6. Costs

MIT 14.01 Principles of Microeconomics, Fall 2018
Instructor: Prof. Jonathan Gruber
View the complete course: ocw.mit.edu/14-01F18
KZbin Playlist: • MIT 14.01 Principles o...
This lecture continues the discussion about producer theory and covers short-run cost curves and long-run cost curves.
License: Creative Commons BY-NC-SA
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[@Amfkndinosaur]

Such a passionate professor. It’s literally a privilege to have this for free at our own convenience. 💪🏼❤️

[@NicoleIrvin-iq2wh]

A teacher that knows how to teach to allow freedom of speaking to point out an ability for it is by subject and without question Einstein did not discuss that in public he knew of such scholarship was Scottish backup by irland the fairies like to tell stories they are very proficient in there intelligence they know how to sit on there rocks and play there sticks wart won't tell you that because he cried when he thinks they hurt them apoun creation in religion we don't practice so he does know I know that I don't know for bance however I can sing and and quite well thank you !!!!!!the system s work together in family of there's was worst better wasn't a question clearly from my cottage this very true although each snowflake is different in design the fall the same when I can't be God can teach highly intelligent children at your school I live further discussions of intelligence communication as it is already written for the systems of design that work together to pay for a home a car and to send them to your school thank you

[@Daddyarius]

What the f u typed...😅

[@cherrymarriedindiscord1404]

1:15 Short run cost curves 1:56 --> Variable cost and constant cost 5:06 --> Cost function 8:18 --> marginal and average cost 16:25 Long run cost curves 18:06 --> isocost curves

[@caratinawaiters2590]

I absolutely love how he explains the setup and "what we are after with this lecture"

[@gorkajames6475]

19:46 this is the key to this lecture folks.

[@ryanhayes5475]

I have a B.S. in Econ, and watching these videos is like reliving the thrill of learning intermediate micro for the first time.

[@luckyshoe28]

Mind if ask you a question? Did you find job easily after graduated?

[@ryanhayes5475]

@@luckyshoe28 I took a different trajectory. Decided I wanted to go back to school and become a high school math teacher. My program was very math intensive, so I earned more than enough math college credits to qualify--just needed to get my teaching certificate (which was no picnic either). I just couldn't see myself doing anything but teaching, however, I did not realize this about myself until after I graduated. Had I wanted to pursue a corporate or civil service career in the econ field, there were plenty of jobs. A B.S. in Econ from a good school is very attractive to prospective employers. That's only part of the equation though. Depending on what you are after, you still need to compete and network aggressively. Jobs don't fall into your lap no matter what your major is. But you can be reassured that it's a solid degree and has a natural path toward employment, especially if you can add programming/coding and statistical/data analysis credentials to your resume. Hope this helps!

[@luckyshoe28]

@@ryanhayes5475 Yeah, this is gonna help big time with that. I'm sophmore right now and I know what I'm gonna do after graduated anymore. Thank your for responding. Means a lot. And no doubt you're gonna be a successful teacher. Best of Luck.

[@ryanhayes5475]

@@luckyshoe28 Enjoy the rest of your time in school. You have so much to learn and an abundance of opportunities that await, so seize the day! Thank you, also, I appreciate that. Likewise, I wish you the best in your endeavors.

[@s.kmusica4166]

can ub please explain me 31:33

[@xingwei9346]

In Figure 6-1, the formula of AVC is not correct. It should be AVC=5q, not AVC=5/q.

[@linhinh7383]

Yes, i’m intend to say that

[@yaycookiz]

Came looking for this comment! Thanks so much for the confirmation.

[@vishwas5078]

​@@yaycookizme too

[@the.reechmond]

Glad you noticed that

[@seprisa19]

Amazing lecture by Prof. Michael Scott

[@domsjuk]

11:30 AVC should be 5*q.

[@zhuwenhao4852]

thanks, man.

[@amybio1189]

This is amazing! Please do more videos like this :)

[@ChameeraDedduwage]

As a Biology graduate, I was pleasantly surprised to hear Le Chatelier's principle being mentioned. And yes, it makes perfect sense in this context. As always, awesome teaching. These students are lucky to have such a passionate teacher.

[@thomasjunior7589]

Best proffesor ever...very clear with constructive depth demostrations❤💪🙏

[@zachperkins688]

Thank you for these videos Professor! These lectures are helping me understand the concepts in my class in a much clearer way than my professor is presenting it. Also, these videos are making me miss having in person lectures!

[@s.kmusica4166]

can u please explain me 31:33

[@caratinawaiters2590]

I love this Professor! He speaks well and l understand him ❤!

[@dalej42]

I’ve got an undergrad degree in economics and that’s definitely a lot of material. I assume the students will get to digest it and then go over it in their small group discussions

[@jamesanderson6130]

Yeah so apparently MIT microeconomics is quite a bit harder than the econ classes I took at University of Houston

[@s.kmusica4166]

can u please explain me 31:33

[@harveerbrar6298]

One of my favourite respected teacher ,and course

[@CEObigwave]

Very good and clear class, from Chile.

[@gunnarjensen5910]

Very detailed....

[@maximillianphelps]

11:15 slight error in the graph, AVC is 5q not 5/q.

[@someonethirsty1957]

That's what I was thinking. Makes so much more sense now. Also, that is not a slight error! At least not for people who aren't in as much practice with the math.

[@vijayawasthi3887]

Thank you so much 😊

[@tuke291]

I think there is a mistake in the computation of AVC, in the first graph, it should be 5q. Anyway, thank you for the lecture!

[@abhishekanand9161]

Great video

[@user-kl2ry3kw3e]

What if the MP of capital is higher than the MP of labor IN the SHORT RUN , when we can not afford any additional capital because it is fixed in the short run . Then what should we do. What decision should we make

[@doellison]

Nice lecture. This math is not too hard, but there is a lot of it. I find math easier to remember if there is conceptual understanding of the underlying principles it is describing.

[@RaylinRecords]

In the Tesla example, I'm curious to see what will happen given Elon Musk's vertical structure. The company is constantly adding more branches of products in the environmental and technology sector that is being intertwined into the products already available. I'm wondering if due to this vertical structure, Elon would choose an SRAC3 curve to handle all of the products he would like to create even if the demand for cars is not what he expected. He could use the plant to efficiently run different sectors of his company within one building. Thoughts?

[@muhammadsiddiqui2244]

That is why innovation always falsifies these types of calculations and entrepreneurs actually earn the money while the professors just keep on teaching...

[@princekushwaha9442]

why the tesla company is not run efficiently under one roof? if we accumulate a company in one state, it's difficult to do Branding, employment, can't use the environment of other states. tesla is doing just like merchandise(addvertisement) a brand within a country by just differentiate the company sector.

[@sreyanshuchaterjee3962]

That is a good observation. You see the lifecycle of a company is barely 20-30 odd years. The first 5 years you operate with focus team to disrupt and then after that you are busy optimizing with a bunch of MBA and theoretic professor models. This is beginning of the end step. This is why a company dies but a city rarely dies. What makes a city thrive is the constant flux of chaos and amidst that, thrives various opinions, variety of trade and business operational practices. Elon is an institution builder, not an executive that focus on stock projections. He may hire a bunch to keep the operations running at Tesla, but his prime focus is to keep pushing the boundaries that has economic merit. * He wants to play the long game *, a fun game (as per him) to keep building. Remember he wasn't keen on Tesla , until the electric car original founders landed at his doorstep to seek funds. He always re-calibrates his steps and runs fast to beat the established players in the field. Right now, he is competing with himself and is having a jolly good time. What makes you think he will stop?

[@ProWhitaker]

Thanks for the video

[@erenyalcn9393]

no problem

[@eejeun867]

avg variable cost at 11.32 is supposed to be 5q right?

[@jamescalderon289]

28:17 we are not indifferent between insurance companies getting taxed and us getting taxed. Like if you get this joke

[@gugeyao8640]

19:32 take notes, here is important.

[@rahulshewale5011]

Awesome 😎 thanks

[@shivanandkoppad7062]

Are there any recommended books which can cover all these topics, if yes please suggest

[@mitocw]

From the syllabus, "There is no formal textbook for the course. If students are interested in further reading, they can look at the following book: Perloff, Jeffrey M. Microeconomics, 7th Edition. Addison-Wesley, 2012. ISBN: 9780133456912." See the course on MIT OpenCourseWare for more materials like lecture notes and handouts at: ocw.mit.edu/14-01F18. Best wishes on your studies!

[@chrisfetchkoproductions7256]

I love this Professor's style of teaching. I wish I had him back in college. Can anyone help me when he simplifies the cost function at the 31:22 mark and how he gets to C = 10 times square root of 2 plus Q. I know he made a math mistake so maybe I am missing something. What is the correct simplification when pluggin in r = 10 and and w = 5. Thanks so much!

[@aarohanchakraborty6200]

Substituting the values of r and w, C=5√2q + 5√2q and hence 10√2q

[@sreyanshuchaterjee3962]

All these theories are nice on paper, rarely in practice. Such practices will never work at a startup when you reduce humans to a number. Perhaps a gaming theory approach to economics will be a better outcome.

[@trent797]

These are very interesting lectures. I just keep wondering how common it is in the modern economy to be able to switch between labor and machines. I can understand humans picking vegetables vs a machine, but I'm not seeing how this relates to many white-collar type jobs.

[@s.kmusica4166]

can ub please explain me 31:33

[@rrrocky1200]

AVC is 5q sir... It is given as 5/q in the graph

[@bkkhilji5332]

11:33 .........sir the formula of AVC is wrong. it is 5q not 5/q beacuse the formula of AVC = VC/Q , so putting the values in to AVC fromula VC= 5q^2. So AVC= 5q^2 / q , so q cancelled by q^2 and then AVC = 5q.. so kindly correct it. u written as 5/q.............. and the rest lecture is adorable...

[@robertwnorrisii9143]

@21:19 "Tension" -or- 'Inflection Point' tangencies of Isoquants & Isocosts curves?

[@robertwnorrisii9143]

@32:20 Imposing the optimal 'marginal rate of technical substitution' between L & K ?

[@ZionForman]

great

[@RaviYadav-uc1tx]

In fig. 6-1 AVC=5*q NOT 5/q.🙂

[@perkinschingono7946]

This is way too easy to go through no torture ...no cap

[@logeshwaribabu1954]

k=1/2(L) or 0.5L, but he is saying, labor is half the price of capital , so we want more workers. how does this works? is nt it should be L=1/2(K)? am kinda confused here, but the math seems to be right, => MRTS=-k/L=-1/2 -----> k=1/2(L). can anyone pls explain?

[@stjepaan]

I'm little confused as well, even more so because in 41:37 he's saying the price of L is 1/2 the price of K. But nobody is mentioning this, so I don't know...

[@abdullahalrafi9888]

w/r is equal to 1/2 as well. so, w = (1/2)*r

[@uditabhattacharya2824]

cost in general you need to revise for micro to understand competition going ahead

[@Ennxi]

Can someone pls explain this to me, why it s mentioned that I would buy more workers when its k=1/2L, literally 2 machines equal one worker, I would rather buy machines in that case if I m indifferent and they give the same output?

[@Ennxi]

or is it their productivity measured?

[@the.reechmond]

It means one machine is equal to half worker and so it means you’ll need to pay two workers to do what one machine can do, definitely any rational being would choose the machine over the two workers to reduce cost.

[@Ennxi]

@@the.reechmond so it is productivity after all,thank you

[@awwa1889]

I don’t understand, anyone can explain it to me , what’s Q

[@anmolagrawal386]

00:00 Developing a cost curve for efficient production 05:24 Deriving short-run cost function from production function and prices 11:12 Understanding the relationship between marginal cost and productivity 16:38 Finding the economically efficient combination of labor and capital to produce goods at minimum cost. 21:43 The isoquant curve represents all possible combinations of capital and labor that deliver a given production level. 27:24 Deriving the optimal mix of labor and capital leads to the cost function. 33:14 Deriving cost function from production function and input prices 38:08 The theory behind the minimum wage debate 42:31 Long run expansion path is a long run cost curve 47:30 Optimizing production requires choosing the right sized plant for the production level Crafted by Merlin AI.

[@pauloat]

There's an error in the graph at 19:40, maybe you can re upload the video fixing that.

[@michaels8297]

LOL. REDO THE CLASS

[@s.kmusica4166]

can any one explain me 31:33

[@julian.ch_]

I don't quite understand - at 9:12, why is MC "10q"? If "MC=[deltaC]/[deltaQ]", then shouldn't MC be "15q"? (since total costs are 10+5q^2)??

[@ruhikaaramalingam6526]

The MC is the first derivative of total cost, so it is 10q

[@muhammadsiddiqui2244]

The derivative of the constant is ZERO

[@anonymous.youtuber]

The rules that apply here are : 1) the derivative of a sum is the sum of the derivatives 2) the derivative of a constant is zero 3) the derivative of a constant times a function is that constant times the derivative of that function 4) the derivative of q^2 is 2q Thus you can ignore the 10 in 10+5q^2 The derivative of 5q^2 is five times the derivative of q^2 5 times 2q is 10q I hope this makes it clear to you.

[@santiagodm3483]

17:16

[@blkstr9557]

HES GOT A PINK SHIRT ON YESSSSSSSSSSSSSSSSSSSSSSSSS

[@demidrek-heyward]

lol writing multiplication as 'x'

[@krupakhargandeepan]

does the example about Tesla mean that SRAC2 would be a safer bet to support both levels of production

[@danielwinsauer6428]

I don't think so because you are optimizing for expected/current demand. If he thought that the big demand spike was just a fad and would return down then maybe SRAC2 would be better. Musk is predicting that demand will continue to be elevated and that in the LR he will need the larger SRAC3.

[@muhammadsiddiqui2244]

I think the best way is to what is called "provision for the future" e,g., buy a big land but don't fully construct it at first, etc.

[@costage]

The math is hard and annoying?! Isn't this MIT? Nice lecture though, thanks for uploading :)

[@unitedstatesdale]

Is someone born this smart ?

[@andyprompt]

Talking about Elon back when he was a neutral topic lol

[@johnvassallo2937]

Economics is not that hard. Taught my children basics in the car while driving to DC. Making these concepts look harder than the are only makes you look smart. And please try not to scribble when you write on the board.

[@mr_vazovski]

This professor likes the word sht way too much.

[@ornicaradepapoursanssur146]

No he likes the short of this word. Example « my bad » ( try to pronounce it) Example « oh I didn’t know that » same Example « what a surprise » same shit Example « do the same things as previously » He only love his discipline. The opportunity cost of saying « shit » is much lower than other things. And it can be use in almost given situations. So shit why do you say shit things like that. That shit is awesome. It’s a joke but I don’t think that’s dumb as me. Haha I came from the world of monster and Compagnie. Sorry if I’m saying absurdity or non sens. I hope you enjoy my shit

[@Ybsjek]

I don’t like how he swears. 😮‍💨

[@tw2800]

This professor has a foul mouth...using foul language in his lecture....not professional

[@chrisfetchkoproductions7256]

grow up.

[@BB-mr3vy]

Dude chill with the random profanity. It's really cringe and distracting. No one thinks you're the cool prof because you swear during lectures.

[@pibob7880]

I think　AVC should be 5ｑ、not 5/q