Introduction to Economics: Key Concepts

So let's go ahead and get started. If you end up watching the video, let me know. I really don't want to wear a mic. I hate hearing myself over the phone or over the, sorry, over the phone, over the speakers. And so I'm hoping this mic picks it up. It's new. They didn't have it last year. Last year's ours was broken. So, the standalone mic. So, we'll hope this one's a good mic. In terms of announcements, remember I have student hours to help out. If you need to meet me, Tuesday, Thursday, 3.30 to 5. Today, we're starting Chapter 1 in the textbook. I did post that. I usually post the first two chapters. That's all I can post legally. So, after that, if you want the book, you got to buy it. Okay. Or get a copy or borrow your friends. Hopefully you might have a roommate that has it and you can go, Hey, they're not using it. Right. I'm all for saving money. I'm an economist. So we're in chapter one. Remember course syllabus, the full course syllabus is online. Please remember to look through that. Okay. We do have lab this Thursday and Friday. So we do start this week. Remember those are meeting in Waters Annex. It is not in this room. So, actually if you're in tomorrow's lab, which is at 11 30, or on Friday there's five sections, those meet in Waters Annex. Okay, if you are confused about your lab section, so, and this is why I wasn't happy when they switched me out, my labs used to be labeled in HACES as A through F. Now it's all 120B, and then recitation. So everyone has the same number, 120B. You need to look at your recitation time. That is the lab section. And then go to that room. Okay? And so go to the scheduled recitation section. And that schedule, you can match it to your syllabus to find out what lab section you're in. Okay? And you'll know. I'll remind you. Okay? There is no tutoring sessions this week. Those will start up next week once we get the first lab packet and assignment. Okay? Questions? So those are my announcements. We're full up today. So we're like a big can of sardines. Hopefully we taste better. I like sardines and salt crackers, but my kids just go, yeah. Or pickled herring. I grew up with that too. If you've never had it, you should go buy a jar and try it. It's always an interesting discovery the first time people taste it. So today we're going to start our introduction to economics. So what is economics? Or as one of my kids used to say, eschatomics. So we're going to look at economics as a social science, define a key aspect of economic scarcity, kind of different scales in economics, micro versus macro, the way we look at economics, positive versus normative, and then we're going to do a graphical review. I throw it here because this is kind of... we'll start looking at linear lines and linear equations in graphs because we're going to use these through the course. These help us tell stories. And we like to tell stories. Science, at the end of the day, is about telling stories. And we need to be able to tell the story. Otherwise, it's just a bunch of equations and theories and stuff. And people go, huh? So it's the story that matters. So economics. Oh, I will say, if you don't have them, you can go to the website. The skeleton notes are online on Canvas. They're posted. They will be posted at the beginning of every week, and you can fill those out, or you can take hand notes with a real pencil. I know that's rare these days, but I do provide that. I actually encourage writing or a tablet because it actually helps you ingrain what you're learning. Typing's not quite as good. But that's up to you. Okay? Whatever works best for you. Economics is a social science. What do we mean by that? We study human behavior. Yes, economics. We do accounting. We like banks. We talk about money. Money is just a means to make exchange happen. But at the end of the day, we're interested in behavior. We want to know what people do and why they do it. We want to understand people, organizations, institutions. And so that's what we study. Okay. Economics not only studies markets. We look at why people commit crimes, why they vote the way they do. It's similar to others. So some of the social sciences, you might say, hey, that's political science. We ask the same questions in economics with a different point of view. Most social sciences ask the same questions with different lenses. And I've learned you look at all the lenses, too. It's cool. bring sociology into economics. And so this is a paradigm shift because people tend not to think of the economy and go, huh, human behavior. Well, that's what it's all about. So it's a study of decision makers. Okay. We have two main types, consumers. We also call them customers, buyers, households. We're all consumers. If you're not a consumer, you're dead. You got to eat so you consume. And producers. A lot of us are also producers in some form. Producers are, we also call them firms, manufacturers, sellers, farms. Are they producers or consumers? They're both. Depends on what decisions they're making. I'm pausing to let people catch up. So economics is interested in discovering motives, the things that motivate people. And that's why we said we're social science. Why do people do what they do? Motives, understanding those motives. And there's a lot of them. So get into this a little deeper. What do we mean? While you might say you give 110% to your job because you love it, you also love other things, such as a pet, a significant other, your family, your house, your car, etc. Right? We love leisure. So while you say you give 110% to your job, well, besides being literally impossible, likely, really, you're giving some percentage to your job and then other percentages to other parts of your life, right? I don't think anyone is all about their job or their career, okay? It's motives that tell us what to spread our time across in our effort, why we do what we do, how we make those decisions. Economics is about discovering those motives. and how they influence people. It's why advertising and marketing are so effective. And it's motives that drive us to spread our resources across different things, our money, our time, and our physical effort and our skills. To get extra performance out of your job to get you even closer to 100% would likely require incentives. Incentives are created once we know what motives are. These are the actions we take to motivate, to build on your motives. And why to get you closer to 100%? Because we have competing interests. These incentives can come as performance bonuses, extra time off, job perks. I toured New Belgium Brewery about a decade ago. I actually grew up in Colorado. How many people are familiar with New Belgium Brewery? It's fat tire. Wow, not many. That's understandable. They're the second largest craft brew company and their primary competitor is Samuel Adams. They just got bought. But they had a really cool perk on their job. You work there five years, they give you a... Bicycle that they have designed and patented themselves and they only give to their employees. You can't buy it. And then they have bike to work days. Once you get 10 years, they sent you on a two week trip to Belgium where the owners figured out how they wanted to make beer. and learned it. So you do the same tour the owners did for two weeks. And the reason they did that is every employee after a year gets vested in the company. The company was employee owned. So you start earning stock. And so huge perks. When the company asks, hey, we have to cut because of finances. What do we cut? People are like, please don't cut that five and 10 year perk. We look forward to that and working toward it. kind of big medals of honor. And so that is, what do you think the biggest incentive in jobs is? If you want to get extra performance out of people, money, what's even, well, money, what kind? How do we do the money? So you can do a bonus. What's better than a bonus? Raises. Raises are the most cost-effective incentive. They have the biggest impact by far because they're permanent. That's a permanent increase over time versus bonuses are one time. So incentives matter. That's kind of the message here. Why are you in class today? Share with the person next to you why you came. So you had to come to class. You came to class. You basically walked in the door and sat down. Talk with the person next to you and share why you came. So, coming back, why did you come? You paid for the class. It's $1,000 to sit here for 15 weeks and gain my knowledge. I don't get it. Some of my scholarships are based on GPA. Scholarship. There's financial incentives beyond just that you pay for it. Future college scholarships depend on it. You got to do well. Right? What else? Your mom. Hey, that could be a powerful incentive. Hey, that's what I should get on the... Index cards. Your mom's phone number. What? Interest. Hey, these are all motives, right? I'm going to remember that for next year. See how many I get. I've read like 7511111. That's the number for Pizza Hut in Denver. Only reason I know that is they ran an ad. 7511111. It's for Pizza Hut delivery. Yeah, everyone knew it. So your reasons for coming to class are motives. They are what influenced you to be sitting here, right? It could be we had interest, benefit of being informed. Hey, there's financial reasons. I paid for it. Toward the end of the semester, that's not as much of incentive as it is at the beginning of the semester. I can tell you that from experience. Attendance drops off in any class, even if there's still good attendance. Incentives drive markets. So what happens when the prices of goods change? There's been a lot of talk about inflation. Do you buy as much when prices go up? No, we see this behavior. That's incentives and motives. There's motives behind why those incentives work. And so if you change your consumption patterns, incentives underpin effective policy. Policy doesn't work if there's not incentives behind it. The right incentives can actually influence behavior. They can decrease pollution. Taxes work decently well if they're high enough. They can improve social welfare. It's why we have SNAP. our welfare system. They can get our politicians to vote the way we want them to. Lobbyists are heavily powerful and our campaign finance laws allow for a strong incentive to be influenced by groups, organizations, institutions, and business. Strong incentives, very much financial. I do a lot of conservation and ag. The most effective conservation programs are the ones that are voluntary, actually, and that pay farmers. But they have the choice to do them or not. And they actually get a lot more done than if you made it mandatory. People will do the minimum and try to get out of it. People don't like being told what to do. And I think that goes around the world. That's human nature. But if we can incentivize you and make it voluntary in your decision, then we can get a lot more improvement with policy. The other side of that is perverse incentives work too. Incentives can go both directions. While they can encourage good behavior, they can also encourage bad behavior or bad things. Perverse incentives are those that create unintended consequences. For example, the Endangered Species Act of 1973 has led landowners to deforest their land, or thin it to the point where they don't have to worry about endangered species on their land if they know they're there, but the U.S. government does not. And that has been documented. And so they will try to get rid of the species so the government doesn't step in and mandate that they have to... Manage their land as a wildlife refuge. And they don't get paid for that under the Endangered Species Act. And so there's a strong incentive when the government created this that they didn't think about ahead of time. Yes, it saves species and it has worked to a degree. But at the same time, it actually created some incentives for people to get rid of those species so they wouldn't be managed or regulated. Owners of stocks and companies that sell antivirus software, this one will make you think, have an incentive to propagate viruses in order to motivate purchases of their software. And I won't say that, if that's actually happening or not. I'll let, I'll, what? Yeah, they're listening. But in terms of, there's an incentive there to do that. Make a big enough virus outbreak that causes enough downturn, you can get a big spike in antivirus sales or protection. Executive salaries that increase with a company's size may encourage excessive mergers. To put this in perspective, there were more than 60,000 mergers between 1980 and 2000 in a 20-year period of companies. These are companies joining together to create bigger companies. That expansion has not slowed. So you could probably say there's an equivalent number in the last 20 years. And there are bonuses for companies, for CEOs based on sales. If they get a merger, they can increase their sales, get their bonus. Their bonuses can be huge. I mean, what was Elon Musk's? $24 billion. And he just got his bonus. Or even for other CEOs, it's like $30 million. Not uncommon. In the millions for their annual bonus. Strong incentive to get that cash. So incentive matters because they impact our choices. And really, they do it on the margin. It's not that I'm trying to influence you in the past or in the far future. I want to influence you now on the margin for your next decision. And then I'll remind you again, it's why we have advertising. It affects us on the margin, meaning it's our next decision. And on the margin means we're not considering all of history in our lives. We're just like, we're weighing marginal benefits, marginal costs. What is my next gain short term and short term costs in that? If we're even doing that and just not acting emotionally, that happens as well. And we'll talk about this. This is key to economics. Economics is not just a discipline. We have actually what we call an economic way of thinking, and we call it marginal analysis. And we'll talk about that a lot this semester. So that's the first key point in economics. It's about human behavior. It's about why we do what we do, and we do it because of motives. What are those motives? We're going to explore that. That's the semester. Economics is also about scarcity. Why do motives matter? Well, part of it is due to scarcity. Scarcity is simply the idea you cannot get everything you want or what you desire. We have unlimited wants and desires. We have limited resources. What are those resources? We have limited water. Yes. But you could drink yourself to death if you're that thirsty. You actually can. Don't over drink water. You can drown your body actually without being in a swimming pool or in a body of water. You can make yourself very sick otherwise. But water, or agriculture is water. What else? Land. Well, I'm thinking even more college students. What are your limited resources? Money. Money! When I was a college student, I was not looking at a porch. As a professor, I can consider it. My wife says no. I drove a minivan for years. Now I drive a Honda Pilot. But my car choice is dictated by my wife. Very much so. And so I have very much big fat Greek wedding. My wife, she treats, she says, you're the head of the house and she's the next. I go where she tells me to go. especially when it comes to our household. But very much in terms of, and I love my wife to death, but I'm limited too by I'm part of a family, right? So I have to provide for them. I have to meet their motives and desires. And so when you have significant others and family, that even, that is an actual potential. It's not a resource per se, but it is a constraint. And it affects this because you have to give compromise. We don't have unlimited income or money. What's the other big one? Time. There's two things that's true in life, right? One is taxes. The other one is death. I know it's not fun to think about, but it's coming, right? It's inevitable. We have not learned immortality yet. I don't think it'll happen in my lifetime. So I will be saying goodbye at some point off this immortal coil. it will go out. I'll fizzle out, break. That light ends. But before then, hopefully I fill some of my desires, but I'm still limited. I have limited time left and limited resources to do it with. I have to be here for an hour. I could be playing my PlayStation. I don't know how fulfilling that is, but it seems fulfilling. Scarcity applies both to material and intangible things. Material things are like cars, like a Lamborghini, trophies, houses. For a lot of college students, beer. That's the positive four-letter word. Don't let it consume you. Pardon the pun. That's my dad joke for the day. Intangible goods, though. There's limits on even intangible goods. Things like respect. If you haven't learned yet, not everyone in the world may like you. That could be a hard lesson, or to please everyone, and you just won't please them. Kind of a fact of life, but it's a lesson everyone learns at some point. Hopefully you learn it when you're young. But fame, there's limited fame. Everyone has 15 minutes, right? Well, on average. heard a great comedian and he's like, I had 30 years. So that means there's a whole stadium of people who have none. But fame, there's limited fame, right? There's limited time. Grades are intangible. Yes, I can print it out on a piece of paper what you got, but you can't hold your grade physically. It's all electronic these days. I guess I could give you the electrons. I don't know how you find them. This makes two types of goods, economic goods, non-economic goods. Economic goods are goods that are scarce. It's most of the goods we consume or use or avoid. But these are economic goods. We also have non-economic goods. These are goods that are free. They're not scarce. You can't ever fully consume them. So economic goods include all the tangible intangibles we just mentioned. So then there's this... category, non-economic, it shows up in your textbooks. People give examples. Sunsets. Outdoor air. So let's start with sunsets. There's other examples. These are classic ones. Are sunsets free? So if you're sitting on your porch watching the sunset, is it free? If I put a billboard in front of you, is it still free? No. I just blocked your sunset. I could keep blocking it. You physically can block it. Is it free in New York? No, you gotta move around. You can't see the sunset everywhere in New York. If you haven't been to a big city like that, you should go. Go find the sunset. You'll walk a long ways if you're in Times Square. So sunsets, you could say, yeah, out in the middle of my cornfield they're free as long as the corn's not above me. So it depends on the season. But you could always block it. Depends where you are. Is outside air free? So outside air, think more, is good air quality outside air free? No. Where is it not free? Well, China, closer to home. Denver. So when I lived in Colorado, we got to drive to Colorado. There's two reasons you know you got there. The mountains and the brown haze. So this brown haze right below the mountains, really pretty, not really, right? And you're like, oh, I'm driving into that. It was physical. On really bad days, you could taste it. And that's because the mountains create this special area like in LA where the pollution doesn't go away. It sticks around. and collects. It's a lot better. But they're still struggling with it because of population growth. But they have some, it's why California and Colorado have some of the most strictest emission standards and burning regulations in the U.S. And so even to get really clean air you got to go to the mountains and drive out of the city. It's not free. And so I could even argue even general outside air is not necessarily free. One, you still got to expend energy to go get it. But most of the time, you got to drive to get clean air. Unlike Colorado, Kansas has some of the cleanest air in the country. So economics, we can put this all together. We have a story now. We know it's a social science. We know it's about motives. Scarcity plays a central role. And so what is economics? One definition, and this is expanded to what's generally in textbooks, economics is the study of human behavior and how choices, motives, and incentives impact how we use our scarce resources to allocate or how they're allocated across competing needs. So we look at economics on different scale. There's macroeconomics, there's microeconomics, and we look at fact versus opinion, normative versus positive economics. So macro versus micro. Macroeconomics is the study of economy-wide activities or results, whereas microeconomics For example, in macro, how long until the recession in the U.S. ends? Hopefully we don't have to answer that question for a while. And what is the economic impact of a decline in the euro on the US economy? Big picture questions. Or Brexit, which sounds like a biscuit. Did you eat your Brexit this morning? There's microeconomics. It's the study of individual decision-making units. So micro can be at the individual, the household, the firm, the state, or even a local community. and it's regional or smaller. It's asking much more specific questions. Should I plant more wheat next year? Should I purchase a new or a used car? That's a really relevant one these days, considering used cars are not much cheaper anymore. In addition to these two dichotomies, we also have positive and normative economics. Positive economics are factual statements that contain no value judgment. They're saying what is. They're answering what are the facts. Normative economics are statements of opinion or value. What ought to be or what should be. So do you know the difference? So here's two statements. The market price for corn is $3.50 per bushel and the market price of corn should be higher. Is the first one positive or normative? Are you sure? You're correct. Is the second one positive or normative? It's normative. Why? How do you know? Yeah, it uses the word should. Okay, let's make it a little more difficult. We're going to up the stakes. So the first one's positive. Second one is normative. Round two. The price of oil has increased over the past 10 years. Well, hold on. I haven't read my statements. And the other one is the high price of oil is the cause of the current economic slowdown. So is the first one positive or normative? Are you sure? How could you tell? You could actually check it with data, right? You could actually verify this. What about the second one? Positive or normative? Are you sure? You sure I want to give you two positive ones? So what do you think? Positive? You think it's positive, raise your hand. If you think it's normative, raise your hand. They uploaded you. Normative is correct. Why is it normative? It's a conjecture, right? It's the cost. That's hard to prove. Unless you have, it could be positive, but boy, I would probably make that statement more concrete. Saying, considering all other factors, right, you need to make a much more concrete statement. Okay? This one is even hard to necessarily verify with data. A lot of things cause impacts in the economy. So positive and normative. So now we're going to switch it up. Our third set. The global climate change debate plays a larger role in agricultural policy. And the second one is. Global climate change is a significant agricultural concern. Is the first one positive or normative? Why is it positive? You can actually verify the due cycle, basically. Okay, so you can potentially verify that? What about the second one, positive or normative? It could potentially be both normative. Why do you think the second one's normative? Well, what's the key? There's actually, I'll give you this one. The second one is normative, right? Why is it normative? What's the word here that kind of gives it away? Significant. We're trying to describe something with an adjective. Adjectives aren't usually fact-based. They're opinion-based. And so, usually normative. Don't always take on that because you could verify, but you need to be really careful on your choice. Someone could say, well, it's not significant, it's moderate. And then you'd have to argue if that's less than significant. What's this one? Positive or normative? Positive. Why? Someone said it. Well, it says larger, but I can go back in time, right? I can go 20 years ago. Were we talking about, before you were born, were we talking about, is climate change as much in our policy? I can always guarantee you it wasn't in ag policy very much. Is it now in ag policy? Yes, it's written across the board and all the websites too, depending on the year. We can verify this. The reason this one works, and you could argue how big is larger, but I can actually show this. It has grown over time and we can verify it with actual data. You could go through the policies and look at direct discussions of climate change in actual government policy. They're in the bills. And so this one is, it's not always. And this isn't meant to confuse you, but sometimes the statements are challenging. My gut for positive is, can you distinctly verify it with data? Could you prove it? If you can, you can possibly, you most likely can argue it's a positive statement. If you can't back it up with data, and data doesn't have to be numbers, it can be qualitative, but should have data. Okay? Questions so far? Okay, now you ready for your quiz? Just kidding. What I want to do to end today is start a graph review. I do want to talk about this because we will be graphing a lot in this class. And then linear equations. It's about as difficult as I get. We do a little bit of Algebra 1, and that's about as far as we go in that. Okay? You'll see part of it now, part of it... later in the semester. One thing I do want to do, and this is one of our favorite phrases in economics, you should get it on a t-shirt, ceteris paribus. It means holding all else constant. We use this in graphs. Graphs look at relationships. When you're looking at a graph, you're implicitly assuming everything not in the graph remains constant. It has to for the graph to work. And so in economics, when we look at relationships between two variables, we're assuming all the other variables, the rest of the economy is standing still. And that's what ceteris paribus means. So you learned some Latin today. Hey, you never knew this was going to be a language course. It's sorry, it's the only Latin I have. But we're going to look at graphs. So graphs show relationships. They tell us stories, which is the reason we use them. They're good visual stories. Graphs have axes with units. You're an ag, units are important. And a relationship, which we call sometimes a curve. For example, this is a demand curve for apples. On the y-axis, we have price in dollars per bushel and quantity on the x-axis in bushels. And notice it's downward sloping. And it tells us what? As more apples are consumed, price goes down, right? And in reality, we can actually, what we'll learn later with supply and demand is as price goes down, people consume more apples. Oddly enough, in economics, this was a convention. People want to put quantity here, price here. This is how it got started and it stuck. This is our exception and we'll talk about that. But the reason we can, you can put them on either axis here. They're determined simultaneously actually. You can't determine one without the other. It's like the chicken and the egg. So how do we get that demand curve? Well data. We collect data. There's lots of economic data. For this case, we have what we call a demand schedule, but it's just a table with data. I observed two prices and then how many bushels of apples are consumed by, say, a local neighborhood. I hope that's not a household. That's a lot of apples. That's in bushels, not apples. A bushel's big. If you've not had a bushel of apples, buy a bushel, take it home. And if you eat all of them, let me know before they go bad. It's a lot of apples. I've done it once. We will not do it again. That's a lot of apple pies. We gave away apple pies. And so how do you get this demand curve? Well, we have data. OK. And so that comes from we'll see how to get it. But this demand curve is an example of a linear relationship, as we talked about. OK. So this is the linear line. If we graph a linear line, it's a straight line. And so this demand curve can be represented by a linear line as well, or a linear equation. And what that means is the slope of this line is constant. The rise over run is one number. It doesn't change. And so that, as price goes down and consumption goes up or vice versa, it's always a constant proportion. So the question is, how do I get this curve? Well, using the demand schedule, the easiest way to graph the line is not to write out y equals mx plus b and compute m and b. You can do that. That's the really long way. And it's the hard way. I didn't like doing that. And especially if your units are really tiny. If those units on the axes are in millions, it may not matter. You're like, you can't see the slope. So plot all you need for how many lines do you, how many points do you need to identify a line? Two. How many coordinates? So we need two coordinates. How many points do I have in my table? Two. Find two points. Plot the two points. Take a straight edge or a ruler. Draw the line through those two points. That's how you get the curve. That simple. We do want to know what the function is. But this is interesting, because if I have that, this is interesting. It tells me some information. If I know it's linear and I draw the curve, this even gives me more information now. And it's a story. I can tell you the relationship between price and consumption of apples. Companies with marketing departments spend millions to figure this kind of stuff out, demand for their products. You can get a whole degree in marketing, which is the study of demand and motives and incentives. It's a subfield of economics. Curves do not have to be linear. They can be non-linear. They can look something like this. The difference here is that the slope of the curve is changing at every point along the x-axis. An example is a production function where you have corn yield or crop yield and nitrogen applied. And I have my units, bushels per acre and pounds per acre. And it's non-linear. How do we know it's non-linear? Well, when you plant a crop, there's nitrogen in the soil, so you get something. And then as you add more, it keeps going up. Thought experiment. I could keep adding it. I could go into mine and I could bury my field in six feet of nitrogen. What happens to your crop? It dies. You can kill the crop with nitrogen. So you know you can get that to zeros. And so we know it goes up, it's got to go down when you over apply, you'll damage the crop. Same with water, any input, you can over apply it. And we'll see that here in the next couple weeks. But we get non-linear functions. the world for the most part is actually non-linear. But linear works well in a lot of circumstances. So what this is saying is the nitrogen apply increases, the gain from it starts to get smaller and smaller until eventually it actually starts damaging the crop and it goes down. So we do want to know how to get a linear... equation. And so this is that famous formula, which you probably saw in sixth, seventh, eighth, or ninth grade. I'm not guessing when people took algebra. But y equals mx plus b or b plus mx. y is your dependent variable. x is your independent variable. m is the slope, rise over run. And b is what we call the y-intercept. It's where that curve intersects the y-axis. As a formula, the slope is calculated. So we use our, it's the change in y, that's your rise over the change in x. You just take your two points. y2 x2 is your first point coordinate, y1 x1 is your second point, or vice versa. As long as you use, you designate one point as your second, one is your first. Otherwise you'll get a wacky result, or the wrong sign, okay? And so this gives us our slope. Once we know our slope, we can calculate our y-intercept. And so we can do this for our demand curve. And so using our two data points, we can calculate our slope as minus 0.25. Give me one more minute. Our y-intercept is 3.5. Plugging those values, so I just called this is y, this is x. Just gave different letters. Calculate the two values from those two data points, and I get my linear demand function. P equals 3.5 minus 0.5 times q. This has more information than this. This is just two points. This contains all the points. on that line. And it's a better representation. We can also interpret it. So you can interpret the margin, that 350, that y-intercept, is the price at which no one will consume apples. Good price to know. The 25 cents, the slope, is the incremental change. If price goes up by 0.25, people will consume one less bushel. It tells you the marginal change for unit changes in price on consumption. And you can flip that around too, but I think this makes a little bit better. And this occurs due to demand and supply. We'll get there. That's in October. Okay? Remember, real quick, remember tomorrow we have lab. We are meeting you where? Waters Annex. We'll see you on tomorrow or Friday. Have an awesome afternoon.

So let's go ahead and get started. If you end up watching the video, let me know. I really don't want to wear a mic.

I hate hearing myself over the phone or over the, sorry, over the phone, over the speakers. And so I'm hoping this mic picks it up. It's new.

They didn't have it last year. Last year's ours was broken. So, the standalone mic. So, we'll hope this one's a good mic.

In terms of announcements, remember I have student hours to help out. If you need to meet me, Tuesday, Thursday, 3.30 to 5. Today, we're starting Chapter 1 in the textbook. I did post that. I usually post the first two chapters.

That's all I can post legally. So, after that, if you want the book, you got to buy it. Okay. Or get a copy or borrow your friends. Hopefully you might have a roommate that has it and you can go, Hey, they're not using it.

Right. I'm all for saving money. I'm an economist. So we're in chapter one.

Remember course syllabus, the full course syllabus is online. Please remember to look through that. Okay. We do have lab this Thursday and Friday. So we do start this week.

Remember those are meeting in Waters Annex. It is not in this room. So, actually if you're in tomorrow's lab, which is at 11 30, or on Friday there's five sections, those meet in Waters Annex. Okay, if you are confused about your lab section, so, and this is why I wasn't happy when they switched me out, my labs used to be labeled in HACES as A through F.

Now it's all 120B, and then recitation. So everyone has the same number, 120B. You need to look at your recitation time.

That is the lab section. And then go to that room. Okay? And so go to the scheduled recitation section. And that schedule, you can match it to your syllabus to find out what lab section you're in.

Okay? And you'll know. I'll remind you. Okay?

There is no tutoring sessions this week. Those will start up next week once we get the first lab packet and assignment. Okay?

Questions? So those are my announcements. We're full up today.

So we're like a big can of sardines. Hopefully we taste better. I like sardines and salt crackers, but my kids just go, yeah.

Or pickled herring. I grew up with that too. If you've never had it, you should go buy a jar and try it. It's always an interesting discovery the first time people taste it.

So today we're going to start our introduction to economics. So what is economics? Or as one of my kids used to say, eschatomics. So we're going to look at economics as a social science, define a key aspect of economic scarcity, kind of different scales in economics, micro versus macro, the way we look at economics, positive versus normative, and then we're going to do a graphical review.

I throw it here because this is kind of... we'll start looking at linear lines and linear equations in graphs because we're going to use these through the course. These help us tell stories. And we like to tell stories.

Science, at the end of the day, is about telling stories. And we need to be able to tell the story. Otherwise, it's just a bunch of equations and theories and stuff. And people go, huh? So it's the story that matters.

So economics. Oh, I will say, if you don't have them, you can go to the website. The skeleton notes are online on Canvas.

They're posted. They will be posted at the beginning of every week, and you can fill those out, or you can take hand notes with a real pencil. I know that's rare these days, but I do provide that. I actually encourage writing or a tablet because it actually helps you ingrain what you're learning. Typing's not quite as good.

But that's up to you. Okay? Whatever works best for you. Economics is a social science. What do we mean by that?

We study human behavior. Yes, economics. We do accounting. We like banks. We talk about money.

Money is just a means to make exchange happen. But at the end of the day, we're interested in behavior. We want to know what people do and why they do it. We want to understand people, organizations, institutions. And so that's what we study.

Okay. Economics not only studies markets. We look at why people commit crimes, why they vote the way they do. It's similar to others.

So some of the social sciences, you might say, hey, that's political science. We ask the same questions in economics with a different point of view. Most social sciences ask the same questions with different lenses. And I've learned you look at all the lenses, too. It's cool.

bring sociology into economics. And so this is a paradigm shift because people tend not to think of the economy and go, huh, human behavior. Well, that's what it's all about.

So it's a study of decision makers. Okay. We have two main types, consumers. We also call them customers, buyers, households. We're all consumers.

If you're not a consumer, you're dead. You got to eat so you consume. And producers. A lot of us are also producers in some form. Producers are, we also call them firms, manufacturers, sellers, farms.

Are they producers or consumers? They're both. Depends on what decisions they're making. I'm pausing to let people catch up. So economics is interested in discovering motives, the things that motivate people.

And that's why we said we're social science. Why do people do what they do? Motives, understanding those motives. And there's a lot of them. So get into this a little deeper.

What do we mean? While you might say you give 110% to your job because you love it, you also love other things, such as a pet, a significant other, your family, your house, your car, etc. Right? We love leisure. So while you say you give 110% to your job, well, besides being literally impossible, likely, really, you're giving some percentage to your job and then other percentages to other parts of your life, right?

I don't think anyone is all about their job or their career, okay? It's motives that tell us what to spread our time across in our effort, why we do what we do, how we make those decisions. Economics is about discovering those motives.

and how they influence people. It's why advertising and marketing are so effective. And it's motives that drive us to spread our resources across different things, our money, our time, and our physical effort and our skills.

To get extra performance out of your job to get you even closer to 100% would likely require incentives. Incentives are created once we know what motives are. These are the actions we take to motivate, to build on your motives. And why to get you closer to 100%?

Because we have competing interests. These incentives can come as performance bonuses, extra time off, job perks. I toured New Belgium Brewery about a decade ago. I actually grew up in Colorado.

How many people are familiar with New Belgium Brewery? It's fat tire. Wow, not many. That's understandable. They're the second largest craft brew company and their primary competitor is Samuel Adams.

They just got bought. But they had a really cool perk on their job. You work there five years, they give you a...

Bicycle that they have designed and patented themselves and they only give to their employees. You can't buy it. And then they have bike to work days.

Once you get 10 years, they sent you on a two week trip to Belgium where the owners figured out how they wanted to make beer. and learned it. So you do the same tour the owners did for two weeks.

And the reason they did that is every employee after a year gets vested in the company. The company was employee owned. So you start earning stock. And so huge perks. When the company asks, hey, we have to cut because of finances.

What do we cut? People are like, please don't cut that five and 10 year perk. We look forward to that and working toward it.

kind of big medals of honor. And so that is, what do you think the biggest incentive in jobs is? If you want to get extra performance out of people, money, what's even, well, money, what kind? How do we do the money?

So you can do a bonus. What's better than a bonus? Raises. Raises are the most cost-effective incentive.

They have the biggest impact by far because they're permanent. That's a permanent increase over time versus bonuses are one time. So incentives matter. That's kind of the message here. Why are you in class today?

Share with the person next to you why you came. So you had to come to class. You came to class. You basically walked in the door and sat down. Talk with the person next to you and share why you came.

So, coming back, why did you come? You paid for the class. It's $1,000 to sit here for 15 weeks and gain my knowledge.

I don't get it. Some of my scholarships are based on GPA. Scholarship.

There's financial incentives beyond just that you pay for it. Future college scholarships depend on it. You got to do well. Right?

What else? Your mom. Hey, that could be a powerful incentive. Hey, that's what I should get on the...

Index cards. Your mom's phone number. What?

Interest. Hey, these are all motives, right? I'm going to remember that for next year. See how many I get. I've read like 7511111. That's the number for Pizza Hut in Denver.

Only reason I know that is they ran an ad. 7511111. It's for Pizza Hut delivery. Yeah, everyone knew it. So your reasons for coming to class are motives.

They are what influenced you to be sitting here, right? It could be we had interest, benefit of being informed. Hey, there's financial reasons. I paid for it.

Toward the end of the semester, that's not as much of incentive as it is at the beginning of the semester. I can tell you that from experience. Attendance drops off in any class, even if there's still good attendance. Incentives drive markets.

So what happens when the prices of goods change? There's been a lot of talk about inflation. Do you buy as much when prices go up? No, we see this behavior.

That's incentives and motives. There's motives behind why those incentives work. And so if you change your consumption patterns, incentives underpin effective policy.

Policy doesn't work if there's not incentives behind it. The right incentives can actually influence behavior. They can decrease pollution.

Taxes work decently well if they're high enough. They can improve social welfare. It's why we have SNAP. our welfare system.

They can get our politicians to vote the way we want them to. Lobbyists are heavily powerful and our campaign finance laws allow for a strong incentive to be influenced by groups, organizations, institutions, and business. Strong incentives, very much financial. I do a lot of conservation and ag. The most effective conservation programs are the ones that are voluntary, actually, and that pay farmers.

But they have the choice to do them or not. And they actually get a lot more done than if you made it mandatory. People will do the minimum and try to get out of it. People don't like being told what to do.

And I think that goes around the world. That's human nature. But if we can incentivize you and make it voluntary in your decision, then we can get a lot more improvement with policy.

The other side of that is perverse incentives work too. Incentives can go both directions. While they can encourage good behavior, they can also encourage bad behavior or bad things. Perverse incentives are those that create unintended consequences. For example, the Endangered Species Act of 1973 has led landowners to deforest their land, or thin it to the point where they don't have to worry about endangered species on their land if they know they're there, but the U.S. government does not.

And that has been documented. And so they will try to get rid of the species so the government doesn't step in and mandate that they have to... Manage their land as a wildlife refuge. And they don't get paid for that under the Endangered Species Act.

And so there's a strong incentive when the government created this that they didn't think about ahead of time. Yes, it saves species and it has worked to a degree. But at the same time, it actually created some incentives for people to get rid of those species so they wouldn't be managed or regulated. Owners of stocks and companies that sell antivirus software, this one will make you think, have an incentive to propagate viruses in order to motivate purchases of their software. And I won't say that, if that's actually happening or not.

I'll let, I'll, what? Yeah, they're listening. But in terms of, there's an incentive there to do that. Make a big enough virus outbreak that causes enough downturn, you can get a big spike in antivirus sales or protection.

Executive salaries that increase with a company's size may encourage excessive mergers. To put this in perspective, there were more than 60,000 mergers between 1980 and 2000 in a 20-year period of companies. These are companies joining together to create bigger companies.

That expansion has not slowed. So you could probably say there's an equivalent number in the last 20 years. And there are bonuses for companies, for CEOs based on sales.

If they get a merger, they can increase their sales, get their bonus. Their bonuses can be huge. I mean, what was Elon Musk's? $24 billion. And he just got his bonus.

Or even for other CEOs, it's like $30 million. Not uncommon. In the millions for their annual bonus. Strong incentive to get that cash.

So incentive matters because they impact our choices. And really, they do it on the margin. It's not that I'm trying to influence you in the past or in the far future.

I want to influence you now on the margin for your next decision. And then I'll remind you again, it's why we have advertising. It affects us on the margin, meaning it's our next decision.

And on the margin means we're not considering all of history in our lives. We're just like, we're weighing marginal benefits, marginal costs. What is my next gain short term and short term costs in that?

If we're even doing that and just not acting emotionally, that happens as well. And we'll talk about this. This is key to economics. Economics is not just a discipline. We have actually what we call an economic way of thinking, and we call it marginal analysis.

And we'll talk about that a lot this semester. So that's the first key point in economics. It's about human behavior.

It's about why we do what we do, and we do it because of motives. What are those motives? We're going to explore that.

That's the semester. Economics is also about scarcity. Why do motives matter?

Well, part of it is due to scarcity. Scarcity is simply the idea you cannot get everything you want or what you desire. We have unlimited wants and desires.

We have limited resources. What are those resources? We have limited water. Yes.

But you could drink yourself to death if you're that thirsty. You actually can. Don't over drink water.

You can drown your body actually without being in a swimming pool or in a body of water. You can make yourself very sick otherwise. But water, or agriculture is water. What else? Land.

Well, I'm thinking even more college students. What are your limited resources? Money.

Money! When I was a college student, I was not looking at a porch. As a professor, I can consider it.

My wife says no. I drove a minivan for years. Now I drive a Honda Pilot. But my car choice is dictated by my wife.

Very much so. And so I have very much big fat Greek wedding. My wife, she treats, she says, you're the head of the house and she's the next. I go where she tells me to go. especially when it comes to our household.

But very much in terms of, and I love my wife to death, but I'm limited too by I'm part of a family, right? So I have to provide for them. I have to meet their motives and desires.

And so when you have significant others and family, that even, that is an actual potential. It's not a resource per se, but it is a constraint. And it affects this because you have to give compromise.

We don't have unlimited income or money. What's the other big one? Time.

There's two things that's true in life, right? One is taxes. The other one is death.

I know it's not fun to think about, but it's coming, right? It's inevitable. We have not learned immortality yet. I don't think it'll happen in my lifetime. So I will be saying goodbye at some point off this immortal coil.

it will go out. I'll fizzle out, break. That light ends. But before then, hopefully I fill some of my desires, but I'm still limited.

I have limited time left and limited resources to do it with. I have to be here for an hour. I could be playing my PlayStation. I don't know how fulfilling that is, but it seems fulfilling. Scarcity applies both to material and intangible things.

Material things are like cars, like a Lamborghini, trophies, houses. For a lot of college students, beer. That's the positive four-letter word.

Don't let it consume you. Pardon the pun. That's my dad joke for the day. Intangible goods, though. There's limits on even intangible goods.

Things like respect. If you haven't learned yet, not everyone in the world may like you. That could be a hard lesson, or to please everyone, and you just won't please them.

Kind of a fact of life, but it's a lesson everyone learns at some point. Hopefully you learn it when you're young. But fame, there's limited fame. Everyone has 15 minutes, right?

Well, on average. heard a great comedian and he's like, I had 30 years. So that means there's a whole stadium of people who have none. But fame, there's limited fame, right?

There's limited time. Grades are intangible. Yes, I can print it out on a piece of paper what you got, but you can't hold your grade physically.

It's all electronic these days. I guess I could give you the electrons. I don't know how you find them. This makes two types of goods, economic goods, non-economic goods.

Economic goods are goods that are scarce. It's most of the goods we consume or use or avoid. But these are economic goods.

We also have non-economic goods. These are goods that are free. They're not scarce.

You can't ever fully consume them. So economic goods include all the tangible intangibles we just mentioned. So then there's this...

category, non-economic, it shows up in your textbooks. People give examples. Sunsets.

Outdoor air. So let's start with sunsets. There's other examples.

These are classic ones. Are sunsets free? So if you're sitting on your porch watching the sunset, is it free?

If I put a billboard in front of you, is it still free? No. I just blocked your sunset. I could keep blocking it.

You physically can block it. Is it free in New York? No, you gotta move around. You can't see the sunset everywhere in New York.

If you haven't been to a big city like that, you should go. Go find the sunset. You'll walk a long ways if you're in Times Square. So sunsets, you could say, yeah, out in the middle of my cornfield they're free as long as the corn's not above me.

So it depends on the season. But you could always block it. Depends where you are.

Is outside air free? So outside air, think more, is good air quality outside air free? No. Where is it not free?

Well, China, closer to home. Denver. So when I lived in Colorado, we got to drive to Colorado.

There's two reasons you know you got there. The mountains and the brown haze. So this brown haze right below the mountains, really pretty, not really, right? And you're like, oh, I'm driving into that.

It was physical. On really bad days, you could taste it. And that's because the mountains create this special area like in LA where the pollution doesn't go away. It sticks around.

and collects. It's a lot better. But they're still struggling with it because of population growth.

But they have some, it's why California and Colorado have some of the most strictest emission standards and burning regulations in the U.S. And so even to get really clean air you got to go to the mountains and drive out of the city. It's not free.

And so I could even argue even general outside air is not necessarily free. One, you still got to expend energy to go get it. But most of the time, you got to drive to get clean air.

Unlike Colorado, Kansas has some of the cleanest air in the country. So economics, we can put this all together. We have a story now.

We know it's a social science. We know it's about motives. Scarcity plays a central role. And so what is economics?

One definition, and this is expanded to what's generally in textbooks, economics is the study of human behavior and how choices, motives, and incentives impact how we use our scarce resources to allocate or how they're allocated across competing needs. So we look at economics on different scale. There's macroeconomics, there's microeconomics, and we look at fact versus opinion, normative versus positive economics.

So macro versus micro. Macroeconomics is the study of economy-wide activities or results, whereas microeconomics For example, in macro, how long until the recession in the U.S. ends? Hopefully we don't have to answer that question for a while. And what is the economic impact of a decline in the euro on the US economy?

Big picture questions. Or Brexit, which sounds like a biscuit. Did you eat your Brexit this morning? There's microeconomics.

It's the study of individual decision-making units. So micro can be at the individual, the household, the firm, the state, or even a local community. and it's regional or smaller. It's asking much more specific questions. Should I plant more wheat next year?

Should I purchase a new or a used car? That's a really relevant one these days, considering used cars are not much cheaper anymore. In addition to these two dichotomies, we also have positive and normative economics.

Positive economics are factual statements that contain no value judgment. They're saying what is. They're answering what are the facts. Normative economics are statements of opinion or value.

What ought to be or what should be. So do you know the difference? So here's two statements.

The market price for corn is $3.50 per bushel and the market price of corn should be higher. Is the first one positive or normative? Are you sure? You're correct. Is the second one positive or normative?

It's normative. Why? How do you know? Yeah, it uses the word should. Okay, let's make it a little more difficult.

We're going to up the stakes. So the first one's positive. Second one is normative.

Round two. The price of oil has increased over the past 10 years. Well, hold on.

I haven't read my statements. And the other one is the high price of oil is the cause of the current economic slowdown. So is the first one positive or normative?

Are you sure? How could you tell? You could actually check it with data, right? You could actually verify this. What about the second one?

Positive or normative? Are you sure? You sure I want to give you two positive ones? So what do you think? Positive?

You think it's positive, raise your hand. If you think it's normative, raise your hand. They uploaded you.

Normative is correct. Why is it normative? It's a conjecture, right? It's the cost.

That's hard to prove. Unless you have, it could be positive, but boy, I would probably make that statement more concrete. Saying, considering all other factors, right, you need to make a much more concrete statement. Okay?

This one is even hard to necessarily verify with data. A lot of things cause impacts in the economy. So positive and normative.

So now we're going to switch it up. Our third set. The global climate change debate plays a larger role in agricultural policy. And the second one is.

Global climate change is a significant agricultural concern. Is the first one positive or normative? Why is it positive? You can actually verify the due cycle, basically.

Okay, so you can potentially verify that? What about the second one, positive or normative? It could potentially be both normative. Why do you think the second one's normative?

Well, what's the key? There's actually, I'll give you this one. The second one is normative, right? Why is it normative? What's the word here that kind of gives it away?

Significant. We're trying to describe something with an adjective. Adjectives aren't usually fact-based. They're opinion-based.

And so, usually normative. Don't always take on that because you could verify, but you need to be really careful on your choice. Someone could say, well, it's not significant, it's moderate.

And then you'd have to argue if that's less than significant. What's this one? Positive or normative? Positive. Why?

Someone said it. Well, it says larger, but I can go back in time, right? I can go 20 years ago. Were we talking about, before you were born, were we talking about, is climate change as much in our policy?

I can always guarantee you it wasn't in ag policy very much. Is it now in ag policy? Yes, it's written across the board and all the websites too, depending on the year.

We can verify this. The reason this one works, and you could argue how big is larger, but I can actually show this. It has grown over time and we can verify it with actual data.

You could go through the policies and look at direct discussions of climate change in actual government policy. They're in the bills. And so this one is, it's not always. And this isn't meant to confuse you, but sometimes the statements are challenging.

My gut for positive is, can you distinctly verify it with data? Could you prove it? If you can, you can possibly, you most likely can argue it's a positive statement.

If you can't back it up with data, and data doesn't have to be numbers, it can be qualitative, but should have data. Okay? Questions so far?

Okay, now you ready for your quiz? Just kidding. What I want to do to end today is start a graph review. I do want to talk about this because we will be graphing a lot in this class. And then linear equations.

It's about as difficult as I get. We do a little bit of Algebra 1, and that's about as far as we go in that. Okay? You'll see part of it now, part of it... later in the semester.

One thing I do want to do, and this is one of our favorite phrases in economics, you should get it on a t-shirt, ceteris paribus. It means holding all else constant. We use this in graphs.

Graphs look at relationships. When you're looking at a graph, you're implicitly assuming everything not in the graph remains constant. It has to for the graph to work. And so in economics, when we look at relationships between two variables, we're assuming all the other variables, the rest of the economy is standing still. And that's what ceteris paribus means.

So you learned some Latin today. Hey, you never knew this was going to be a language course. It's sorry, it's the only Latin I have.

But we're going to look at graphs. So graphs show relationships. They tell us stories, which is the reason we use them.

They're good visual stories. Graphs have axes with units. You're an ag, units are important. And a relationship, which we call sometimes a curve.

For example, this is a demand curve for apples. On the y-axis, we have price in dollars per bushel and quantity on the x-axis in bushels. And notice it's downward sloping. And it tells us what?

As more apples are consumed, price goes down, right? And in reality, we can actually, what we'll learn later with supply and demand is as price goes down, people consume more apples. Oddly enough, in economics, this was a convention. People want to put quantity here, price here. This is how it got started and it stuck.

This is our exception and we'll talk about that. But the reason we can, you can put them on either axis here. They're determined simultaneously actually.

You can't determine one without the other. It's like the chicken and the egg. So how do we get that demand curve?

Well data. We collect data. There's lots of economic data.

For this case, we have what we call a demand schedule, but it's just a table with data. I observed two prices and then how many bushels of apples are consumed by, say, a local neighborhood. I hope that's not a household. That's a lot of apples. That's in bushels, not apples.

A bushel's big. If you've not had a bushel of apples, buy a bushel, take it home. And if you eat all of them, let me know before they go bad.

It's a lot of apples. I've done it once. We will not do it again. That's a lot of apple pies. We gave away apple pies.

And so how do you get this demand curve? Well, we have data. OK. And so that comes from we'll see how to get it.

But this demand curve is an example of a linear relationship, as we talked about. OK. So this is the linear line.

If we graph a linear line, it's a straight line. And so this demand curve can be represented by a linear line as well, or a linear equation. And what that means is the slope of this line is constant. The rise over run is one number. It doesn't change.

And so that, as price goes down and consumption goes up or vice versa, it's always a constant proportion. So the question is, how do I get this curve? Well, using the demand schedule, the easiest way to graph the line is not to write out y equals mx plus b and compute m and b.

You can do that. That's the really long way. And it's the hard way.

I didn't like doing that. And especially if your units are really tiny. If those units on the axes are in millions, it may not matter. You're like, you can't see the slope. So plot all you need for how many lines do you, how many points do you need to identify a line?

Two. How many coordinates? So we need two coordinates. How many points do I have in my table?

Two. Find two points. Plot the two points.

Take a straight edge or a ruler. Draw the line through those two points. That's how you get the curve.

That simple. We do want to know what the function is. But this is interesting, because if I have that, this is interesting. It tells me some information. If I know it's linear and I draw the curve, this even gives me more information now.

And it's a story. I can tell you the relationship between price and consumption of apples. Companies with marketing departments spend millions to figure this kind of stuff out, demand for their products.

You can get a whole degree in marketing, which is the study of demand and motives and incentives. It's a subfield of economics. Curves do not have to be linear.

They can be non-linear. They can look something like this. The difference here is that the slope of the curve is changing at every point along the x-axis. An example is a production function where you have corn yield or crop yield and nitrogen applied. And I have my units, bushels per acre and pounds per acre.

And it's non-linear. How do we know it's non-linear? Well, when you plant a crop, there's nitrogen in the soil, so you get something. And then as you add more, it keeps going up. Thought experiment.

I could keep adding it. I could go into mine and I could bury my field in six feet of nitrogen. What happens to your crop? It dies. You can kill the crop with nitrogen.

So you know you can get that to zeros. And so we know it goes up, it's got to go down when you over apply, you'll damage the crop. Same with water, any input, you can over apply it.

And we'll see that here in the next couple weeks. But we get non-linear functions. the world for the most part is actually non-linear.

But linear works well in a lot of circumstances. So what this is saying is the nitrogen apply increases, the gain from it starts to get smaller and smaller until eventually it actually starts damaging the crop and it goes down. So we do want to know how to get a linear...

equation. And so this is that famous formula, which you probably saw in sixth, seventh, eighth, or ninth grade. I'm not guessing when people took algebra. But y equals mx plus b or b plus mx. y is your dependent variable.

x is your independent variable. m is the slope, rise over run. And b is what we call the y-intercept. It's where that curve intersects the y-axis. As a formula, the slope is calculated.

So we use our, it's the change in y, that's your rise over the change in x. You just take your two points. y2 x2 is your first point coordinate, y1 x1 is your second point, or vice versa. As long as you use, you designate one point as your second, one is your first. Otherwise you'll get a wacky result, or the wrong sign, okay?

And so this gives us our slope. Once we know our slope, we can calculate our y-intercept. And so we can do this for our demand curve. And so using our two data points, we can calculate our slope as minus 0.25.

Give me one more minute. Our y-intercept is 3.5. Plugging those values, so I just called this is y, this is x.

Just gave different letters. Calculate the two values from those two data points, and I get my linear demand function. P equals 3.5 minus 0.5 times q. This has more information than this. This is just two points.

This contains all the points. on that line. And it's a better representation. We can also interpret it.

So you can interpret the margin, that 350, that y-intercept, is the price at which no one will consume apples. Good price to know. The 25 cents, the slope, is the incremental change. If price goes up by 0.25, people will consume one less bushel.

It tells you the marginal change for unit changes in price on consumption. And you can flip that around too, but I think this makes a little bit better. And this occurs due to demand and supply. We'll get there.

That's in October. Okay? Remember, real quick, remember tomorrow we have lab.

We are meeting you where? Waters Annex. We'll see you on tomorrow or Friday. Have an awesome afternoon.

Transcript for:Introduction to Economics: Key Concepts

Transcript for:
Introduction to Economics: Key Concepts