Economics

BBA 2501 Unit I Ch 1 The Economic Problem

00:00:00 Hello class.

00:00:02 Welcome to the very first video of microeconomics.

00:00:05 In this video we're going to be talking about the Economic Problem.

00:00:10 Now before we get into this problem we need to realize something.

00:00:14 Economists make assumptions.

00:00:16 As hard as it may seem, economists do make assumptions.

00:00:20 We have to.

00:00:21 There's no other way to answer a question in economics if we did not.

00:00:27 For example, what will happen to how much bread you're going to purchase if the price of bread doubles?

00:00:34 Sounds simple, I'm gonna buy less.

00:00:38 But it can be more complex than that.

00:00:41 What if your income doubles?

00:00:43 What if the price of sandwich meat triples?

00:00:46 What if your expectations are that there's gonna be a shortage of bread in the future?

00:00:53 All of these factors, down on the bottom, these are factors that economists are gonna assume don't change because if they do, that's gonna change your answer regarding how much bread you're going to purchase.

00:01:04 So we have to make assumptions.

00:01:09 The first assumption in economics, more is preferred to less.

00:01:13 We always want more.

00:01:17 For instance, here's a picture of my dog, Luna.

00:01:20 And in early March of 2020, everyone in my family, including Luna, was happy whenever I brought home one roll of paper towels.

00:01:29 As you know, there was a shortage, in March of 2020, of paper towels.

00:01:36 But in mid March of 2020, whenever I brought home a package of 30 rolls of paper towel, everyone, including Luna, in my family, were just knocked out.

00:01:49 They were overjoyed.

00:01:51 More is preferred to less.

00:01:57 The problem is that although our wants and desires are virtually unlimited, the resources available to satisfy those wants are very scarce.

00:02:07 For instance, most of the supermarkets, their aisles with paper towel and toilet paper look like the picture on the right.

00:02:15 In fact, this is a picture from a local supermarket near my home.

00:02:21 There was a limited physical resource here.

00:02:25 At the same time, the price of paper towels in mid March, that 30 roll pack, cost me nearly $40.

00:02:33 I have limited financial resources.

00:02:39 So the price is something I do want to focus on here.

00:02:43 The price of those paper towels was $40 for 30 rolls.

00:02:48 And I have a limited financial resource.

00:02:51 Well, the price here is the focus, and it suggests that paper towels are scarce.

00:02:59 A resource is scarce when it's not freely available.

00:03:03 In other words whenever the price is greater than zero.

00:03:07 So even if that 30 roll package of paper towels would have cost $1, we could still say that they were scarce, because their price was greater than zero.

00:03:23 How all of this relates to economics, is economics studies how people allocate their scarce resources to satisfy all these unlimited wants.

00:03:38 For instance, you can read a bedtime story to your child or watch a game on television live.

00:03:45 You have to decide which one to do.

00:03:47 You have to decide what to do with the limited resource of time.

00:03:53 You can go shopping for a new car.

00:03:56 You have to decide how many upgrades to include in that new car given how much money you have.

00:04:01 You have to allocate your scarce financial resources.

00:04:07 You have invitations to go to eat with a friend on Saturday, as well as go shopping with another friend at the exact same time.

00:04:14 You have to decide, which one are you going to do?

00:04:16 How are you gonna allocate that time resource?

00:04:20 Believe it or not, you made a scarcity decision today with your time whenever you chose to watch this video.

00:04:28 You could be doing a million other things.

00:04:32 But you decided to allocate your scarce resource of time to watching this video.

00:04:41 All of these are examples of economics at work.

00:04:44 Economics is all around us.

00:04:47 We make decisions each and every day regarding our scarce resources.

00:04:52 Just look around you right now.

00:04:55 There's examples of you making decisions with scarce resources all around you.

00:05:02 As we embark on this study of economics, remember this concept of scarcity because it is the foundation of economics.

00:05:13 Now, as we finish up this video, Luna would like to give you some highlights that we've covered.

00:05:20 Number one, economists make assumptions.

00:05:24 Yes, I am an economist and I assume if the cat is running around the house, Luna's the one that's chasing her.

00:05:33 More is preferred to less.

00:05:36 Luna would love to have a whole bag of treats versus just one.

00:05:43 Wants or desires are virtually unlimited, but resources available to satisfy those wants are scarce.

00:05:50 Luna gets very upset in the morning whenever I have to leave to go to work because she would much rather me stay and spend another hour scratching her belly.

00:06:01 And finally, a resource is scarce whenever it's not freely available.

00:06:05 In other words, it has a price greater than zero.

00:06:10 Now, Luna really doesn't understand about prices, after all, she's a dog.

00:06:15 But just take this one for granted.

00:06:17 This is very, very important to economics, that something is scarce whenever it is not freely available.

00:06:26 I do hope that you've enjoyed this video.

00:06:29 Look forward to talking to you on future ones.

00:06:31 And good luck with this class.

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