Sentence stringlengths 159 3.48k | video_title stringlengths 15 104 |
|---|---|
So that's the situation we just talked about. This is an inferior good. Inferior good. And for kicks, what is the income elasticity of demand right over here? Calculate that. So just remember, our income elasticity of demand is just going to be our percent change in quantity demanded divided by our percent change, instead of price, we're gonna say in income. I'll just write percent change of income, which is going to be what? | Income elasticity of demand APⓇ Microeconomics Khan Academy.mp3 |
And for kicks, what is the income elasticity of demand right over here? Calculate that. So just remember, our income elasticity of demand is just going to be our percent change in quantity demanded divided by our percent change, instead of price, we're gonna say in income. I'll just write percent change of income, which is going to be what? Well, we know our percent change in income, it went up by 20% in this example. And what happened to our quantity demanded? Well, it went down by 10%, so negative 10%. | Income elasticity of demand APⓇ Microeconomics Khan Academy.mp3 |
I'll just write percent change of income, which is going to be what? Well, we know our percent change in income, it went up by 20% in this example. And what happened to our quantity demanded? Well, it went down by 10%, so negative 10%. And so here, you have an income elasticity of demand of negative 1 1⁄2 or negative 0.5. Let's do another example. Suppose we knew that when people's income increased by 5% in a country, the demand for healthcare increased by 10%. | Income elasticity of demand APⓇ Microeconomics Khan Academy.mp3 |
Well, it went down by 10%, so negative 10%. And so here, you have an income elasticity of demand of negative 1 1⁄2 or negative 0.5. Let's do another example. Suppose we knew that when people's income increased by 5% in a country, the demand for healthcare increased by 10%. What kind of good do people consider healthcare? Normal or inferior? So first, calculate the income elasticity of demand for this example, and then answer these questions. | Income elasticity of demand APⓇ Microeconomics Khan Academy.mp3 |
Suppose we knew that when people's income increased by 5% in a country, the demand for healthcare increased by 10%. What kind of good do people consider healthcare? Normal or inferior? So first, calculate the income elasticity of demand for this example, and then answer these questions. All right, so first, we are, our income elasticity of demand. Let's see, when our income increases by 5%, so we have a 5% increase in income, our demand for healthcare increases by 10%. Our demand for healthcare increases by 10%. | Income elasticity of demand APⓇ Microeconomics Khan Academy.mp3 |
So first, calculate the income elasticity of demand for this example, and then answer these questions. All right, so first, we are, our income elasticity of demand. Let's see, when our income increases by 5%, so we have a 5% increase in income, our demand for healthcare increases by 10%. Our demand for healthcare increases by 10%. So we get a positive income elasticity of demand. And so in general, if this thing is positive, you're dealing with a normal good. As income goes up, then you similarly see quantity demanded going up. | Income elasticity of demand APⓇ Microeconomics Khan Academy.mp3 |
And we kind of view them as polar opposites. Over here, you have exactly one player. Here you have many players. In a monopoly, you get to set the price and the quantity. Here you have to be a price taker. In a monopoly, there's huge barriers to entry. In perfect competition, there's no barriers to entry. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
In a monopoly, you get to set the price and the quantity. Here you have to be a price taker. In a monopoly, there's huge barriers to entry. In perfect competition, there's no barriers to entry. What I want to think about in this video is, are there other situations, or especially, are there terms for other situations that are in between? And to think about that, I'm going to draw a spectrum. I'm going to do a two-dimensional spectrum. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
In perfect competition, there's no barriers to entry. What I want to think about in this video is, are there other situations, or especially, are there terms for other situations that are in between? And to think about that, I'm going to draw a spectrum. I'm going to do a two-dimensional spectrum. I could probably think of more variables where there's nuance between these terms, but these are the two big ones. So in one dimension, I'm going to think about the number of competitors there are. So this is the number of competitors. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
I'm going to do a two-dimensional spectrum. I could probably think of more variables where there's nuance between these terms, but these are the two big ones. So in one dimension, I'm going to think about the number of competitors there are. So this is the number of competitors. Competitors. Number of competitors. And obviously, a monopoly is one competitor. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
So this is the number of competitors. Competitors. Number of competitors. And obviously, a monopoly is one competitor. In perfect competition, you've got a bunch. You've got a bunch of competitors. So I'll put one right over here, and a bunch of competitors. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
And obviously, a monopoly is one competitor. In perfect competition, you've got a bunch. You've got a bunch of competitors. So I'll put one right over here, and a bunch of competitors. If this was zero, then there wouldn't even be a market to speak of. No one is participating there. In this axis, in the vertical axis, I want to think about how differentiated the competitors in the market are. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
So I'll put one right over here, and a bunch of competitors. If this was zero, then there wouldn't even be a market to speak of. No one is participating there. In this axis, in the vertical axis, I want to think about how differentiated the competitors in the market are. How different are their products or their brands? Differentiation. In the market, and this was low differentiation, and this is high. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
In this axis, in the vertical axis, I want to think about how differentiated the competitors in the market are. How different are their products or their brands? Differentiation. In the market, and this was low differentiation, and this is high. This is high differentiation. So let's think of a bunch of industries and think about where they sit here, and then I'll introduce you to two new words other than just a monopoly or perfect competition. So let's just say that we live in a world where there's 50 producers of screws, and all of those screws are completely identical. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
In the market, and this was low differentiation, and this is high. This is high differentiation. So let's think of a bunch of industries and think about where they sit here, and then I'll introduce you to two new words other than just a monopoly or perfect competition. So let's just say that we live in a world where there's 50 producers of screws, and all of those screws are completely identical. And so if one producer charges even a penny more, no one's going to want to go to them because they can get the exact same thing from one of the other of the many producers. So that would be a case right over here. Low differentiation, all the screws are the same, and there's a bunch of competitors. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
So let's just say that we live in a world where there's 50 producers of screws, and all of those screws are completely identical. And so if one producer charges even a penny more, no one's going to want to go to them because they can get the exact same thing from one of the other of the many producers. So that would be a case right over here. Low differentiation, all the screws are the same, and there's a bunch of competitors. So that's about as perfect as perfect competition can get in the real world. So a bunch of identical screw manufacturers. I'm not sure if the actual screw market has a bunch of competitors, but let's just assume if it did, then you would be sitting right over here pretty close in the world of perfect competition. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
Low differentiation, all the screws are the same, and there's a bunch of competitors. So that's about as perfect as perfect competition can get in the real world. So a bunch of identical screw manufacturers. I'm not sure if the actual screw market has a bunch of competitors, but let's just assume if it did, then you would be sitting right over here pretty close in the world of perfect competition. In the other spectrum, you imagine your utilities. In most places, especially in the US, but probably the world, there's only one utility. There's only one entity that's managing the power lines a lot of times because of that. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
I'm not sure if the actual screw market has a bunch of competitors, but let's just assume if it did, then you would be sitting right over here pretty close in the world of perfect competition. In the other spectrum, you imagine your utilities. In most places, especially in the US, but probably the world, there's only one utility. There's only one entity that's managing the power lines a lot of times because of that. It's actually run by the government. But in most of the US, it's a regulated private company. And so here you have one player, and you can debate whether it's low differentiation or so high differentiation that it's the only player. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
There's only one entity that's managing the power lines a lot of times because of that. It's actually run by the government. But in most of the US, it's a regulated private company. And so here you have one player, and you can debate whether it's low differentiation or so high differentiation that it's the only player. But let's just stick it right over there, low differentiation. This right over here might be a utility. And that's about as close to a monopoly, or that actually is a monopoly. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
And so here you have one player, and you can debate whether it's low differentiation or so high differentiation that it's the only player. But let's just stick it right over there, low differentiation. This right over here might be a utility. And that's about as close to a monopoly, or that actually is a monopoly. They are the only player there. Mono comes from one. Poly comes from seller. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
And that's about as close to a monopoly, or that actually is a monopoly. They are the only player there. Mono comes from one. Poly comes from seller. One seller, that would be a utility. Now there are things that are in between. So for example, if you thought about your, let's say the telephone providers in your area, there normally are a few people who can provide phone service, especially with the age of internet telephony. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
Poly comes from seller. One seller, that would be a utility. Now there are things that are in between. So for example, if you thought about your, let's say the telephone providers in your area, there normally are a few people who can provide phone service, especially with the age of internet telephony. Now the cable companies are starting to provide phone service, and the telephone companies are starting to provide internet and cable service. So we could think of that market. So let's put this market right over here. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
So for example, if you thought about your, let's say the telephone providers in your area, there normally are a few people who can provide phone service, especially with the age of internet telephony. Now the cable companies are starting to provide phone service, and the telephone companies are starting to provide internet and cable service. So we could think of that market. So let's put this market right over here. So the number of competitors is low, so it's going to be here. And they are somewhat differentiated. They might give you a different cable box or might offer you slightly different levels of bandwidth or whatever else. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
So let's put this market right over here. So the number of competitors is low, so it's going to be here. And they are somewhat differentiated. They might give you a different cable box or might offer you slightly different levels of bandwidth or whatever else. So they're somewhat differentiated right over here. So I'll call that the cable internet telephone providers. Then you can think of markets where there's a bunch of competitors, but they are somewhat differentiated. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
They might give you a different cable box or might offer you slightly different levels of bandwidth or whatever else. So they're somewhat differentiated right over here. So I'll call that the cable internet telephone providers. Then you can think of markets where there's a bunch of competitors, but they are somewhat differentiated. And I can think of fine dining. So let's say here there's a bunch of restaurants in any place that sells nice food, that they really define themselves by the quality of the food that they produce. So they're highly differentiated. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
Then you can think of markets where there's a bunch of competitors, but they are somewhat differentiated. And I can think of fine dining. So let's say here there's a bunch of restaurants in any place that sells nice food, that they really define themselves by the quality of the food that they produce. So they're highly differentiated. Each restaurant is unique. The chefs have specialties and all the rest, but there's a bunch of them. So right over here I will put fine dining. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
So they're highly differentiated. Each restaurant is unique. The chefs have specialties and all the rest, but there's a bunch of them. So right over here I will put fine dining. You could also imagine name brand clothing. They're very differentiated, certain design or certain materials, all of those type of things, but there's a bunch of them. So name brand clothing. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
So right over here I will put fine dining. You could also imagine name brand clothing. They're very differentiated, certain design or certain materials, all of those type of things, but there's a bunch of them. So name brand clothing. It's not quite perfect competition. It's very competitive. There's a bunch of players there, but they're not selling the same product. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
So name brand clothing. It's not quite perfect competition. It's very competitive. There's a bunch of players there, but they're not selling the same product. They are very, very differentiated. To some degree, you almost feel like even though there's all this competition, they have a monopoly on their own product. Another one could be you could imagine something like high-end laptops or high-end computers or nice computers. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
There's a bunch of players there, but they're not selling the same product. They are very, very differentiated. To some degree, you almost feel like even though there's all this competition, they have a monopoly on their own product. Another one could be you could imagine something like high-end laptops or high-end computers or nice computers. Or maybe I'll just say computers in general. Some people might want to go for an Apple. That's what they've associated with. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
Another one could be you could imagine something like high-end laptops or high-end computers or nice computers. Or maybe I'll just say computers in general. Some people might want to go for an Apple. That's what they've associated with. And some people might want to go for a Sony. So maybe I'll put branded computers up here. Branded computers up here. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
That's what they've associated with. And some people might want to go for a Sony. So maybe I'll put branded computers up here. Branded computers up here. But then you could also have something like the unbranded PC market. And that might be something closer to here where you might have these random manufacturers. You don't even care. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
Branded computers up here. But then you could also have something like the unbranded PC market. And that might be something closer to here where you might have these random manufacturers. You don't even care. Some manufacturer from overseas, you don't even care, but they're saying they're using the same processor, the same memory chip. They're saying using all the same things. So they're much less differentiated. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
You don't even care. Some manufacturer from overseas, you don't even care, but they're saying they're using the same processor, the same memory chip. They're saying using all the same things. So they're much less differentiated. So this might be right over here, unbranded. And that tends to happen with the personal computer industry. You're like, well, they're using the same Intel chip, they're using the same memory, they're all running Windows, whatever else. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
So they're much less differentiated. So this might be right over here, unbranded. And that tends to happen with the personal computer industry. You're like, well, they're using the same Intel chip, they're using the same memory, they're all running Windows, whatever else. There's not a lot of difference between them. So those actually start getting closer to this perfect competition. So the whole reason that I've introduced these ideas to you is that there are names for these things that aren't quite perfect competition because they're highly differentiated. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
You're like, well, they're using the same Intel chip, they're using the same memory, they're all running Windows, whatever else. There's not a lot of difference between them. So those actually start getting closer to this perfect competition. So the whole reason that I've introduced these ideas to you is that there are names for these things that aren't quite perfect competition because they're highly differentiated. And there are names for these things that aren't quite monopolies because they have a few providers. These right over here, so we could put other things around here, so I'll circle this general area. We would call these oligopolies. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
So the whole reason that I've introduced these ideas to you is that there are names for these things that aren't quite perfect competition because they're highly differentiated. And there are names for these things that aren't quite monopolies because they have a few providers. These right over here, so we could put other things around here, so I'll circle this general area. We would call these oligopolies. This comes from this part right over here, and I'm not an expert in Greek. But this comes from few, and obviously the poly, once again, just with monopolies, comes from sellers. So this means few sellers. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
We would call these oligopolies. This comes from this part right over here, and I'm not an expert in Greek. But this comes from few, and obviously the poly, once again, just with monopolies, comes from sellers. So this means few sellers. And oligopolies, and we're going to study this in much more detail, are not quite monopolies. They can't set the price and the quantity. And they can kind of, depending on the oligopoly, depending on the market, they might start acting more like a monopoly. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
So this means few sellers. And oligopolies, and we're going to study this in much more detail, are not quite monopolies. They can't set the price and the quantity. And they can kind of, depending on the oligopoly, depending on the market, they might start acting more like a monopoly. The players could coordinate with each other to their mutual benefit, or they might become fiercely competitive, even if there's only a few providers. So oligopolies can kind of, in their personality characteristics, they can either look more like monopolies or they can look like very competitive industries. And these things up here, where these are quite competitive industries, but they are highly differentiated. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
And they can kind of, depending on the oligopoly, depending on the market, they might start acting more like a monopoly. The players could coordinate with each other to their mutual benefit, or they might become fiercely competitive, even if there's only a few providers. So oligopolies can kind of, in their personality characteristics, they can either look more like monopolies or they can look like very competitive industries. And these things up here, where these are quite competitive industries, but they are highly differentiated. To some degree, you could say that, for example, in branded computers, Apple has a monopoly on selling Apple computers. It doesn't have a monopoly on computers. Obviously, there's many, many people who can provide computers, but they have a brand. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
And these things up here, where these are quite competitive industries, but they are highly differentiated. To some degree, you could say that, for example, in branded computers, Apple has a monopoly on selling Apple computers. It doesn't have a monopoly on computers. Obviously, there's many, many people who can provide computers, but they have a brand. If someone wants an Apple computer, you have to go to Apple. It's a self-evident statement. But it's highly differentiated, highly branded. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
Obviously, there's many, many people who can provide computers, but they have a brand. If someone wants an Apple computer, you have to go to Apple. It's a self-evident statement. But it's highly differentiated, highly branded. And so they have a monopoly on their product, but there are many, many, many other competitors who are out there that won't let them just set price because they can offer products that serve the same purpose, but they're differentiated in some way. And so these players up over here, we would call these markets, these are monopolistic competition. And when you first hear that, it sounds more because the first word you hear is monopolistic, but this is more, at least in my mind, closer to perfect competition than it is to a monopoly, or at least the way I view it in my mind. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
But it's highly differentiated, highly branded. And so they have a monopoly on their product, but there are many, many, many other competitors who are out there that won't let them just set price because they can offer products that serve the same purpose, but they're differentiated in some way. And so these players up over here, we would call these markets, these are monopolistic competition. And when you first hear that, it sounds more because the first word you hear is monopolistic, but this is more, at least in my mind, closer to perfect competition than it is to a monopoly, or at least the way I view it in my mind. Monopoly is completely uncompetitive. While this is still highly competitive, it's still not quite as highly competitive as perfect competition, but it's close. You have a monopoly in just your product, but there are other not too different similar products. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
And when you first hear that, it sounds more because the first word you hear is monopolistic, but this is more, at least in my mind, closer to perfect competition than it is to a monopoly, or at least the way I view it in my mind. Monopoly is completely uncompetitive. While this is still highly competitive, it's still not quite as highly competitive as perfect competition, but it's close. You have a monopoly in just your product, but there are other not too different similar products. There are other products on the market whose prices affect your price, or that there are other alternatives, I should say, in the market that will affect people's demand for your product. And the best giveaway between a monopolistic competitor and a perfect competition is that there is some differentiation with the products over here. There is some maybe branding here. | Oligopolies and monopolistic competition Forms of competition Microeconomics Khan Academy.mp3 |
At one end, you might have perfect competition. Let's write perfect comp. And this is where you have many firms, what they produce is not differentiated, there's no barriers to entry. And in that situation, we have looked at that the market price, the firms just have to take that market price, and that market price is going to describe what their marginal revenue is going to be. No matter how much each of those individual firms produce, they're just going to get that market price. So that marginal revenue will be that market price. But then we looked at a whole sort of what we could call imperfectly competitive firms. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
And in that situation, we have looked at that the market price, the firms just have to take that market price, and that market price is going to describe what their marginal revenue is going to be. No matter how much each of those individual firms produce, they're just going to get that market price. So that marginal revenue will be that market price. But then we looked at a whole sort of what we could call imperfectly competitive firms. Imperfectly, imperfect competition. At the extreme, you have the monopoly, where you only have one firm in the market, huge barriers to entry. And so that company or that firm essentially is the market. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
But then we looked at a whole sort of what we could call imperfectly competitive firms. Imperfectly, imperfect competition. At the extreme, you have the monopoly, where you only have one firm in the market, huge barriers to entry. And so that company or that firm essentially is the market. And so their demand curve for their product essentially is the market demand curve. But in between, you have things like monopolistic competition, right over there. And in monopolistic competition, you have many firms that are competing, but they're all differentiated in some way. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
And so that company or that firm essentially is the market. And so their demand curve for their product essentially is the market demand curve. But in between, you have things like monopolistic competition, right over there. And in monopolistic competition, you have many firms that are competing, but they're all differentiated in some way. And there are some barriers to entry. A good example of monopolistic competition or imperfect competition might be the athletic shoe market. In the athletic shoe market, you have many competitors, you have your Nike, Adidas, Reebok, and I could keep listing names, and they are all differentiated in their own way. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
And in monopolistic competition, you have many firms that are competing, but they're all differentiated in some way. And there are some barriers to entry. A good example of monopolistic competition or imperfect competition might be the athletic shoe market. In the athletic shoe market, you have many competitors, you have your Nike, Adidas, Reebok, and I could keep listing names, and they are all differentiated in their own way. They all have their own brands, which they've built up over time. They have associations with certain sports figures. Some of their shoes might be perceived as better in certain categories. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
In the athletic shoe market, you have many competitors, you have your Nike, Adidas, Reebok, and I could keep listing names, and they are all differentiated in their own way. They all have their own brands, which they've built up over time. They have associations with certain sports figures. Some of their shoes might be perceived as better in certain categories. But they are also competing with each other. So the competition is that they're competing with each other, but you could consider it monopolistic competition, because only Nike can sell, well, Nike shoes. And so you can imagine a demand curve for, say, only Nike shoes. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
Some of their shoes might be perceived as better in certain categories. But they are also competing with each other. So the competition is that they're competing with each other, but you could consider it monopolistic competition, because only Nike can sell, well, Nike shoes. And so you can imagine a demand curve for, say, only Nike shoes. So in an imperfect competition, every firm would have their own unique demand curve. And how much they produce actually will affect the price that they get for the product or the service. And what we're going to see in this video is when we're dealing with imperfect competition, the demand curve, the price, isn't exactly what marginal revenue is going to be. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
And so you can imagine a demand curve for, say, only Nike shoes. So in an imperfect competition, every firm would have their own unique demand curve. And how much they produce actually will affect the price that they get for the product or the service. And what we're going to see in this video is when we're dealing with imperfect competition, the demand curve, the price, isn't exactly what marginal revenue is going to be. And to understand that, let's look at a simple model here. So right over here, I have a very simple model of a demand curve for a firm in an imperfectly competitive market. And you can see here that the more that that firm produces of its goods, the lower pricing can get for that good. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
And what we're going to see in this video is when we're dealing with imperfect competition, the demand curve, the price, isn't exactly what marginal revenue is going to be. And to understand that, let's look at a simple model here. So right over here, I have a very simple model of a demand curve for a firm in an imperfectly competitive market. And you can see here that the more that that firm produces of its goods, the lower pricing can get for that good. And we can see very clearly, this is a classic downward-sloping demand curve. But what's going to be really interesting is to think about what is going to be the marginal revenue, especially the marginal revenue in a world where if they sell one unit, they get 32.50. But when they sell two units, it's not like they'll get 32.50 for one of those units and then they'll get 25 for the second unit. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
And you can see here that the more that that firm produces of its goods, the lower pricing can get for that good. And we can see very clearly, this is a classic downward-sloping demand curve. But what's going to be really interesting is to think about what is going to be the marginal revenue, especially the marginal revenue in a world where if they sell one unit, they get 32.50. But when they sell two units, it's not like they'll get 32.50 for one of those units and then they'll get 25 for the second unit. If you have a market price out there for $25, you're going to get $25 on all two units. So even though someone was willing to pay 32.50 for one, they're still only going to pay $25. So let's think about what that does to the marginal revenue. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
But when they sell two units, it's not like they'll get 32.50 for one of those units and then they'll get 25 for the second unit. If you have a market price out there for $25, you're going to get $25 on all two units. So even though someone was willing to pay 32.50 for one, they're still only going to pay $25. So let's think about what that does to the marginal revenue. I encourage you to pause this video and try to fill out this table yourself before I do it with you. All right, now let's do it together. So our total revenue, obviously when we sell nothing, we have, let me do this in another color, we have zero total revenue. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
So let's think about what that does to the marginal revenue. I encourage you to pause this video and try to fill out this table yourself before I do it with you. All right, now let's do it together. So our total revenue, obviously when we sell nothing, we have, let me do this in another color, we have zero total revenue. Now when we sell one unit at 32.50, well then our total revenue is going to be 32.50. No surprise there. Now it's going to get interesting. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
So our total revenue, obviously when we sell nothing, we have, let me do this in another color, we have zero total revenue. Now when we sell one unit at 32.50, well then our total revenue is going to be 32.50. No surprise there. Now it's going to get interesting. When we sell two units, what's going to be our total revenue? Well, both of those units are going to be sold at $25. It's not like, as I just said, it's not like that first person's still willing to pay 32.50. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
Now it's going to get interesting. When we sell two units, what's going to be our total revenue? Well, both of those units are going to be sold at $25. It's not like, as I just said, it's not like that first person's still willing to pay 32.50. It's like, hey, your market price is $25. That's what everyone's going to pay. So now your total revenue is $50, two times $25. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
It's not like, as I just said, it's not like that first person's still willing to pay 32.50. It's like, hey, your market price is $25. That's what everyone's going to pay. So now your total revenue is $50, two times $25. Now when you go to three, the market price that you can get is 17.50. Let's see, that is going to be 52.50. 52.50 of total revenue. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
So now your total revenue is $50, two times $25. Now when you go to three, the market price that you can get is 17.50. Let's see, that is going to be 52.50. 52.50 of total revenue. And then if your market price was $10, you could have a quantity of four. If you wanted to sell four, you could do so at a price of $10. You could do it either way, but then your total revenue is going to be $40. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
52.50 of total revenue. And then if your market price was $10, you could have a quantity of four. If you wanted to sell four, you could do so at a price of $10. You could do it either way, but then your total revenue is going to be $40. Now from this, we can think about, well, what's our marginal revenue? Well, our marginal revenue for that first unit is the same as what the price of that first unit is. We went from zero to 32.50 with that first unit, so that's 32.50 right over here. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
You could do it either way, but then your total revenue is going to be $40. Now from this, we can think about, well, what's our marginal revenue? Well, our marginal revenue for that first unit is the same as what the price of that first unit is. We went from zero to 32.50 with that first unit, so that's 32.50 right over here. But what about as we go from that first unit to that second unit? Well, our units go up by one, but our revenue from 32.50 to 50 goes up by 17.50. And so you're already seeing that there's a discrepancy between our marginal revenue and our price. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
We went from zero to 32.50 with that first unit, so that's 32.50 right over here. But what about as we go from that first unit to that second unit? Well, our units go up by one, but our revenue from 32.50 to 50 goes up by 17.50. And so you're already seeing that there's a discrepancy between our marginal revenue and our price. And we can keep going. When we go from two to three units, our revenue only goes up by 2.50. And so that's going to be our marginal revenue. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
And so you're already seeing that there's a discrepancy between our marginal revenue and our price. And we can keep going. When we go from two to three units, our revenue only goes up by 2.50. And so that's going to be our marginal revenue. And then something very interesting happens. As we go from three units to four units, our total revenue actually goes down. It goes down by 12.50, negative 12.50 right over here. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
And so that's going to be our marginal revenue. And then something very interesting happens. As we go from three units to four units, our total revenue actually goes down. It goes down by 12.50, negative 12.50 right over here. And that's because when the price gets that low, you are taking a hit on all of the units that you're selling so you actually get a lower total revenue right over here. And if we plot it, we'll see very clearly that the marginal revenue curve departs from the demand curve for that firm that's competing in an imperfectly competitive market. And so we can see here at one unit, our marginal revenue is the same. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
It goes down by 12.50, negative 12.50 right over here. And that's because when the price gets that low, you are taking a hit on all of the units that you're selling so you actually get a lower total revenue right over here. And if we plot it, we'll see very clearly that the marginal revenue curve departs from the demand curve for that firm that's competing in an imperfectly competitive market. And so we can see here at one unit, our marginal revenue is the same. But at two units, our marginal revenue is 17.50. At three units, our marginal revenue is 2.50. And so we have a marginal revenue curve that looks more like this. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
And so we can see here at one unit, our marginal revenue is the same. But at two units, our marginal revenue is 17.50. At three units, our marginal revenue is 2.50. And so we have a marginal revenue curve that looks more like this. So the big takeaways here are that a firm that's operating in an imperfectly competitive market, it isn't just a price taker. It's not that no matter how much it produces, it's going to get the same price. It's going to have its own unique demand curve because there is some differentiation in the market. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
And so we have a marginal revenue curve that looks more like this. So the big takeaways here are that a firm that's operating in an imperfectly competitive market, it isn't just a price taker. It's not that no matter how much it produces, it's going to get the same price. It's going to have its own unique demand curve because there is some differentiation in the market. And so it's going to have a downward-sloping demand curve. And because of that downward-sloping demand curve, you are also going to have a downward-sloping marginal revenue curve. And that marginal revenue curve is actually going to be downward-sloping at a steeper rate. | Types of competition and marginal revenue APⓇ Microeconomics Khan Academy.mp3 |
Let's say that we have three small ponds. So this is pond A, this is pond B, and this is pond C over here. And let's say that this first pond right over here, it's a privately owned pond. It's owned by Al. And this pond over here is owned by Carol. It is owned by Carol. But this middle pond, pond B, I guess we called it to start off with, this is common land, or I guess this is a common pound, or this is open to the public. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
It's owned by Al. And this pond over here is owned by Carol. It is owned by Carol. But this middle pond, pond B, I guess we called it to start off with, this is common land, or I guess this is a common pound, or this is open to the public. Open to the public. Open to the public. And let's say that Al and Carol, they're both fisher, I guess Carol would be a fisher woman. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
But this middle pond, pond B, I guess we called it to start off with, this is common land, or I guess this is a common pound, or this is open to the public. Open to the public. Open to the public. And let's say that Al and Carol, they're both fisher, I guess Carol would be a fisher woman. They both like to fish, that's how they make their living. And Al, in his pond, he has fish in there, and he does some fishing in his pond. But he makes sure not to overfish, because he doesn't want to deplete the stock of fish he has. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
And let's say that Al and Carol, they're both fisher, I guess Carol would be a fisher woman. They both like to fish, that's how they make their living. And Al, in his pond, he has fish in there, and he does some fishing in his pond. But he makes sure not to overfish, because he doesn't want to deplete the stock of fish he has. So he fishes just enough that he can pay his bills and whatever else, but not so much that it depletes the fish and essentially makes them extinct in his pond. So he doesn't want to overfish. And Carol does the same thing. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
But he makes sure not to overfish, because he doesn't want to deplete the stock of fish he has. So he fishes just enough that he can pay his bills and whatever else, but not so much that it depletes the fish and essentially makes them extinct in his pond. So he doesn't want to overfish. And Carol does the same thing. She's got fish in her pond, and she uses them to make a living. She gets them out and sells them and eats them and whatever else. But she's careful not to overfish, because if she overfished, then there wouldn't be fish, there wouldn't be a next generation of fish. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
And Carol does the same thing. She's got fish in her pond, and she uses them to make a living. She gets them out and sells them and eats them and whatever else. But she's careful not to overfish, because if she overfished, then there wouldn't be fish, there wouldn't be a next generation of fish. But over here in this public pond, there are also fish. There are also fish, I'll draw their fish in orange. There are also fish in this public pond over here. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
But she's careful not to overfish, because if she overfished, then there wouldn't be fish, there wouldn't be a next generation of fish. But over here in this public pond, there are also fish. There are also fish, I'll draw their fish in orange. There are also fish in this public pond over here. They're smiling, maybe they won't be smiling for long. And what is going to happen? Anyone can go and fish in this public pond. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
There are also fish in this public pond over here. They're smiling, maybe they won't be smiling for long. And what is going to happen? Anyone can go and fish in this public pond. So Al might say, and we'll just assume we're in a world of two people, obviously the real world has more than two people. Al will say, okay, I'm gonna be very careful in my own pond. I'm gonna fish just enough that I don't deplete the fish there. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
Anyone can go and fish in this public pond. So Al might say, and we'll just assume we're in a world of two people, obviously the real world has more than two people. Al will say, okay, I'm gonna be very careful in my own pond. I'm gonna fish just enough that I don't deplete the fish there. But any extra fish I need, I could go over here to this public pond and fish all I want. And I might be concerned about depletion in the public pond, except for the fact, if I'm concerned about depletion, that's still not going to help the situation, because other people might come and still not be so concerned. And so I won't even get the benefit of the depletion if I hold back and other people come and deplete the pond. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
I'm gonna fish just enough that I don't deplete the fish there. But any extra fish I need, I could go over here to this public pond and fish all I want. And I might be concerned about depletion in the public pond, except for the fact, if I'm concerned about depletion, that's still not going to help the situation, because other people might come and still not be so concerned. And so I won't even get the benefit of the depletion if I hold back and other people come and deplete the pond. And so when you have this pond that is open to the public, all of the surrounding people, whether it's Al or Carol, or I guess you could have other people here, they would say, look, I'm gonna fish here, I'm going to get some benefit. And even if I overfish, the benefit of overfishing I'm going to get. In the near term, I'm going to get all of those fish. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
And so I won't even get the benefit of the depletion if I hold back and other people come and deplete the pond. And so when you have this pond that is open to the public, all of the surrounding people, whether it's Al or Carol, or I guess you could have other people here, they would say, look, I'm gonna fish here, I'm going to get some benefit. And even if I overfish, the benefit of overfishing I'm going to get. In the near term, I'm going to get all of those fish. And then the cost of that overfishing, which is in the future, there won't be as many fish or no fish at all, that's going to be spread out amongst everyone else. And so you have the situation where, because there's no one, I guess you could say either owning this land, or there's no one protecting this lake, or however you want to describe it, you have, there's a rational, and I want to be clear, rational does not always mean good, there rational actors might decide to overfish. Decide to overfish. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
In the near term, I'm going to get all of those fish. And then the cost of that overfishing, which is in the future, there won't be as many fish or no fish at all, that's going to be spread out amongst everyone else. And so you have the situation where, because there's no one, I guess you could say either owning this land, or there's no one protecting this lake, or however you want to describe it, you have, there's a rational, and I want to be clear, rational does not always mean good, there rational actors might decide to overfish. Decide to overfish. And essentially by doing that, everyone's going to be worse off. They're going to destroy the productivity of this pond. They're going to destroy the productivity, productivity of the pond, of the pond right over here. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
Decide to overfish. And essentially by doing that, everyone's going to be worse off. They're going to destroy the productivity of this pond. They're going to destroy the productivity, productivity of the pond, of the pond right over here. And this idea that if there's this common land or common resource, in this case it was a pond, and people can spread out the costs and they get the benefits directly, you essentially, you have a situation where that shared resource can get abused. And this is called the tragedy of the commons. So this is the tragedy, tragedy of the commons. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
They're going to destroy the productivity, productivity of the pond, of the pond right over here. And this idea that if there's this common land or common resource, in this case it was a pond, and people can spread out the costs and they get the benefits directly, you essentially, you have a situation where that shared resource can get abused. And this is called the tragedy of the commons. So this is the tragedy, tragedy of the commons. Where in this, in the example we did here, the pond is the common space that's being abused. And it's especially a tragedy, and I've already hinted at this already, is that even if Al decides that, hey, you know what, I'm going to hold back a little bit, I'm not going to fish so much because I don't want to deplete it, he'll say, but wait, if I do that, if I do that, other people are going to come and deplete it, so I have no incentive to hold back. And so other people are also going to have the same logic, and then this thing is going to get overfished here. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
So this is the tragedy, tragedy of the commons. Where in this, in the example we did here, the pond is the common space that's being abused. And it's especially a tragedy, and I've already hinted at this already, is that even if Al decides that, hey, you know what, I'm going to hold back a little bit, I'm not going to fish so much because I don't want to deplete it, he'll say, but wait, if I do that, if I do that, other people are going to come and deplete it, so I have no incentive to hold back. And so other people are also going to have the same logic, and then this thing is going to get overfished here. And the classic example of tragedy of the commons, or the example was first given, was common grazing land. Same exact idea. If this was private grazing land over here, where I can keep my cows and my sheep, and this is private grazing land over here, where someone else has their cow and sheep, but this over here is literally a commons where anyone can graze their cow and sheep, then, just like the fishing, huge incentive for people to let their cow and sheep maybe overgraze the land, destroy the land, make it not sustainable, but the costs of it are going to be shared by everyone else and the benefit of overgrazing, at least in the near term, you, the person who's overgrazing, is going to get from it. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
And so other people are also going to have the same logic, and then this thing is going to get overfished here. And the classic example of tragedy of the commons, or the example was first given, was common grazing land. Same exact idea. If this was private grazing land over here, where I can keep my cows and my sheep, and this is private grazing land over here, where someone else has their cow and sheep, but this over here is literally a commons where anyone can graze their cow and sheep, then, just like the fishing, huge incentive for people to let their cow and sheep maybe overgraze the land, destroy the land, make it not sustainable, but the costs of it are going to be shared by everyone else and the benefit of overgrazing, at least in the near term, you, the person who's overgrazing, is going to get from it. And you might even say, I'm not even the one overgrazing it. It's all of us collectively overgrazing, so you don't blame me. Now, what is the solution to the tragedy of the commons? | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
If this was private grazing land over here, where I can keep my cows and my sheep, and this is private grazing land over here, where someone else has their cow and sheep, but this over here is literally a commons where anyone can graze their cow and sheep, then, just like the fishing, huge incentive for people to let their cow and sheep maybe overgraze the land, destroy the land, make it not sustainable, but the costs of it are going to be shared by everyone else and the benefit of overgrazing, at least in the near term, you, the person who's overgrazing, is going to get from it. And you might even say, I'm not even the one overgrazing it. It's all of us collectively overgrazing, so you don't blame me. Now, what is the solution to the tragedy of the commons? How does a government or a jurisdiction or a group of people avoid this type of destruction of a resource? Well, one way that you could do is you could make this somehow into private land. So if that was owned by the government, it could sell it, auction it off to private people who could then sell access to this, or if the government does retain control of it, it could sell permits to the land. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
Now, what is the solution to the tragedy of the commons? How does a government or a jurisdiction or a group of people avoid this type of destruction of a resource? Well, one way that you could do is you could make this somehow into private land. So if that was owned by the government, it could sell it, auction it off to private people who could then sell access to this, or if the government does retain control of it, it could sell permits to the land. So in this situation, you could sell permits. So it could figure out, hey, if someone fishes responsibly in a given day, they're going to get, I don't know, $200 of value by doing this, so we're going to make a permit cost, I don't know, $150, so that someone still has an incentive to do it, but that will also limit the amount of fishing that can be there, and you could have some conservationists that make sure that not too many permits are given for this space over here. We see that happening. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
So if that was owned by the government, it could sell it, auction it off to private people who could then sell access to this, or if the government does retain control of it, it could sell permits to the land. So in this situation, you could sell permits. So it could figure out, hey, if someone fishes responsibly in a given day, they're going to get, I don't know, $200 of value by doing this, so we're going to make a permit cost, I don't know, $150, so that someone still has an incentive to do it, but that will also limit the amount of fishing that can be there, and you could have some conservationists that make sure that not too many permits are given for this space over here. We see that happening. If you wanted to go hunting, there are permits you need to have. If you want to go fishing in a lot of places, there are permits that you want to have. If you want to go camping in a lot of places, there are permits, because you could even over-camp an area. | Tragedy of the commons Consumer and producer surplus Microeconomics Khan Academy.mp3 |
What we're going to think about in this video is elasticity of demand. Elasticity of demand. And what this is, is a measure of how does the quantity demanded change given a change in price, or how does a change in price impact the quantity demanded. So change in price impact quantity demanded. When you talk about demand, you're talking about the whole curve. Quantity demanded is a specific quantity. Quantity demanded. | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
So change in price impact quantity demanded. When you talk about demand, you're talking about the whole curve. Quantity demanded is a specific quantity. Quantity demanded. And the way that we as economists, I'm not really an economist, but since we're doing economics we can pretend to be economists. The way that economists measure this is they measure it as a percent change in quantity over the percent change in price. And the reason why they do this as opposed to just say change in quantity over change in price is because if you did change in quantity over change in price, you would have a number that's specific to the units you're using. | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
Quantity demanded. And the way that we as economists, I'm not really an economist, but since we're doing economics we can pretend to be economists. The way that economists measure this is they measure it as a percent change in quantity over the percent change in price. And the reason why they do this as opposed to just say change in quantity over change in price is because if you did change in quantity over change in price, you would have a number that's specific to the units you're using. So it would depend on whether you're doing quantity in terms of per hour, per week, or per year. And so you would have different numbers based on the time frame or the units that you might use. But when you use a percentage, it is a unitless number. | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
And the reason why they do this as opposed to just say change in quantity over change in price is because if you did change in quantity over change in price, you would have a number that's specific to the units you're using. So it would depend on whether you're doing quantity in terms of per hour, per week, or per year. And so you would have different numbers based on the time frame or the units that you might use. But when you use a percentage, it is a unitless number. Because of the percentage, you're taking a change in some quantity divided by that quantity. So the units themselves actually cancel out. And the reason why it's called elasticity, this might make some sense to you, or the reason why I like to think it's called elasticity is I imagine something that's elastic, like an elastic band or a rubber band. | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
But when you use a percentage, it is a unitless number. Because of the percentage, you're taking a change in some quantity divided by that quantity. So the units themselves actually cancel out. And the reason why it's called elasticity, this might make some sense to you, or the reason why I like to think it's called elasticity is I imagine something that's elastic, like an elastic band or a rubber band. If you pull it, depending if something, so let's say this one is inelastic. So if you pull, you're not going to be able to pull it much. It's going to be fairly stiff. | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
And the reason why it's called elasticity, this might make some sense to you, or the reason why I like to think it's called elasticity is I imagine something that's elastic, like an elastic band or a rubber band. If you pull it, depending if something, so let's say this one is inelastic. So if you pull, you're not going to be able to pull it much. It's going to be fairly stiff. It's not going to stretch a lot. While if something is elastic, if something is elastic for a given amount of force, so this is for a given amount of force, you're not able to pull it much. And if something is elastic maybe for the same amount of force, you're going to be able to pull it a lot. | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
It's going to be fairly stiff. It's not going to stretch a lot. While if something is elastic, if something is elastic for a given amount of force, so this is for a given amount of force, you're not able to pull it much. And if something is elastic maybe for the same amount of force, you're going to be able to pull it a lot. So this right over here is elastic. And so the analogy maybe might make a little bit sense relative to price and demand. Something is elastic, so let me write this down. | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
And if something is elastic maybe for the same amount of force, you're going to be able to pull it a lot. So this right over here is elastic. And so the analogy maybe might make a little bit sense relative to price and demand. Something is elastic, so let me write this down. Elastic, so let me write very elastic, if a given change in price, given price change, you have, and especially we'll talk about percentages in a little bit, but a given change in price, you have a large change in demand, so large percentage change. Let me just speak in terms of percentage. So if you're given a percentage change in P, you end up having a large percentage change in Q. | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
Something is elastic, so let me write this down. Elastic, so let me write very elastic, if a given change in price, given price change, you have, and especially we'll talk about percentages in a little bit, but a given change in price, you have a large change in demand, so large percentage change. Let me just speak in terms of percentage. So if you're given a percentage change in P, you end up having a large percentage change in Q. That would be very elastic. So you could imagine the P is like the force, and the Q, the quantity demanded, is how far the thing can get stretched apart. And that's why we would call this very elastic, just like a very elastic rubber band. | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
So if you're given a percentage change in P, you end up having a large percentage change in Q. That would be very elastic. So you could imagine the P is like the force, and the Q, the quantity demanded, is how far the thing can get stretched apart. And that's why we would call this very elastic, just like a very elastic rubber band. And if something is very inelastic, if given a percent change in P, you have a small percent change in Q. So just like a rubber band, for a given amount of force, if you're not able to pull it much at all, then it's inelastic. If you're able to pull it a lot, it's elastic. | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
And that's why we would call this very elastic, just like a very elastic rubber band. And if something is very inelastic, if given a percent change in P, you have a small percent change in Q. So just like a rubber band, for a given amount of force, if you're not able to pull it much at all, then it's inelastic. If you're able to pull it a lot, it's elastic. Same thing with price and quantity. For a given change in price, if the quantity demanded, if the percent quantity demanded changes a lot, very elastic. If it doesn't change a lot, very inelastic. | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
If you're able to pull it a lot, it's elastic. Same thing with price and quantity. For a given change in price, if the quantity demanded, if the percent quantity demanded changes a lot, very elastic. If it doesn't change a lot, very inelastic. Now, with that out of the way, let's actually calculate the elasticity for multiple points along this demand curve right over here. And I think that will give us a better grounding, especially because there are a little slightly, I would call them unusual ways of calculating the percent change in quantity and the percent change of price, just so that we get the same number when we have a positive change in price and the same as we get the negative change in price, or a negative and a positive, or a drop in price and an increase in price. So let me give myself some real estate over here, because I want to do some actual mathematics. | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
If it doesn't change a lot, very inelastic. Now, with that out of the way, let's actually calculate the elasticity for multiple points along this demand curve right over here. And I think that will give us a better grounding, especially because there are a little slightly, I would call them unusual ways of calculating the percent change in quantity and the percent change of price, just so that we get the same number when we have a positive change in price and the same as we get the negative change in price, or a negative and a positive, or a drop in price and an increase in price. So let me give myself some real estate over here, because I want to do some actual mathematics. And actually, all of this we will be reviewing in what I'm about to do, and it will give me some real estate to work with. So let me clear all of that, and let me clear that right over here. And what I'm going to do is I'm going to calculate the elasticity of demand at several points along this demand curve right over here. | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.