Crash Course Economics - Microeconomics

Introduction

• Hosts: Jacob Clifford & Adriene Hill
• Transition from macroeconomics to microeconomics.
• Microeconomics Focus:
  • Individual markets.
  • Decision-making by consumers, businesses, governments.
  • Questions addressed:
    • How many workers should be hired?
    • Impact of increasing the minimum wage?
    • Reasons for expensive healthcare.
• Both micro and macroeconomics are important.

Marginal Analysis

• Marginal Concept:
  • Marginal = Additional
  • Analysis of additional benefits vs. additional costs.
• Applications:
  • Businesses hiring decisions based on marginal revenue vs. marginal cost.
  • Governments deciding on projects like city park development.
• Law of Diminishing Marginal Utility:
  • Utility: Satisfaction/happiness from a good or service.
  • Additional units provide less additional satisfaction.
  • Quantified using 'utils' (subjective happiness points).

Examples of Marginal Analysis

• Stan at Amusement Park:
  • Weighing benefits of ride utility vs. cost (time in line).
  • Pricing strategies: Discounts for additional purchases.

Supply and Demand

• Strawberries Market Example:
  • Price on vertical axis, quantity on horizontal.
  • Demand Curve: Downward sloping due to diminishing marginal utility.
  • Supply Curve: Upward sloping, representing marginal costs.
• Market Efficiency: Achieved when marginal benefit equals marginal cost.

Diamond-Water Paradox

• Explanation using Marginal Analysis:
  • Water: High total utility, low marginal utility due to abundance.
  • Diamonds: High marginal utility due to scarcity, thus higher price.
• Subjective Utility & Relative Scarcity:
  • Utility influenced by consumer tastes, preferences, and scarcity.

Substitutes and Elasticity

• Demand Elasticity:
  • Gasoline: Inelastic due to necessity and lack of substitutes.
  • Pizza: Elastic due to availability of substitutes.
• Elasticity of Supply:
  • Airplanes: Inelastic supply due to production complexity.
  • T-shirts: Elastic supply, responsive to price changes.
  • Van Gogh paintings: Perfectly inelastic, supply cannot increase.

Conclusion

• Microeconomics Focus:
  • Detailed analysis, not GDP or unemployment.
  • Concepts like marginal analysis and elasticity help in decision-making.
• Encouragement to support Crash Course on Patreon.

Note: These notes summarise the key points discussed in a lecture on microeconomics, focusing on marginal analysis, supply and demand, and elasticity among other concepts.