Marginal Analysis, Roller Coasters, Elasticity, and Van Gogh: Crash Course Economics #18 

Some notes for y'all: Micro-economics looks at individual markets and the decision-making of consumers and businesses. Micro-economics asks questions such as "should we increase minimum wage?" or "how many workers should we hire?". Important aspect of Micro-economics: marginal utility - Marginal utility is an analysis of how businesses and consumers make decisions. Marginal is similar to "additional". Marginal costs = additional costs. Marginal benefits = additional benefits. Businesses use marginal utility when considering employment. They compare the marginal costs of hiring the worker with the benefits. If hiring the worker results in more revenue (profit) then they are employed. +$ > -$ = More revenue +$ < -$ = Loss - Utility means satisfaction or how much happiness is generated when humans consume goods or services - The Law of Diminishing Marginal Utility means that as you consume more of a good or service, the utility, or satisfaction is lowered each time. The Law of Diminishing Marginal Utility can be reworded as "The Law of Decreasing Additional Satisfaction". - Utils are units to quantify satisfaction. They are completely subjective, meaning that they are based/influenced on people's opinions. People use Marginal Analysis unconsciously every day. Demand curve sloping downwards can represent marginal benefits. Supply curve sloping upwards is marginal costs. The Equilibrium is efficient because the benefits of the goods consumed are equal to the costs. This is how markets are so good at managing scarce resources. - The Law of Supply is when an increase in price gives producers an incentive to produce more. - Substitution Effect is that as prices rise, consumers will replace more expensive goods with alternate, similar, cheaper ones. Diamond Water Paradox: Water's utility is VERY HIGH, crucial for life. But since it is plentiful to most people, the marginal utility is really low. Since we don't get much additional satisfaction from water, prices stay low. Diamonds on the other hand, the additional satisfaction, or marginal utility is VERY HIGH, due to its "scarcity" or the fact that diamond mining is run by monopolies. Relative Scarcity generally means that the more rare an item is, the higher the price. This doesn’t apply for everything though. Utility is Subjective. Demand is dependent on peoples preferences. Elasticity shows how sensitive quantity is to a change in price. Things that people need with little substitutes usually mean that if prices rise, people will not buy that much less of the good. Examples of goods that have a relatively inelastic demand include healthcare, coffee and fuel. Elasticity of demand means that goods with lots of substitutes will only be chosen if their prices are lower than their substitutes. There is also Elasticity of Supply. Inelasticity means that even if prices rise, the supply of goods will not change. Relatively elastic supply is when quantity is sensitive to price change because producers can respond quickly.

Marginal analysis reminds me a lot of how much of a difference it makes when you spend additional time on a task (e.g. perfecting an essay). The first few hours or planning, writing, reviewing and editing are highly productive. Then, each additional hour you spend will result in a relatively smaller improvement, until spending more time on it is no longer worth it.

I’ve been struggling to understand elasticity for the whole time of getting my degree and you explained it so easy in 12 minutes Feel like going to my Uni accountant and demanding my money back tf

Yes. The additional benefits of watching this video was definitely greater than the additional cost 👏🏾👏🏾👏🏾👏🏾👏🏾👏🏾

"diamonds are scarce" *south african mafia laughing secretely*

finally gets onto microeconomics when my microeconomics class has already been finished

I'm full of utils. Thanks, Crash Course.

*Stan*: How much does it cost to ride the rollercoaster? *Employee*: Less! *Stan*: _Is confused_

Marginal Analysis , Law of diminishing marginal utility , Utils - Discount deals , Law of supply , Diamond water paradox , Relative scarsity , Substitution effect , Elasticity of demand , Relativly inelastic .

"Diamonds are intrinsically worthless..." - De Beers chairman Nicky Oppenheimer, 1999

The inelastic demand of products, like pharmaceuticals, is a big reason why the free market needs some regulation.

9:38 " I don't really need pizza." Speak for yourself.

Diamonds are expensive due to monopolies & marketing campaigns.

"No substitute for coffee" TEA, YOU UNCULTURED HEATHENS

One of the most useful lecture learned for me today. It helps solve a lot of my questions. Thank you crash course.

Thanks CrashCourse for the 55 Utils + the knowledge value I just got for free. I can’t donate currently but I’ll help spread the word as much as I can. I admire this channel a lot and it represents a significant revolution in education.

The diamond example could lead really well into a crossover with psychology, considering that supply is (for the most part) kept artificially low by DeBeers while advertising is done to make people think the marginal utility of diamonds is really high, so that in effect they can sell diamonds in that system at very high prices.

Thank you SO must Crash Course for this RU-vid channel you creative, also a big thanks to ALL the people who are involved with the making of these awesome, educational ,and very helpful videos! I appreciate, and I am so very thankful! Thanks guys! 😁

Have to say, on the first video of this series I wasn't impressed. Thankfully, I feel like it has both grew on me and the overall quality has improved with each episode. Well done Adriene and Jacob, keep it up.

I have oodles of utils from watching these videos. Super helpful! Thanks guys.

Amazing job guys! Really loving this series!

"What if I see something that would give me a lot of utils and I take it?" "That's illegal" "You don't understand it'll give more utils than it would give to them" "Still illegal"

If the gas is too high, buy ethanol, if ethanol is high buy gas. Such is life in Brazil.

thank a lot miss Adrien and Mr Gakob and all of the people who let crash course exist

I found this video more educating than all the previous ones. Maybe because I enjoyed this one so much? It was so interesting!

diamonds are artificially scarce

Awesome, I loved the way Adriene carried the lesson into the credits and the pitch for Patreon. Very well done!

fact : diamonds are NOT scarce, their plentifull, The de Beers mining company however has a Monopoly on Diamond mines, only selling about three % of their income in diamonds each year artificialy inflating The price of diamonds

There's no substitute for Crash Course. Thank you so much!

This is Rehan. I ve just watched your video. I came across very very best n elaborative way of describing the microeconomics basic principles in easy n polite way. Thanks again

As someone about to write a test on this content, I found this video extremely useful. Thank you!

Love the John Green wearing Holden's cap in 4:18

There aren't relatively few diamonds, the DeBeers company hordes Diamonds to decrease supply and drive up demand. This is well known and if the video addressed this it could have further proved its point vis-a-vis supply/demand/marginal utility etc, It's a great video though, thanks!

man I love crashcourse. I watch them to learn random stuff about the economy and astronomy on the weekends & at school where John Green saves my gpa in AP world. ❤️❤️❤️

At 3:16, the Latin motto around the roller coaster means "Don't forget to be awesome"

we are doing exams on Monday... the video came just in the right time...👍👍thanks crash course.. and also ACDC Enon.. you are the best in every video

This one video pretty much sums up the last 3 months in my Economics 101 class. Touche Crash Course touche. . .

Explanations as simple as "For economists the word marginal is pretty the same as additional", helped me as an ESL to understand more than what I tried to learn/ search for in the past 10 weeks... Thanks crash course! 😂

Thumbs up for AC/DC buckle belt!!!

Jacob talks so fast I can't wrap my brain around the concepts quickly enough😂

Gas stations used to have sales. "Gas wars," where stations on opposite corners would compete by lowering prices all day long, were common in Los Angeles.

I love the tiny John&Sherlock in the thought bubbles btw:3 Too bad they have got no line.

I love that law of diminishing marginal utility. All he had to say was how this is why markets are so efficient. I love efficiency and hate waste.

What great timing. I'm studying for this exam right now.

4:35 the sarcasm

I like the addition of Spock and Captain Kirk at the amusement park... Great creativity!

A very good, neutral episode. Facts of economics, not personal theories.

Diamonds are only expensive due to a monopoly.

Nice, they have slowed down their pace.

Van Gogh won't make more paintings but people who have a Van Gogh that they're not selling, might be willing to sell it when the price goes up, so the price isn't completely inelastic.

Quite refreshing for the micro exam I have next week

Hi. What do you think about the elasticity of demand for Beethoven recordings and classical music recordings? I think the first one is more elastic in theory because it's more specific, but I'm not sure

7:00 Not to mention the fact that the diamond supply is being artificially restricted by companies. Diamonds aren't rare jewels, they're actually kind of common. Companies just make it really hard to get them. 8:49 Vegetable oil will work just fine with very little damage to your engine, but you'd have to be really desperate.

Can you guys go deeper into microeconomics like elasticity, supply and demand, cost of demand, etc. with their own personal videos plz

THIS GUY IS ROCKIN A ACDC BELT. too cool.

This video confirmed the earlier noted point that economics are indeed part of the study of human nature.

What should we do when the costs=benefits?

What is this 'don't really need pizza' that you speak of?

Here are some notes if you need em! -Microeconomics looks at individual markets and the decision making of consumers, businesses, and markets -Marginal Analysis = an analysis of how individuals, businesses, and government make decisions (in economics marginal = ~ additional) → additional benefits and additional costs -Businesses determine the additional revenue the worker would bring in contrast to the additional cost of bringing in the worker → if marginal revenue is higher than marginal cost, then the worker is needed -Law of diminishing marginal utility (utility = satisfaction or happiness consumers get from a good or service) → reward to Law of Decreasing Additional Satisfaction (economist made up a term called “utils” which are like subjective happiness points) -Demand curve on the supply & demand curve is actually the Marginal Benefit Curve while Supply curves are Marginal Cost Curves -Then a terrible Diamond example that refuses to acknowledge the De Beers Scam -Demand depends on the preferences and choices of consumers, but also on the number of substitutes -Substitution effect = as prices rise, consumers will replace more expensive items with less costly alternatives -Elasticity = shows how sensitive quantity is to a change in price -Elasticity of demand = how readily people are ready to jump ship to another substitute good when the price is too high → demand for gasoline (as it has no alternatives in the short run for petrol car owners) is relatively inelastic = meaning a large percent change in the price leads to a small percent change in the quantity demanded (steeper demand curve) -Perfectly inelastic goods (like Insulin) are goods in which a percentage change in price leads to not change in quantity demanded -Elasticity in supply = relatively elastic supply is things like t-shirts in which quantity produced is sensitive to change in price because producers can respond quickly -Perfectly inelastic supply can be used to describe expensive paintings like the Van Gogh, because even if the price goes up, Van Gogh is not going to be doing any more paintings

Can you guys cover inputs and costs? Along with monopoly, oligopoly, monopolisitc competition and perfect competition? Your vids are really awesome and they're really helping me with my economics course.

BELIEF is also a factor in the value of items. Many people pay more for something like a car not because of it's practical use but because they believe it is worth more.

That cut tho at 4:35

Thanks for enriching my knowledge of Economy.

4:48 Damn, haven't seen this since ep 1

The term Utils is good, I would connect it with a "health index" which defines its true value

I like the Spock and Kirk characters at 3:31

Does the law of diminishing utility apply to wealth? Do utils for money go down the more you have?

How to solve this B(Q) = 20Q -2Q^2 and the corresponding total cost is C(Q) =4 +2Q^2 so that MB(Q) = 20 - 4^2 and MC(Q)=4Q. What is total benefit when Q = 2? Q=10?

Adrian Hill oh my goodness! I'm a Marketplace listener and I had no idea she did this!!!!!!

well done guys! i like the way you provide the course. Please add more diagrams. Thank you!

Geologists and industrial chemists they are not. The notion that a diamond is rare or difficult to produce is a falsehood. Apart from that, I still applaud this series. Greatly enjoy all of the episodes.

definitely a nice condensed review before my final tomorrow!!

Will you guys eventually make an (AP) Art History Crash Course series? It definitely seems like you guys could efficiently pull it off, plus it is a very complex and intriguing topic that needs the Crash Course treatment for a better understanding.

Still waiting for them to talk about Jacobs ACDC belt. This is the most anticipated mystery of all entertainment

woo love you guys , thank you for these videos, about to start my B.S. online in Econ at Penn State (serving abroad)

Love the belt buckle

Ooooof course you start covering this as my micro final is on Tuesday

Asking whether macro or microeconomics is more important is like asking whether the individual or the society is more important. It depends on who you ask

I had my microecon final yesterday. This video came out one day late :(

Nice presentation, thx for the information! It really helped me.

The price of diamonds price is kept artificially high! The diamond market is being control unfair, like most markets!

This video was worth 100 utils. Thank you.

Small tip for students who are watching these videos, slow down the video speed under the you tube settings to 0.75...the information gets processed a lot better cause they are talking a bit fast....Thanks for the video though :)

Where is crash course econ lesson 19? Please keep making these videos, they're really great!

Interestingly, in Mexico, the cost of electricity goes up the more you use it to encourage people to limit their use of electricity.

Can you guys make a video about the Early Modern era economy? That's what we are studying rn in AP World

Nice belt buckle.

Now they do Micro. After I passed the class...

Most awesome in series.

It’s the ac dc belt for me

This video is very useful for me. Thank CrashCourse ^^

I miss macroeconomics already, i don't get microeconomics good enough, any advice!!

diamonds are not scarce. it is an artificially scarce good. Tons(in weight) of diamonds are being used yearly for drilling and cutting machines almost at the same price like water :)

Nice refresh.

diamonds aren't even that rare

I just wish the admin would link the vids to the right playlist... seems some of the videos aren't under the playlists. like Econ has 18 vids but only 15 under the playlist :/

8:50- you CAN power most newer cars with alcohol Or ethanol.

I obtained a lot utils from this course because the cost for me was very low. For me it only required the opportunity costs purchasing a computer, the internet and using my time. But the course is not free, because there is no such thing as a free lunch. It wasn't free for you to make it and it wasn't free for me to watch it. It was just without price.

Diamonds actually rain down from the sky, but when you place an umbrella so wide and funnel it to a single house - now you have scarcity.

This stuff really helps. Thank you