonds
57:53
and then they created a Transit
57:56
Authority situation and real racket if
57:59
everyone was one of the Transit
58:00
Authority they get the fun
58:02
letters keep getting offered money off a
58:05
pop in other words before they pay off
58:07
anybody else on the subway system they
58:09
pay the bondholders the bondholders leo
58:10
usually the former stockholders and I
58:12
their Vaughn get refinanced every few
58:14
years at a higher interest rate does the
58:16
old Dave interest rate is much lower so
58:18
they say originally got bonds at three
58:19
percent which is a handsome subsidy then
58:21
and now getting ten percent or something
58:23
and they’re they’re living off us
58:25
basically I mean Lee the bond the bond
58:27
holders and anyway the so from twine day
58:35
in the future it’s not gonna be too
58:35
often I they’re gonna raise a fair again
58:37
sometime the five bucks whatever it is
58:40
right and they gonna find out not only
58:43
the number of ride to go on about the
58:44
total revenue is going down that’s are
58:46
they gonna find that gonna get up here
58:47
somewhere I find out that taking in left
58:50
some money in a double cool are they
58:52
gonna do that uno cut that throat
58:53
perhaps okay because I think they mean
58:57
got the mindset of lowering this fair to
58:59
try to get a lot of people they might
59:00
even privatize about what would help but
59:03
that’s that’s I bet that’s the objective
59:05
and you heard it here first five years
59:07
from now you’re the newspaper
59:09
like fair goes up to five bucks and they
59:11
find out they lose money on it right you
59:13
know you heard it here first okay so
59:16
this is the this is a general mindset of
59:20
most people authorities over in the fair
59:24
setting business okay this is uh you
59:31
have a little demand and there’s a
59:40
property of their can as you can see it
59:43
makes a big difference the businessmen
59:44
what happens to total revenue because we
59:47
know now it’s not necessarily like I be
59:50
the same it can change so I have to fill
59:52
revenue becomes the key thing because
59:54
this is business I’m trying to make
59:55
profits and avoid losses total revenue
59:59
and price times quantity is over revenue
60:02
and total revenue minus total cost which
60:05
we’ll get to later on of course will
60:07
give you the profit or loss in other
60:09
words that this is positive its toll
60:11
revenues $100,000 them as you take in
60:13
100,000
60:14
you pay out 80,000 and your profit
60:17
20,000 plus if on the other hand your
60:22
total revenues 105 you paid out out of
60:24
the 20,000 then you’re in bad shape and
60:27
you give a loss of 25 so you have to do
60:30
something fairly rapid leading out of
60:31
this so this is so other business been
60:34
extremely interested in total revenue
60:36
just say we’re now concentrating on or
60:38
get later in the term of the course
60:39
question and and so it becomes very
60:44
important than what happens if the price
60:48
changes pays raised whatever the present
60:51
thing is one of the good is you raise
60:54
the fight you here to hear what happens
60:55
to total revenue don’t have we now come
61:04
to the most important property of an
61:06
Amana curve which is which is the
61:09
reaction to demand curve as you change
61:12
the price what happens to total revenue
61:13
in other words what has cut us quantity
61:15
react compared to very price this is the
61:19
end of this hour I think I’m gonna do is
61:20
I’m do I that’s like couldn’t we didn’t
61:23
have more chair as a number of people
61:24
you know more and more people in chairs
61:26
with just about even as a sort of a
61:29
modified protest I will cancel the
61:30
second hour say the hell with it and
61:32
hope the next thursday will have a
61:34
decent room Tuesday limiting so bad
61:36
Thursday room well I’m kind of change
61:38
that to Thursday room is abominable okay
61:41
I want to cancel an hour to and you’ve
61:44
got the got the syllabus and at the
61:47
readings etc that’s it

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