Summary of Lec 1 | MIT 14.01SC Principles of Microeconomics

00:00:00 - 00:30:00

This video introduces the basics of microeconomics, including scarcity, trade-offs, and models. It discusses how microeconomics is used to understand and explain decisions made in everyday life, such as buying a textbook.

• 00:00:00 This video introduces the concepts of microeconomics, scarcity, trade-offs, and models. Professor discusses how the field of microeconomics is focused on the behavior of consumers and producers. The course uses simplifying assumptions to make models work, but the models are not always accurate to the 10th decimal. Despite these limitations, the models are still valuable tools for understanding how people make decisions in a constrained environment.
• 00:05:00 In microeconomics, we learn about the goals of consumers and firms and how prices play a role in enabling these goals. We also learn about how prices determine what goods and services are produced and how these decisions impact the overall economy.
• 00:10:00 The role of prices in economics is to determine what gets produced, how it is produced, and who gets the goods. The example used in the lecture was of how prices determine who gets an iPod. Prices are determined by the market and will change depending on the conditions in the market.
• 00:15:00 This video describes the distinction between positive and normative economics, and how microeconomics is used to explain the world. A perfect example of microeconomics in action is eBay, where the price is used to allocate goods to the person who wants it the most. Recently, an auction for a kidney on eBay went too high, and eBay shut it down.
• 00:20:00 This video discusses the Diamond Water paradox, in which the demand for a particular good (in this case, kidneys) exceeds the available supply. The video then goes on to discuss a trade-off in which one party (the rich person) is better off as a result of the transaction. Finally, the video discusses a second reason why we might not want this transaction to happen.
• 00:25:00 This video discusses how microeconomics relates to decisions made in everyday life, such as buying a textbook. It goes on to explain how economists model these decisions to better understand them.
• 00:30:00 Textbook writers update their books often, so it's important to be aware of which edition of a course you're taking. If you're very risk averse, or your parents are footing the bill, then you'll want the new edition. If you're more risk loving, and you don't mind taking a chance, you can get by with the old edition. And finally, you'll be thinking about these factors when you make the decision to buy the book.