Sentence stringlengths 159 3.48k | video_title stringlengths 15 104 |
|---|---|
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 g... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
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. And so the first one I will do it at point A to point B. So let me make another column right over here. Elasticity of demand. And actually, we're going to have one column that's elastic... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
Elasticity of demand. And actually, we're going to have one column that's elasticity of demand. So it's a big E with a little subscript D. And the other one I'll just take its absolute value, because depending on, sometimes people like to just think of the number, which will tend to be a negative number, and sometimes ... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
So we'll look at both and see what it actually means. So let's say our price drops from point A to point B. So from point A to point B, we have a negative $1 change in price, and we have a positive, so this is a negative $1 change in price, and we have a positive $2 burger per hour change in quantity demanded. So what ... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
So what is the elasticity of demand there? So let's write it over here. I'll do it in A's color. So the elasticity of demand, remember, it's the percent change in quantity. So percent change in quantity, rewrite it. Percent change in quantity over percent change in price. And so we have, what's our percent change in qu... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
So the elasticity of demand, remember, it's the percent change in quantity. So percent change in quantity, rewrite it. Percent change in quantity over percent change in price. And so we have, what's our percent change in quantity? So it's going to be the change in quantity over some base quantity. So our change in quan... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
And so we have, what's our percent change in quantity? So it's going to be the change in quantity over some base quantity. So our change in quantity is 2, so it's going to be equal to 2 over. Now, in traditional terms, and this is what I want to kind of clarify, it's a little bit unusual in how we do it, but we do it s... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
Now, in traditional terms, and this is what I want to kind of clarify, it's a little bit unusual in how we do it, but we do it so that we get the same elasticity of demand whether we go from A to B or B to A, or essentially we get the same elasticity of demand along this whole part of the curve. Instead of just dividin... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
Actually, now let's just think about it. What's the average between 2 and 4? Well, the average is just going to be 3. That's the average of 2 and 4. I could write, let me write it down just so it's clear. This right over here, that right over here is 2 plus 4 over 2. That's how you get 3. | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
That's the average of 2 and 4. I could write, let me write it down just so it's clear. This right over here, that right over here is 2 plus 4 over 2. That's how you get 3. That's how you would calculate the average. All right, so that is our proportionate change, and then you want to multiply by 100 times 100 to actual... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
That's how you get 3. That's how you would calculate the average. All right, so that is our proportionate change, and then you want to multiply by 100 times 100 to actually get a percentage. Then what is our change in price? Well, we're going to do the same thing, or the percent change in price. Our change in price is ... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
Then what is our change in price? Well, we're going to do the same thing, or the percent change in price. Our change in price is negative 1. It is negative 1 over, and once again, we don't just do negative 1 divided by 9. We do it over the average of 8 and 9, and the average of 8 and 9 is 8.5, and then multiply by 100 ... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
It is negative 1 over, and once again, we don't just do negative 1 divided by 9. We do it over the average of 8 and 9, and the average of 8 and 9 is 8.5, and then multiply by 100 to get your percentage. Now, these hundreds obviously cancel out. We are going to be left with, when you divide by fractions, the same thing ... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
We are going to be left with, when you divide by fractions, the same thing as multiplying by its inverse. We're going to get 2 thirds times negative 8.5 over 1, or times negative 8.5. We get out our calculator, and it is 2 times negative 8.5 and then divided by 3, which gives us negative 5.6667. It's really negative 5 ... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
It's really negative 5 and 2 thirds. I'll just write it negative. I'll round it. It's negative 5.67. This is approximately equal to negative 5.67. Right over here, it's negative 5.67, and this absolute value is obviously just 5.67. I'll leave it to you to verify for yourself that you'll get the same elasticity of deman... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
It's negative 5.67. This is approximately equal to negative 5.67. Right over here, it's negative 5.67, and this absolute value is obviously just 5.67. I'll leave it to you to verify for yourself that you'll get the same elasticity of demand using this technique where you use the average as your base and the percentage,... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
I'll leave it to you to verify for yourself that you'll get the same elasticity of demand using this technique where you use the average as your base and the percentage, going from 9 to 8 in price as going from 8 to 9 in price, which is different than if you use the 9 as the base or the 8 as a base. This right here is ... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
We'll write that part right over here. I'll write the absolute value. The absolute value of our elasticity of demand is 5.67. Now let's do the other two sections right over here. Let's think about what happens when we go from C to D. Our elasticity of demand there. From C to D, we have a change in quantity, once again ... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
Now let's do the other two sections right over here. Let's think about what happens when we go from C to D. Our elasticity of demand there. From C to D, we have a change in quantity, once again of plus 2, and our change in price, once again, is negative 1. We'll see, even though the change in quantity is the same and t... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
We'll see, even though the change in quantity is the same and the change in price is the same, we're going to have a different elasticity of demand because we have different starting points. Our starting points and our ending points for price are lower and our starting and ending points for quantity are higher. It'll a... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
Let's see what we get. Our percent change in quantity, we have a change in quantity of 2, and then our average quantity is 9 plus 11, which is 20, divided by 2 is 10. All of that over percent change in price. We have negative 1, let me scroll down a little bit, negative 1 divided by the change in, negative 1 divided by... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
We have negative 1, let me scroll down a little bit, negative 1 divided by the change in, negative 1 divided by the average price. Negative 1 is the change in price, and we want to divide that by the average price. 550 plus 450 is $10, divided by 2 is 5. The average price is 5. We can multiply the numerator by 100 and ... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
The average price is 5. We can multiply the numerator by 100 and the denominator by 100, but that won't change anything because we'll just divide both by 100. This is equal to 2 over 10, times, dividing by a fraction, same thing as multiplying by its inverse, times negative 5 over 1. This is just because 2 over 10 is t... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
This is just because 2 over 10 is the same thing as 1 fifth. 1 fifth times negative 5 over 1, it is negative 1. This right over here, our elasticity of demand right over here is negative 1 or its absolute value is 1. The absolute value of the elasticity of demand right over here is equal to 1. Let's just do one more se... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
The absolute value of the elasticity of demand right over here is equal to 1. Let's just do one more section, and maybe in the next video we can think a little bit about what it's telling us. Let's do this last section over here just for some practice. I encourage you to pause it and try it yourself. We're going to thi... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
I encourage you to pause it and try it yourself. We're going to think about this section right over here. Once again, our change in quantity is plus 2, and our change in price is negative 1, and our elasticity of demand, change in quantity, 2 over average quantity, which is 17, change in price is negative 1, over avera... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
We don't have to multiply the numerator and denominator by 100 because those just cancel out. We get 2 over 17 times negative, well, we could just write this as negative $1.50 over 1. This is equal to, getting our calculator back out, this is equal to, I'll just write, well, it's really just going to be negative 3 over... | Price elasticity of demand using the midpoint method Elasticity Microeconomics Khan Academy.mp3 |
And what this chart tells us, if country A put all of their energy behind apples in a day, they could produce three apples. And if they put all of their energy behind bananas in a day, they could produce six bananas. Similarly, country B, if they put all of their energy behind apples in a day, they could produce two ap... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
And country B, if they put all of their energy behind bananas in a day, they could produce four bananas. So given this, who has the comparative advantage in apples and who has a comparative advantage in bananas and how should they trade? Pause this video and try to figure it out on your own. All right, so when we're th... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
All right, so when we're thinking about comparative advantage, we really wanna think about, well, what is the opportunity cost of producing an apple in each country and what is the opportunity cost of producing a banana in each country? And so let me make another little subcolumn right over here, opportunity cost. And ... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
And pause the video at any point if you get inspired. Well, to produce three apples, they would have to trade off six bananas. And so that means per apple, they are not producing two bananas. So this is two bananas, two bananas. I'll just write bananas per apple. And their opportunity cost for bananas is just going to ... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
So this is two bananas, two bananas. I'll just write bananas per apple. And their opportunity cost for bananas is just going to be the reciprocal of that. So one over two apples, apples per banana. And then for country B, we can do a similar calculation and you might be noticing something interesting is about to happen... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
So one over two apples, apples per banana. And then for country B, we can do a similar calculation and you might be noticing something interesting is about to happen. What's country B's opportunity cost of apples? Well, one way to think about it, if they produce two apples, that means they're giving up four bananas or ... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
Well, one way to think about it, if they produce two apples, that means they're giving up four bananas or they're giving up two bananas per apple. So two bananas, bananas per apple. And once again, if we wanna think in terms the opportunity cost of a banana, well, to produce four bananas, they're giving up two apples. ... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
So this is one half of an apple per banana, per, I'll just write banana right over there. So this one is a little bit interesting. They have the same opportunity cost for, they have the same opportunity cost for apples in terms of bananas, and they have the same opportunity cost for bananas in terms of apples. And so b... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
And so because they have the same opportunity costs, so let me write this down, same opportunity costs, costs, costs, there is no comparative advantage. So no comparative advantage in either. Advantage, advantage in either. And so based on our very simple model here, there are no gains from, no gains from trade. Anothe... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
And so based on our very simple model here, there are no gains from, no gains from trade. Another way we could visualize this that maybe makes it maybe hopefully a little bit more clear, so let me make one axis here. I'm trying to draw a straight line. All right, and then this is my other axis right over here. And let'... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
All right, and then this is my other axis right over here. And let's make this one right over here, this horizontal one, let's make this the apples axis, and let's make the vertical one the bananas axis. Bananas. And we're saying per day, per day. And this of course is apples per day. And so if we look at country A, le... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
And we're saying per day, per day. And this of course is apples per day. And so if we look at country A, let me do country A in a new color. So country A, let's say orange. If they put all of their energy behind apples, they could produce one, two, maybe spread this out a little bit, they could produce one, two, three ... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
So country A, let's say orange. If they put all of their energy behind apples, they could produce one, two, maybe spread this out a little bit, they could produce one, two, three apples in a day. If they put all of the energy behind bananas, they could produce, let's just say this is two, four, six. So that's six, this... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
So that's six, this is four, this is two, this is three right over here. Let me put markers in between to make this clear. So if they put all of their energy into bananas, they could produce six in a day. And so their production possibilities, if we assume it is a linear trade-off, would look something like this. And t... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
And so their production possibilities, if we assume it is a linear trade-off, would look something like this. And the slope right over here, this would be the opportunity cost. This would be, so the slope right over here, every time we increase apples by one, we decrease bananas by two. So in this situation, we would h... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
So in this situation, we would have a, so the slope, slope here is equal to, well, it's actually a negative slope, it's equal to negative two bananas, bananas per apple. So this right over here, this slope, based on how I picked the axes, this is giving me the opportunity cost for apples in terms of bananas. Every time... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
So that is my opportunity cost there. And now if we think about country B, and let me do this in a new color, I'm running out of colors. Country B right over here, they can either produce four bananas or two apples or things in between. But notice, it has the exact same slope. The slope is the opportunity cost. And if ... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
But notice, it has the exact same slope. The slope is the opportunity cost. And if we switch these axes right over here, then the slope would be the opportunity cost for bananas in terms of apples. But the big takeaway here, if you see the production possibilities of two countries, and we're talking about two goods, an... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
But the big takeaway here, if you see the production possibilities of two countries, and we're talking about two goods, and they have the same slope, then that means our opportunity costs are going to be the same, and there's not going to be a gain from trade. Remember, the whole point of comparative advantage and trad... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
But there are situations where both countries wouldn't benefit because they have the same opportunity cost, and this was an example of one of them. Now the other case, sometimes they will have, one will have a comparative advantage over the other. They do have different opportunity costs. And then you might have no gai... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
And then you might have no gains from trade. Maybe there's some way that they can't know each other's opportunity cost. There's some way that they don't trade. Maybe irrespective of what the models tell us about comparative advantage, some country says, hey, I don't want to produce bananas. Apples are the future. That'... | When there aren't gains from trade Basic economics concepts AP Macroeconomics Khan Academy.mp3 |
So just to remind ourselves, and we'll focus on price elasticity of demand, although we've been exposed to other types of elasticities already, but just as a review, price elasticity of demand, so the elasticity of demand, is defined as the percent change in quantity demanded over the percent change in price. So first ... | Elasticity and strange percent changes Elasticity Microeconomics Khan Academy.mp3 |
But we first think about the percent change in quantity, and we're going to assume we're going to calculate the elasticity of demand between point A over here, point A, and point B over here. So what is our percent change in quantity? Well our absolute change in quantity going from A to B, we have increased by 2, so we... | Elasticity and strange percent changes Elasticity Microeconomics Khan Academy.mp3 |
We don't say 2 over 4, we say 2 over the average of 4 and 6, 2 over the average of our starting point and our ending point, and the average of 4 and 6 is 5. So this is going to be, we have a 40% change based on how we calculated the percentages in our quantity demanded, and then let's do our percent change in price. So... | Elasticity and strange percent changes Elasticity Microeconomics Khan Academy.mp3 |
So our absolute change in price is negative 1 dollar, and then instead of doing it over our starting point, over 2, we do it over the average of the two, over 150. And negative 1 over 150 is negative 2 thirds, or right about negative 66.7% if we say roughly. So this right over here, so based on how we calculated percen... | Elasticity and strange percent changes Elasticity Microeconomics Khan Academy.mp3 |
Now the reason why this is valuable, and then obviously if you do the math right here, 40% over negative 66.7%, you're going to get some, let's see, you're going to get something, I think it's going to be in the sixes,.6 something, but let's actually get a calculator out to calculate it. So it would be 40 divided by 66... | Elasticity and strange percent changes Elasticity Microeconomics Khan Academy.mp3 |
Actually I'll just leave it there, oh yeah,.60. Now what's cool about this, or what's useful about this, and this is the reason why we economists do it is you would get the same answer whether you're going from A to B or whether you're going from B to A. So this is the situation where we're going from A to B, but if we... | Elasticity and strange percent changes Elasticity Microeconomics Khan Academy.mp3 |
If we go from B to A, what is our change in quantity? Our change in quantity is negative two, so it would be negative two over, now you wouldn't do it over your starting point, you do it over the average. This is why we'll get the same value regardless of what direction we go in. So we get the average of four and six i... | Elasticity and strange percent changes Elasticity Microeconomics Khan Academy.mp3 |
So we get the average of four and six is going to be five, and that's going to be over, now going from B to A, what is our change in price? Our change in price is now plus one, it is plus one over the average of our starting point and our ending point, over 150. Now these are the exact same quantities, both going to be... | Elasticity and strange percent changes Elasticity Microeconomics Khan Academy.mp3 |
Here the negative is on the bottom, here the negative is on top, but either way, you're going to, and actually this was a negative.60 because you have a positive divided by a negative, and this too, when you evaluate it, is going to turn out to be the exact same thing. It's going to be negative 0.60. Now if you calcula... | Elasticity and strange percent changes Elasticity Microeconomics Khan Academy.mp3 |
And just to show that to you, I'll put this in quotation marks because it's not the wrong way to do it in general. In fact, this is how you would calculate price changes traditionally, but it's not how you do it in kind of the microeconomic sense. And so if you do it the wrong way, if you said from A to B, you have you... | Elasticity and strange percent changes Elasticity Microeconomics Khan Academy.mp3 |
This is the way you do it outside of economics class, and so you get, this would be equal to 50% plus 50% over negative 50%. So you essentially get negative one going from A to B using a traditional way of calculating percent change. Now what happens if you go from B to A? Well now all of a sudden, your change in quant... | Elasticity and strange percent changes Elasticity Microeconomics Khan Academy.mp3 |
Well now all of a sudden, your change in quantity is negative two. Your base is now, the starting point is six, and then your change in price, once again you're increasing in price by one going from B to A, so this is plus one, and your base is now one. So you will get, this is negative 33%, roughly, it's negative a th... | Elasticity and strange percent changes Elasticity Microeconomics Khan Academy.mp3 |
And in the video we constructed it, this firm is a car wash. And also how we can use this to think about what's a rational number of people for this firm to hire. And just as a reminder, this horizontal axis here, this is a quantity of labor per hour. So this is people per hour that are working at the firm. People per ... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
People per hour. And the vertical axis here, the marginal product revenue, that you could view as the marginal dollars or the incremental dollars that you're getting per person per hour. And to just verify that it's telling us the same thing visually that this table told us right up here, we could think about what is t... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
So what we could do is we can multiply the quantity of people, which is 1, times the average marginal product revenue that we get from one person. Or I should say the average we get going from 0 to 1 person. And the average is 25. And the reason why I said it that way is you could imagine a reality where getting a tent... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
And the reason why I said it that way is you could imagine a reality where getting a tenth of a person, you get a value higher than 25. And you might say, how do I get a tenth of a person? Well, what if one person shows up every 10 days? And then you get a little, little less benefit as you get closer and closer to a w... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
And then you get a little, little less benefit as you get closer and closer to a whole person per hour. But on average, as we go from 0 to 1 person, we are getting $25 of value or $25 of marginal revenue per person per hour. And so if you wanted to figure out what's the total marginal revenue that we got from this pers... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
So that would give us the area of this rectangle right over there, which would be $25. Now, and you would really have to do a little bit of calculus to fully appreciate it, but I think you can look at it geometrically. That also happens to be, given that this is a line, that our curve, our marginal product revenue is a... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
The orange curve, between 0 and 1 half, is above this rectangle. And between 1 half and 1, it is below the rectangle. And the area above is the same as the area below. So $25 is also the area under this curve. And that's essentially how much benefit the firm is getting from hiring, from going from 0 to 1 person. They'r... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
So $25 is also the area under this curve. And that's essentially how much benefit the firm is getting from hiring, from going from 0 to 1 person. They're getting $25 of benefit. Now, how much benefit do they get going from 1 to 2 people? Well, going from 1 to 2, our change in quantity of people per hour is 1. And then ... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
Now, how much benefit do they get going from 1 to 2 people? Well, going from 1 to 2, our change in quantity of people per hour is 1. And then our average marginal product revenue, going from 1 to 2 people, is $20. So it is $20. And so the area is 1 times 20. And that's also going to be the same as the area under the cu... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
So it is $20. And so the area is 1 times 20. And that's also going to be the same as the area under the curve. So the area under the curve right over there is going to be 20. Likewise, the area under the curve, if we wanted to say, what's the marginal product revenue we get going from 2 to 3 people? Well, the average h... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
So the area under the curve right over there is going to be 20. Likewise, the area under the curve, if we wanted to say, what's the marginal product revenue we get going from 2 to 3 people? Well, the average height here, we'd essentially just say, well, what is the area between 2 and 3? And we can figure out that area ... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
And we can figure out that area by saying, well, the average height is 15 multiply 15. So this height, the average height is 15. Multiply 15 times 1. You get $15 of benefit. Between 3 and 4, the average height is 10. So you get 10 times 1. You get $10 of benefit would be the area under the curve right over here. | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
You get $15 of benefit. Between 3 and 4, the average height is 10. So you get 10 times 1. You get $10 of benefit would be the area under the curve right over here. $10 of benefit. And then the area under the curve there, by the same argument, is $5 of benefit. Now, given this, this is just telling us the revenue we're ... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
You get $10 of benefit would be the area under the curve right over here. $10 of benefit. And then the area under the curve there, by the same argument, is $5 of benefit. Now, given this, this is just telling us the revenue we're getting. But it's really not telling us what is the optimal or the rational number of empl... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
Now, given this, this is just telling us the revenue we're getting. But it's really not telling us what is the optimal or the rational number of employees to hire. To do that, we have to think about the cost per employee, the marginal cost that we are actually incurring. And I mentioned earlier that this is a competiti... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
And I mentioned earlier that this is a competitive firm. And when I mentioned it before, I talked about it being competitive in terms of the car wash market. So it was a competitive supplier. But let's assume that it is also a competitive buyer in the labor market. So these are two different markets. I want to clarify,... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
But let's assume that it is also a competitive buyer in the labor market. So these are two different markets. I want to clarify, in the car wash market, we are a competitive supplier. Or I guess we could say we are a seller of car washes. In the labor market, our firm is a competitive buyer. Now, I'll do a little bit o... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
Or I guess we could say we are a seller of car washes. In the labor market, our firm is a competitive buyer. Now, I'll do a little bit of an aside here. Because when we talk about suppliers, there's the competitive suppliers, where there's many undifferentiated people who are supplying some type of good or service. And... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
Because when we talk about suppliers, there's the competitive suppliers, where there's many undifferentiated people who are supplying some type of good or service. And the opposite of that was a monopoly. So non-competitive. As a seller, we call that a monopoly. If we had a non-competitive buyer, so if you had many sel... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
As a seller, we call that a monopoly. If we had a non-competitive buyer, so if you had many sellers but only one big buyer that could have a lot of market influence, and we haven't done a deep analysis of that yet, that word, just so you know it, you're not taken by surprise if someone says it, just it means monopsony.... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
Not relevant to this video, we are the opposite of a monopsony in the labor market. We're assuming that we are a competitive buyer. There are many, many, many, many, many buyers here. So we essentially just have to take the market wages. And we are also the opposite of a monopoly in the car wash market. We're assuming ... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
So we essentially just have to take the market wages. And we are also the opposite of a monopoly in the car wash market. We're assuming that we are one of many competitive sellers. Monopoly means only one seller. Monopsony means one powerful buyer. But the whole reason why I'm saying that we are competitive in the labo... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
Monopoly means only one seller. Monopsony means one powerful buyer. But the whole reason why I'm saying that we are competitive in the labor market is I'm assuming that we're just going to have to take the market wages. So the market wage for the type of labor we're hiring, so the market wage, and we're just going to h... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
So the market wage for the type of labor we're hiring, so the market wage, and we're just going to have to take that, the market wage is going to be, let's just say it is $10 per hour. And given that, what is a rational number of people to hire? Well, that first person we hire, we're getting $25 of benefit. The margina... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
The marginal cost of them, and we can actually draw a marginal cost curve, the marginal cost curve will just be flat right here at $25. It'll just be, sorry, it'll be flat here at $10. That's how much it costs us. If we hire one person, it costs us, the area would be $10. If we hire two people, the area would be betwee... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
If we hire one person, it costs us, the area would be $10. If we hire two people, the area would be between 0 and 2 and under the curve, which would be 20. Or you could say the increment from going from 1 to 2 people is another $10. From going to 2 to 3 people, this area right over here is another $10. If you go from 3... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
From going to 2 to 3 people, this area right over here is another $10. If you go from 3 to 4 people, this area under here is another $10 under this green curve. So does it make sense to hire that first person? Sure. You're going to get $25 in revenue and you're going to have $10 in wages. So you're going to have $15 of... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
Sure. You're going to get $25 in revenue and you're going to have $10 in wages. So you're going to have $15 of benefit. So you definitely want to hire one person. Does it make sense to hire that second person? Well, the marginal product revenue is going to be $20 from that second person. Your marginal cost from that se... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
So you definitely want to hire one person. Does it make sense to hire that second person? Well, the marginal product revenue is going to be $20 from that second person. Your marginal cost from that second person is $10. So you're going to make $10 on that second person. So you should hire that second person. The third ... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
Your marginal cost from that second person is $10. So you're going to make $10 on that second person. So you should hire that second person. The third person, you're going to make $15 off them. They're going to cost you $10. And this is all on a per hour basis. You're going to make $5. | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
The third person, you're going to make $15 off them. They're going to cost you $10. And this is all on a per hour basis. You're going to make $5. So you should hire that. The fourth person, well, now it's interesting. The fourth person, you're going to make $10 in total off of the fourth person, but you're also going t... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
You're going to make $5. So you should hire that. The fourth person, well, now it's interesting. The fourth person, you're going to make $10 in total off of the fourth person, but you're also going to have to pay $10 for that fourth person. So it doesn't make sense for you to hire another total fourth person. Now, if y... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
The fourth person, you're going to make $10 in total off of the fourth person, but you're also going to have to pay $10 for that fourth person. So it doesn't make sense for you to hire another total fourth person. Now, if you could, it could make sense for you to hire another half person, maybe someone who shows up eve... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
Because for a half person, it does make sense. A half person is going to cost $5. And their marginal benefit is going to be the area under the curve between this point and this point. So the profit from that person, the net benefit we're going to get, is going to be this area right over here. So it would be rational to... | How many people to hire given the MPR curve Microeconomics Khan Academy.mp3 |
And the idea here is if you want to produce anything, so let's just say this circle is the production process, and this arrow is the output, you need inputs. Now, you might have many, many, many inputs. You might need supplies, you might need a factory, you might need people to work in the factory. You need all of thes... | Four factors of production AP Microeconomics Khan Academy.mp3 |
You need all of these different things, but the idea of the four factors of production is that these things can all be classified in one of these four groups as either land, labor, capital, or entrepreneurship. Now, these words have meaning in everyday language, and so some of it might jump out at you. Of course, if yo... | Four factors of production AP Microeconomics Khan Academy.mp3 |
And you can see that in this example here where we see a farm, clearly they need a lot of land in order to have the farm. Even in a garment factory, this is a picture of a garment factory from maybe 100 years ago, even there, they needed land on which to build the factory. So this floor is sitting on land. And land doe... | Four factors of production AP Microeconomics Khan Academy.mp3 |
And land doesn't just have to strictly mean land in an economics context. It can mean natural resources in general. This could be things like water or air or energy. So in some context, instead of land, some people might say natural resources for this first factor of production. Now, another important factor of product... | Four factors of production AP Microeconomics Khan Academy.mp3 |
So in some context, instead of land, some people might say natural resources for this first factor of production. Now, another important factor of production, and arguably they are all important, is the idea of labor. To produce many or most things, someone has to work on it. So someone had to plant these seeds and the... | Four factors of production AP Microeconomics Khan Academy.mp3 |
So someone had to plant these seeds and they will have to harvest these crops. The labor is very clear here. You see people putting in work in order to produce the product right over there. Now, capital is an interesting one. It means one thing in everyday language, and it means something slightly more specific when we... | Four factors of production AP Microeconomics Khan Academy.mp3 |
Subsets and Splits
No community queries yet
The top public SQL queries from the community will appear here once available.