4. Demand Curves and Income/Substitution Effects
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- Опубліковано 27 вер 2024
- MIT 14.01 Principles of Microeconomics, Fall 2018
Instructor: Prof. Jonathan Gruber
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Prof. Gruber begins the lecture by explaining how to derive demand curves. Other topics covered include elasticity of demand, income shifts, and effects of a price change.
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What a privilege it is to have access to this incredibly useful information presented by such a distinguished spork advocate
sb help me what is spork advocate😂
@@sarahzheng24 around 20min or so I think the professor asked about a good that is perfectly substitutable to elustrate perfect elastic demand
One student said spork (which is a spoon with some fork-y looking edges)
But the proff jokingly defended the spork saying it can't be substituted since it is two things and you'd have to buy two good instead of it thus it is not replaceable
The commentator also jokingly called the prof a spork advocate for his defense against replacing the sporks
I'm currently a first year economics student in the UK, and these lectures have been super useful revision tools for my microeconomics module. Great job here.
Right?! I’m taking this class in my local junior college in California, and the videos work as a great form of revision, and it solidifies my understanding of the core concepts of micro Econ. I don’t even watch the videos, but I listen to the audio while I work as a food courier and it’s helps me multitask.
@@bdzz7100 wow that's great! I'm about to pursue my masters in economics!
What job positions are you seeking after your masters ?
@@nothingmuch67 I'm actually pursuing my Associates degree.
Same from Italy
Microeconomics is such a useful tool in all aspect you know.Wherever the demand exist the functional elements impacted in the demand curve gets in and directly or indirectly gets impacted thus there is accomodation of different demand curve except the parabolic only comes into play.
The microeconomics henceby a great powerful tool to demonstrate a macroeconomy by a curve hence the strategy of recruitment or any financial strategy thus the propensity to derive the utmost level of survivability gets on increasing.
Supposing in the industry of Information Technology there is a sharp fall in the demand curve will be observable in all the service or product based domain worldwide this year.Hence,we have to be having thought preference in order to slope ourselves up.
00:00 Lecture outline
00:53 Deriving Demand Curves
10:35 Elasticity of Demand
12:23 - - > Perfect Inelasticity
15:03 - - > Perfect Elasticity
19:14 Income Shifts
23:29 - - > Normal & Inferior Goods
25:59 - - > Luxuries & Necessities
28:09 Effects of Price Change
29:35 - - > Substitution
33:10 - - > Compensated Demand
40:19 - - > Income Effect
44:21 - - > Inferior & Normal Goods Comparison Table
46:28 - - > Giffen Goods
those time stamps are very helpful, thanks mate
Thanks mage
Dude just murdering chalk every lecture hahaha
That UP ⬆️ arrow 😂
I haven't even taken a microeconomics class yet, but his lecture are extremely interesting to the point I'm learning the material
Me too, my background is in engineering but these lectures really give you valuable insights to the real world.
Here is the place, I was looking for, MIT is contributing to education so much that I can't explain. Love it
@ 2:21 bc1 and bc 2 are mixed up
@7:27 the demand curve should have price on the y axis which is wrongly marked as pizza and point B should have price 9 instead of 7
yes!!! thank you. It seems that the graphs have been inconsistent thus far. Thank you for this.
I kept thinking the graph made no sense. thank you!!
touche!
That was needed brother .thanks
thank you!
8:46 Question: Regardless of the utility function, is it always true you still want 3 pizzas?
10:02 Could we use 3 as a constant?
11:49 Is this the change in quantity of the new quantity to the old quantity or old quantity to the new quantity?
18:25 Would market for dollar bills be perfectly elastic?
Thank you. Massive service provided
Am an undergraduate Economicst from Nigeria and this is helpful to me THANKS
SOME MISTAKES IN THE VIDEO TO CONSIDER WHILE TAKING NOTES
@ 2:21 bc1 and bc 2 are mixed up
@7:27 the demand curve should have price on the y axis which is wrongly marked as pizza and point B should have price 9 instead of 7
👆These are from @yashchugh9132's comment below.
👉And also @40:20 , point B should be tangent to the dotted line.
Bro thanks a lot. I was going crazy to understand where the hell was that price coming frome cuz is complety wrong. But I was to focus to remember the prices of the cookies xD. Thanks 👍
nice, the demand curve was important
wow, thank you for pointing that out. It works out now. Maybe you should be at MIT teaching
@@ritaallerding6802 Thank you for the kind words :)
I like that these videos have no adds
I think there is an error on the graph at 39:10. Isnt point B placed incorrectly, and should be placed on the curve where it is tangent to BC'.
I feel for you. how is B tangent to anything? B should be tangent to the dotted/imaginary budget constraint line.
I think the same. As a matter of fact, the new budget constraint curve, when income is lower (BC2) isn't either parallel to to BC', while it should be
yes
Stupid professor
Any lectures on Mathmatical methods of economics.
These lectures are very good for very good students but for relatively weaker or even normal students, especially in countries where English is not the first language for most students, students most likely won't be able to understand most of the lecture.
I showed these video lectures to my year 1 students and almost all of them could not follow.
it is MIT what do you expect
Before you get in to MIT, you need to pass math extensively high because you are expected to understand and now math!
I think its the only time in my life that I would love being a University class watching this....
Is there any discord server for economics community?
You are a great teacher.
Thank you so much for uploading this lecture!
Is there an error in figure 4-1 with the axes? I got the impression the y axis should be price of cookies not pizza.
Yeah, it should be price as it's the demand curve
@@javieryoung8653 He is explaining the concept on how demand curves are created, which is a combination of utility and budget constraints.
The idea of Giffen good comes from observation of victorian era poor. From wikipedia:
As Mr. Giffen has pointed out, a rise in the price of bread makes so large a drain on the resources of the poorer labouring families and raises the marginal utility of money to them so much that they are forced to curtail their consumption of meat and the more expensive farinaceous foods: and, bread being still the cheapest food which they can get and will take, they consume more, and not less of it.
In 40:34, shouldn't be the point B in the tangency between the dotted line and the indiference curve BC1?
ya, seems off to me. Think it's supposed be on the imaginary budget constraint BC', and the higher indifference curve, not bc1 tho.
The point B is correctly placed, but if you look closely BC' and BC₂ aren't parallels as they should be. The BC' curve is incorrect.
@@adieu2141 The bc prime? I couldn't understand what was happening in the graph, thanks.
I fucking love potatoes
For Steak and Potato example; After increasing Potato price form 1 to 3 dollars how did he get to point B where potato demand was 4 and steak 5.2? Can't make sense of graphs. Did he just pick that number out of nowhere to illustrate the point of an inferior good?
It's an example, of course the numbers are made up
I think that spork dude peek the lecturer notes
in the real world, how do you choose the 2nd product from your budget constraint? based on different comparative products you get also different demand curves, so what do you choose?
19:03 What determines elasticity is substitute-bility. The more substituable goods are, the more elastic-ly demanded they are
38:05 Intuitive definition of Substitution Effect & Income Effect
To tackle the 1st problem drawing an index of the cross elasticity would be most useful in case of suppose Del Q the deviant over Cookies to the Pizza or the indifference chosen.
From the demand elasticity itself there will be high proponent on the income elasticity of the a class of consumers buying the product.
Great lecture
@46:15-->isn't substitution effect always negative?
I thought this professor just said a Giffen good has an upward sloping demand curve, so how exactly does the chinese rice example show that if they bought LESS rice?
Geometrically, upward sloping means that the variables are directly related. In the Chinese rice example, it shows that with a lower price of rice, consumption becomes lower thus the price and quantity demanded are directly related to each other. In most demand curves these are inversely related so thats why Giffen goods(chinese rice) are exceptions/rarities
@@tojo_MOV Thank you for your reply Tojo. My mental graph must have been disoriented at the time of this question. Although, I am now wondering, did they buy less rice physicaly or is "less" relative to income, i.e. did they buy the same amount of rice, but the relative increase in income deflate the value of the ratio of income to rice?
Does anyone know where to find this study (before I google it?)
Wouldn't Giffen goods be a result of psychological interpretations, rather than being the quality of the good itself? It seems to me that they are transitional and should be viewed though the lens of a producer, rather than an end goal consumer. In that view, a Giffen good can be anything where the prices are a reflection of its utility in time. (thinking on keyboard)
Poor people are extreemly pragmatic afterall
The cheaper it was, the less they bought.
Are Hidden goods the goods the quantity demanded is not dependent on the price change....this should be likewise As the price increases and this has no effect on the quantity demanded would be indifferently high in case of the uprising demand.
Can anyone explain why the Engel curve at 22:43 is not perfectly elastic? When I come grows 1/3 (72->96) so does quantity (6->9). When it shrinks 1/3 (72->48) so does quantity (6->4). Same if you consider the other way (48->72 is 1/2, 4->6 is 1/2). So how comes it doesn’t have constant elasticity?
I am guessing the same...
Me also
Yes the think in demand by the same as that of income shows negative income elasticity of a particular product brought.....it's easy to interpret and answer.
Elasticity of D,now thats a good topic to study🤔🤔
Was multivariable calculus required for this course? Id imagine not. To me this seems like another case where students are confused because their mathematical background isnt yet strong enough to really understand the underlying principles. The students seemed highly confused by partial derivatives (change in one variable holding others constant) but if they understood multivariable calculus this would have been the easy part and they could focus on the economics rather than getting lost in the math
They go to MIT they should know calculus
@@trumppence3834 multivariable calculus is 3rd year calculus and id be very surprised if the business school (sloan) requires it before an intro microeconomics course, if they do good on them, but the student asking the questions definitely didnt understand partial derivatives
Thanks for the lecture
Amazing😍😍😍
In the case of food, I have to add that the Financially Educated rich eat less fast food, cause the poor eat more as soon as they start earning more money, that's a fact and it's because most work longer and that decreases the time they dedicate to a dinner, therefore, more money, more fast food. From here it's also derived that by not having time, they are not educated either and therefore they remain in the poor stage even if they earn more per hour.
Does anyone know if he covers lagrangian multipliers in this class?
He does not
Steak doesn't leave you hungrier long term. You'll be hungrier sooner if you fill up on carbs (potatoes) protein satiates for far longer and you need less of it overall. Potatoes may be a survival food, but no they are not better on any level, including nutritionally.
anyone skipped all the lectures at their uni and now watching this to get ready for the finals?
Give me an example for elastic demand.
Student: Spork
😂 😂
Thank u
21:30
34:06
Lol his spork reaction
Could anyone tell me that this all stuff is from where? I mean is it from first semester or anything else??
This course has no prerequisites. From the syllabus, "There are no prerequisites for this course, although some calculus at the level of 18.01 Single Variable Calculus will be used." So in theory, the course could be taken at anytime. For more info, see ocw.mit.edu/14-01F18. Best wishes on your studies!
👍👍👍👍👍👍👍👍
most internet porn is perfectly substitutable
Income effect is negative or positive?
It's the purchasing power that rises so it's positive .
I miss face-to-face classes :(
perfectly elastic
example: coffee substitute with tea
16.00 coca cola and pepsi
The statement that 3 slices of pizza and 6 cookies can make somebody happy is a slight exaggeration. Even American constitution does not guarantee happiness It guarantees the pursuit of happiness only.
literally saving me from desperately useless lectures that I have...Thank you for uploading this
Same!
16:47
Great videos ! Can't believe it's free, no add, and is of such high quality.
I had to start my background in econ from scratch, CFA lvl1 expects you to know the basics before learning their materials ...
It's funny to see all these implicite references to multivariate calculus, without being explicitly mentioned.
You can always solve for the optimum nbr of pizzas and cookies by using a Lagrange multiplier to apply the budget constraint.
Something like minimizing L = 1/U - lambda*(Qp*Pp + Qc*Pc - Y).
1/U because maximizing Utiliy is like minimizing its inverse.
Solving the partials for Qp, Qc and lambda (prices are known), yields the result.
Few mistakes in the images watch out (D curve has price in ordinate NOT pizzas), and when Pc increases, the new dotted line should be tangent to B (it's not in the image, but it should be). Hope that'll help someone.
So you are saying by the Lagrange's multiplier using the misutility if a buy will be characterized by the negative proportion but I think that will be added to the misutility component to understand the whole scenario of the buy.
My dream to go to MIT but I cannot afford it! Love UA-cam
Thanks for sharing this, it's saved me from my teacher's nonsense lessons
everything about this would be simpler and more straightforward if you graphed things with price on the X axis in your price and quantity graphs.
for example, perfectly elastic demand would look like how you described it instead of looking like no matter what quantity needs to be disposed the price per unit will be the same.
"I reject your spork option"
Label of figure 4-1b is wrong. The Y axis is the price, not pizza.🙂
I was looking at the professor as a good one until he started talking about food stamps and cocaine and the use of cash for food stamps or updated SNAP. We all know who he is talking about…
Thank you for uploading this.
here in india rich people eat more fast food whereas poor people prefer real food
The thing is not same across the globe though... Healthier food is expensive... Vegetables and organic foods are more...
India have largest cultivable land on earth... And also one of the most fertile one.... And lot's of people engage in agriculture.. So foods and vegetables are cheaper... While big chain of fast food joints have invested lot's of money and thus economically well can afford it better.
33:26 moving to point B doesn't mean that I have less cookies but more pizza?
It does because your moving from A, the first optimum, to B
hehe 35:13
Thank you for this wonderful lecture. And thanks a lot to the (wo)man who wrote captions and the (wo)man who shooted this and also the one who uploaded it and MIT.☺
hey brotendos, anyone wanna join me for some ranch throwing up on the quad after class?
이번년도 경제공부 시작의 기초!!
40:40 aren't the Indifference Curves poorly drawn?
If you expand them they cross each other and that should not be the case
8:50 where can i get those notes?
The course materials are available on MIT OpenCourseWare at: ocw.mit.edu/14-01F18. Best wishes on your studies!
Are there any section materials published?
The course materials are on MIT OpenCourseWare at: ocw.mit.edu/14-01F18. Best wishes on your studies!
16:17 xD
I believe the x and y labels of the 2nd chart are wrong, they should be quantity and price for the cookies.
Super helpful, thank you so much!
Where can we get notes ( handouts etc.)
The course materials are on MIT OpenCourseWare at: ocw.mit.edu/14-01F18. Best wishes on your studies!
@@mitocw thankyou, sir 😊
This guy is chalk's worst nightmare.
10:36 Elasticity of demand
I should have watched this before quiz
is insulin an example of perfectly inelastic and inferior product?
No if you have more income you dont need less insulin
That's a interesting idea 😁
very informative and fun to learn!
I am from India .useful lectures
16:18
28:18
12:12
I took calculus 6 years ago, I don't remember Episonlon.( good thing i still have my textbook)
Epsilon.
Where did the indifference curve C in 31:41 come from?
Change in income
Do Americans always have to add "Like" to all their sentences?
I am an Indian and use like a lot.... it's just a way of explaining and making things simpler to understand by giving an example/simile hence use of like. Don't be such a douchè.
@@geetanjali6484 He's talking of "like" as a meaningless filler word, not about it's common literal use. ;)
en.m.wikipedia.org/wiki/Filler_(linguistics)
With attention directed to the "In different languages" section.
Lol in India were studying this in 11th standard
There is a mistake in name of y axis in graph 4-1b, should be Price instead of Pizza. 🙂
No, we compare the numbers of pizzas and the number of cookies, not the price. The class analyzes how demand of one good impacts the demand of another
This Prof. should have focused more on Case based teaching rather than overemphasizing theoretical perspectives. Moreover, things could be better presented in a mild and lucid way with a specific and focused approach rather than wasting so much of energy speaking so loudly. By the way, Economics is not Business communication.
Most economics is taught from a theoretical perspective, especially when it comes to a BSc. I imagine you have more productive thing to do than criticize a MIT course/professor.
This is more theoretical basic course...right?
They had section for the practical