CrashCourse - 2015-12-12
This week Jacob and Adriene teach you about marginal analysis, which you're using RIGHT NOW! The video is coming from inside the house! Or something. You'll learn how marginal analysis guides the decision making if cities, nations, companies, and amusement park enthusiasts. We'll also look at the idea of elasticity, and what people are willing to pay for certain stuff based on the supply. Why is a Van Gogh worth more than an OBEY poster? (hint: it's because they're still cranking out the OBEY posters, and Vincent is dead) All this and more on Crash Course Economics! *** Crash Course is on Patreon! You can support us directly by signing up at http://www.patreon.com/crashcourse Thanks to the following Patrons for their generous monthly contributions that help keep Crash Course free for everyone forever: Mark, Eric Kitchen, Jessica Wode, Jeffrey Thompson, Steve Marshall, Moritz Schmidt, Robert Kunz, Tim Curwick, Jason A Saslow, SR Foxley, Elliot Beter, Jacob Ash, Christian, Jan Schmid, Jirat, Christy Huddleston, Daniel Baulig, Chris Peters, Anna-Ester Volozh, Ian Dundore, Caleb Weeks -- Want to find Crash Course elsewhere on the internet? Facebook - http://www.facebook.com/YouTubeCrashCourse Twitter - http://www.twitter.com/TheCrashCourse Tumblr - http://thecrashcourse.tumblr.com Support Crash Course on Patreon: http://patreon.com/crashcourse CC Kids: http://www.youtube.com/crashcoursekids
"No substitute for coffee"
TEA, YOU UNCULTURED HEATHENS
Finally, someone who understands! You can get more or less the same amount of caffeine from tea as with coffee, WITH the added bonus of no bitter taste and a wider variety of flavors available for consumption.
the tea is a lie
Tea is for Britons
Yerba mate
Alternative, yes. Substitute, no.
Coffee is coffee. Tea is tea. Cocoa is cocoa.
I thought diamond prices were set by the De Beers cartel.
I don't think we're luckier. I think we're simply faced with a new set of challenges and armed with a different tool kit. Sure we have the internet and I am grateful for that, but the internet is a difficult distraction that I have to fight every day. Shit's hard.
Edit: spelling
Yeah, they aren't rare, or very expensive to get.
how many diamonds exists? how many water exists?
True, and it's DeVries. They stockpile the massive number of diamonds they pull out of the ground because ladies and gentlemen diamonds are one of the most common gemstones out there! Emeralds are magnitudes rarer especially ones of a high enough quality to use in jewellery. Meanwhile even trained experts can barely tell the difference between an industrial diamond and an uncut gem quality stone. There really is very little difference. So in order to maximize the very minute differences there are a complex system of color and clarity grades was arbitrarily made up wherin imperceptible shits in degrees of yellowness and result in wildly different prices and btw the yellow one, by all accounts more common than pure white, ARE WORTH MORE. It's a huge racket. xD
Thats why more and more high tech arms in the hands of many can bust up cartels. Imagine if smaller and smaller groups had access to large numbers of intermediate range cruise missles and they decided they did not like the cartel ... so they launch which costs the cartel BIG money, imagine if this could keep happening every time there was an imballance.
This is one of the best explanations of marginal analysis I have ever heard.
Millennials have got it so easy. I am 43-years-old Gen X-er with a degree in economics.
Marginal analysis is one of the most misunderstood and important topics in micro economics. What took me a few years to figure out, it will take Millennials twelve minutes to figure out. If the excellent explanation of the marginalism was not enough, CrashCourse explained the diamond-water paradox, which is so important in explaining the reason why Leron James is paid more than the typical high school teacher. Like diamonds, basketball players like Leron James have rare characteristics that are in short supply that yield a high level of marginal utility but total utility. Whereas, teachers, like water, are relatively more plenty full but yield a much lower marginal utility than basketball players but higher total utility. As a result, although a teacher, like water, is more important to the economy in of terms of educating tomorrows workforce, than basketball players', like diamonds, total contribution or total utility to the economy or society as whole but marginal utility is smaller so teachers get paid less. In other words, because of the higher marginal utility of basketball players than teachers. Basketball players get paid much higher wages than teachers despite their obviously important contribution to society.
I don't entirely agree with that. I understand where you're coming from that we have it easier, how we have amazing access to studying resources, and we don't have to spend hours scouring the library. However, you do also have to keep in mind grade inflation.
Just like inflation in economics where money is devalued from increasing prices, grades are getting devalued. Because students are getting better and better grades because of the increased accessibility to resources, examinations are getting harder and harder to compensate that. That's why they created a torture method called the "International Baccalaureate" or IB.
Well basketball has amazing health benefits and is amazing entertainment
Doesn't seem to take into account that diamonds are a commodity and store of wealth, in the case of gold the Federal Reserve doesn't receive any utility from ownership. The concept of 'utils' is useful for comparison between a chocolate bar and a hot dog, its not useful for comparing the purchase of a house with the purchase of a pack of peanuts.
@Matthew Lee I agree, I thought the same thing however I did not see anybody with the same opinion so I decided not to say anything
ok boomer
9:38 " I don't really need pizza." Speak for yourself.
+killerfrenchy I can substitute pizza pretty easily with a pizza burrito (calzone), or a pizza cake (lasagna).
she is, hence the "I" in that statement.
+killerfrenchy Ha. Yes. Amen!
That's literally what the word 'I' is used for, she was speaking for herself.
I feel bonded because "5 cups of coffee in the morning", so.... I'll defend her :-|
I'm full of utils.
Thanks, Crash Course.
+Ben Aaron You're full of Utils because the cost of the course was very very low. The only opportunity costs were the computer and the internet and your time.
@David Williams - that makes sense.
Oodles of utils
I could tell with that big fat smile in ur photo
Diamonds are expensive due to monopolies & marketing campaigns.
TheDajamster and cause of the high demand
@Diyanshu Sarkar The marketing campaigns created greater demand
Diamonds aren't the best example, there are actually a lot of diamonds out there. The price is kept artificially high because they hold onto them purposely.
I should say it's changing though.
http://priceonomics.com/post/45768546804/diamonds-are-bullshit
@Banderi
Anything can be a metaphor for anything. Now we see the heart of the problem, the dissonance between objective and subjective value. My point was to find an example where it was bigger than the water-diamond paradox.
I admit this reminds me a bit of fiat money. "This paper/cloth has value/meaning. Why? Becouse I said so." Also Im not saying that the toughts behind these things wouldn't be of notable value. That also leads to the question about essence of art, one of the most subjective thins there is I presume.
@Lawrence Tider The fact that you can't perceive those qualities does not entail the complete lack thereof. To understand art is subjectivity, to acknowledge the reason other people understand it is objectivity.
Also any quality - not only composition - is subjective as well. Any person that will tell you that you're "not doing it correctly because you're not (applying the perspective/using the golden ratio/keeping inside the borders/making the colors match/referencing real anatomy/etc.)" is not an artist, is a subset critic.
@puskajussi37 Sorry, I was just kinda jumping in to clarify why people (stereotypically) pay for such pieces, but yes, it is highly subjective in the end.
+MiddleClass SeaBass Diamonds are a precious mineral that is less ubundant and utilized then water. The validity of their price in the economy does not matter in contrast to the point they were trying to make in this video.
+MiddleClass SeaBass It's an example from the 18th century. There were a lot less diamonds going around back then.
Anyway, this isn't about diamonds, it's about the paradox.
I'd say that diamonds are still a great example of how a product's worth is determined by the perception consumers have of that product, and not by its inherent value.
finally gets onto microeconomics when my microeconomics class has already been finished
diamonds aren't even that rare
What is this 'don't really need pizza' that you speak of?
“Everybody likes pizza.” -Michael Scott
diamonds are artificially scarce
that doesn't make any sense. Diamonds could only be produced under very specific conditions, so their scarcity is not at only related to the mining process
Look up debeers
If I remember the topic correctly, several of the largest producers of diamonds purposefully bribes diamond-rich countries (such as Russia) to not extract the diamonds, and tries to prevent development and devalue the percieved utility of artificial diamonds.
Diamond companies reduce the supply of diamonds to jack up their prices.
nickwoo2 h
"Diamonds are intrinsically worthless..." - De Beers chairman Nicky Oppenheimer, 1999
If the gas is too high, buy ethanol, if ethanol is high buy gas. Such is life in Brazil.
+Ramon Denner Tell that to a USA consumer where it's practically illegal to use ethanol :'(
+Ramon Denner , +Larry Bolan , you should consider the CO2 capture done by the sugar cane. All of the CO2 released when burning ethanol was captured from the atmosphere during photosyntesis.
+Larry Bolan I noticed in brasil that most of the cars are newer models on average then those in the united states. My own person car is a 1995!
+Larry Bolan theoretically ethanol COULD be carbon neutral - the carbon it releases is carbon that was only recently removed from the atmosphere; it is just cycling back and forth, while fossil fuels release carbon that was removed from the cycle millions of years ago.
Of course, fossil fuel is used to make ethanol so the benefits aren't actually that great (fertilizers, fueling tractors, transport etc). I think I read somewhere that it takes 10 gallons of gasoline to make 11 gallons of corn-based ethanol. Corn is really a terrible choice.
I'm not sure about sugar cane based ethanol. It depends on what kind of energy inputs are necessary to grow it. If it grows like a weed and doesn't take much fuel to process it could be great. I've got my doubts.
Ramon Denner cocaine
"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"
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
overlord2304 so, to consumers, they are scarce, as in that there is not a lot of them availabe to them. The point was not necessarily that they are inherently scarce.
"diamonds are scarce" south african mafia laughing secretely
Thumbs up for AC/DC buckle belt!!!
Nah, the goverment doesn't know how to measure the benefit of a park.
Utils? My happiness is measured by yodels. Today i will perform 5 yodels and be very happy
I hear your yodels and raise you my yee-haws.
Diamonds are only expensive due to a monopoly.
Stan: How much does it cost to ride the rollercoaster?
Employee: Less!
Stan: Is confused
The inelastic demand of products, like pharmaceuticals, is a big reason why the free market needs some regulation.
Or, alternatively, the government can provide those products as well (e.g. universal healthcare).
Well, they have to have incentive to create in the first place. That is why the government grants patents to the drug companies. It has to be "worth doing". Cost vs. Benefit.
Or maybe less regulation. In a free market, if a medicine's price is high, other pharmaceutical companies have incentives to create the same pharmaceuticals at a lower price.
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
very well explained. these concepts were evading me... ouch... just admitted my limitations...
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.
"micromaco" "macromicro" oh geeze, they've gone back to the child-level jokes.
Now they do Micro. After I passed the class...
Jacob talks so fast I can't wrap my brain around the concepts quickly enough😂
The term Utils is good, I would connect it with a "health index" which defines its true value
"Diamonds are extremely scarce"
Girl you almost made me punch my monitor.
They are manipulating the supply (DeBeers, Monopoly), and the demand (Advertising, "Diamonds are forever").
"Pair'o docs"
I see what you did there.
"The quantity of van Gogh paintings doesn't go up"...
Unless you're Otto Wacker.
w00t finally, my favorite part of economics!!
damn it! took my micro final today in the morning :(
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.
One of the most useful lecture learned for me today. It helps solve a lot of my questions. Thank you crash course.
I love the tiny John&Sherlock in the thought bubbles btw:3
Too bad they have got no line.
damn, just did my microeconomics final exam 4 days ago. Bad timing for me haha
Amazing job guys! Really loving this series!
Awesome, I loved the way Adriene carried the lesson into the credits and the pitch for Patreon. Very well done!
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.
+ David de Klioet yeah but there is still a fixed amount of the paintings available unless someone ripped or broke his/hers
>no substitute for coffee
Excuse me, me and my buddy Kyle would like to have a word
*Punches hole in dry wall
I had my microecon final yesterday. This video came out one day late :(
At 3:16, the Latin motto around the roller coaster means "Don't forget to be awesome"
"relatively high" yup she knows whats up xD
When I was in high school, in AP Microeconomics, I thought I was missing out, not taking AP Macroecon, which wasn't offered. Now a Junior in college, this video made me appreciate that AP Micro. experience! Awesome! #Definitely60UtilsofHappiness #DFTBA
Huh.. I've got my econ final tomorrow
wrong thumbnail
+Zach Crennen You are absolutely right. Fixed! -stan
+bret spath Diamonds, like internet data, is actually an artificially scarce good. It isn't a monopoly by definition since there are many many diamond mines and cutters in the market.
+bret spath Correct. The cartel is called De Beers. De Beers really scored after the fall of the Soviet Union. Russia was literally sitting on tons of unpolished diamonds of many grades, and De Beers somehow worked out an agreement to keep Russia from collapsing the gem grade diamond market, even though Russia was desperate for cash. De Beers is a brilliant monopoly!
I couldn't agree with all on fixed diamond market more. Current example: An incredibly productive diamond "chimney (a geological thing)" was discovered in northern Canada a while back. We didn't hear much about it. After it proved itself DeBeers bought it and all news has disappeared in general media.
woo love you guys , thank you for these videos, about to start my B.S. online in Econ at Penn State (serving abroad)
Federico García Lorca - 2017-08-13
Main outtakes of this lesson
a. Microeconomics - Study of the economic behavior of individual units of an economy (such as a person, household, firm, or industry).
b. Marginal analysis - An analysis of how individuals, businesses and governments make decisions.
Marginal = Additional
c. Utility - Satisfaction or happiness people get from consuming a good or service.
d. Law of Diminishing Marginal Utility = Law of Decreasing Additional Satisfaction
e. Utils - A unit used to quantify satisfaction; they are completely subjective.
Demand curve = Marginal benefit curve
Supply curve = Marginal cost curve
f. Law of supply - An increase in price gives producers an incentive to produce more.
g. Diamond-water paradox - Although water is on the whole more useful, in terms of survival, than diamonds, diamonds command a higher price in the market.
g. Substitution effect - As prices rise consumers will replace expensive items with less costly alternatives.
h. Elasticity of demand - a measure of the relationship between a change in the quantity demanded of a particular good and a change in its price.
i. Elasticity of supply - a measure of the responsiveness of quantity supplied to a change in price.
Peter Traulsen - 2019-10-06
Thanks!
md abdool - 2019-12-10
May God bless thee
Saleha Akbar - 2019-12-10
Thankyou so much
thabest0910 - 2020-02-15
love you
Lily Lien - 2020-04-03
Thank you alot