Microeconomics Supply Chain notes ( by MIT Professor)
Microeconomics is the study of how individuals and firms make decisions in a world of scarcity..
he says the course is about tradeoffs, how do you trade off things to make yourself as well off as
possible. [UNK] will this cover irrationality. I will sprinkle it throughout but not as much as I
actually believe in it. everything you do has a next best alternative you could have done.
Instead.. economics is referred to as the "doomish science" by Paul Samuelson.. mit is the
perfect place to be teaching economics. Because engineering is all about constrained
optimization. Constrained optimization. the same principles you could think of for your
engineering classes, but applied to people's lives..
What we 'll learn today was developed at mit, so it 's a great place to be learning it. we 're going
to proceed by teaching very simplified models. we want to write down in our models a set of
simplifying assumptions that allow us, with a relatively small set of steps, to capture relatively
broad phenomena. with a fairly simple set of models, we will be able to offer insights and explain
a whole huge variety of phenomena... Adam Smith is considered the father of economics. his
1776 book The Wealth of Nations laid out the entire core of the economics field. Adam Smith's.
Most famous example was the water diamond paradox. he said, think about water and
diamonds. yet for most of us, water 's free and diamonds are super expensive. how can this be.
Adam Smith asked. in the market for roses,. In the market for roses, we have a demand curve
and a supply curve. basically, as the price of roses goes up., people want fewer of them. we are
going to dive into where this demand curve comes from. we'll go to first principles and build it
back up. as the price goes up, firms want to produce more of the roses..
where the points meet is the market Equilibrium. that is the point where both consumers and
producers are happy to make a transaction. consumers are happy because on their demand
curve is the $ 3 and 600 roses.. producers are willing to supply 600 roses at $ 3. that's the one
point where consumers are happy and producers happy. there are people out there who need a
kidney. I 'm putting my kidney on ebay for auction. bidding went nuts. it started at $ 25,000. it
climbed to $ 5 million. Before the auction was shut down.. ebay decided they would n't allow you
to sell your body on ebay. on ebay, there's no way to regulate it or you do n't necessarily know.
people might not be able to tell if they're getting a legit kidney or not. people could be like selling
fake kidneys, per se. There could be imperfect information. a second problem is what we call ''
equity '' or fairness..
There's sort of a third class of failures that gets into the question about behavioral economics
that was raised earlier. people do n't always make decisions in the perfectly rational way we
model them as doing so This semester. increasingly over the past several decades., economists
have started incorporating insights from psychology into our models. economics at its core is all
about how the market knows best and that basically governments only mess things up..
America is by far the most unequal major nation in the world.. America was not a wealthy nation
100 years ago or 150 years ago.. led to tremendous growth, where we are now the most
powerful. rather than a capitalist economy., it 's called a "command economy'' in this case, the
Microeconomics is the study of how individuals and firms make decisions in a world of scarcity..
he says the course is about tradeoffs, how do you trade off things to make yourself as well off as
possible. [UNK] will this cover irrationality. I will sprinkle it throughout but not as much as I
actually believe in it. everything you do has a next best alternative you could have done.
Instead.. economics is referred to as the "doomish science" by Paul Samuelson.. mit is the
perfect place to be teaching economics. Because engineering is all about constrained
optimization. Constrained optimization. the same principles you could think of for your
engineering classes, but applied to people's lives..
What we 'll learn today was developed at mit, so it 's a great place to be learning it. we 're going
to proceed by teaching very simplified models. we want to write down in our models a set of
simplifying assumptions that allow us, with a relatively small set of steps, to capture relatively
broad phenomena. with a fairly simple set of models, we will be able to offer insights and explain
a whole huge variety of phenomena... Adam Smith is considered the father of economics. his
1776 book The Wealth of Nations laid out the entire core of the economics field. Adam Smith's.
Most famous example was the water diamond paradox. he said, think about water and
diamonds. yet for most of us, water 's free and diamonds are super expensive. how can this be.
Adam Smith asked. in the market for roses,. In the market for roses, we have a demand curve
and a supply curve. basically, as the price of roses goes up., people want fewer of them. we are
going to dive into where this demand curve comes from. we'll go to first principles and build it
back up. as the price goes up, firms want to produce more of the roses..
where the points meet is the market Equilibrium. that is the point where both consumers and
producers are happy to make a transaction. consumers are happy because on their demand
curve is the $ 3 and 600 roses.. producers are willing to supply 600 roses at $ 3. that's the one
point where consumers are happy and producers happy. there are people out there who need a
kidney. I 'm putting my kidney on ebay for auction. bidding went nuts. it started at $ 25,000. it
climbed to $ 5 million. Before the auction was shut down.. ebay decided they would n't allow you
to sell your body on ebay. on ebay, there's no way to regulate it or you do n't necessarily know.
people might not be able to tell if they're getting a legit kidney or not. people could be like selling
fake kidneys, per se. There could be imperfect information. a second problem is what we call ''
equity '' or fairness..
There's sort of a third class of failures that gets into the question about behavioral economics
that was raised earlier. people do n't always make decisions in the perfectly rational way we
model them as doing so This semester. increasingly over the past several decades., economists
have started incorporating insights from psychology into our models. economics at its core is all
about how the market knows best and that basically governments only mess things up..
America is by far the most unequal major nation in the world.. America was not a wealthy nation
100 years ago or 150 years ago.. led to tremendous growth, where we are now the most
powerful. rather than a capitalist economy., it 's called a "command economy'' in this case, the
