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Khan Academy Microeconomics

Supply, demand and market equilibrium
The core ideas in microeconomics. Supply, demand and equilibrium

Elasticity
Price elasticity of demand and supply. How sensitive are things to change in price.

Consumer and producer surplus
Summary

Scarcity, possibilities, preferences and opportunity cost
How do you decide what to produce or trade? How can you maximize happiness in a world of scarcity. What are you giving up when you choose something (i.e., opportunity cost)?

Production decisions and economic profit
Economic profit vs. accounting profit. Average total cost (ATC) and marginal cost (MC). Marginal product of labor (MPL). Price discrimination.

Forms of competition
Summary

Game theory and Nash equilibrium
Summary

Supply, demand and market equilibrium

Introduction to economics
This tutorial (that only has one video) is an overview of what economics is. In particular it will tell you the difference between microeconomics (the subject you're in right now) and macroeconomics. Really good first watch to give you some context on the world of economics.

The demand curve
You've probably heard of supply and demand. Well, this tutorial focuses on the demand part. All else equal, do people want more or less of something if the price goes down (what would you do)? Not only will you get an intuition for the way we typically depict a demand curve, you'll get an understanding for what might shift it.

The supply curve
Now we'll focus on the "supply" part of supply and demand. Supply curves (as we typically depict them) come out of the idea that producers will make more if they get paid more.

Market equilibrium
You understand demand and supply. This tutorial puts it all together by thinking about where the two curves intersect. This point represents the equilibrium price and quantity which is, in an ideal world, where the market would transact.

What drives oil prices
This tutorial tries to address a very important question in the real world--what drives oil prices? And we will do it using the tools of the supply and demand curves.

Elasticity

Price Elasticity
You're familiar with supply and demand curves already. In this tutorial we'll explore what implications their steepness (or lack of) implies. Price elasticity is a measure of how sensitive something is to price.

Consumer and producer surplus

Consumer and producer surplus
Many times, the equilibrium price is lower than the highest price some folks are willing to pay. For all consumers, this is called consumer surplus. Similarly, the price might be higher than the minimum price at which some are willing to produce. For all the producers, this is called producer surplus. This tutorial covers them both with an emphasis on the visual.

Deadweight Loss
Many times, the equilibrium price is lower than the highest price some folks are willing to pay. For all consumers, this is called consumer surplus. Similarly, the price might be higher than the minimum price at which some are willing to produce. For all the producers, this is called producer surplus. This tutorial covers them both with an emphasis on the visual.

Public goods and externalities
In many scenarios thinking only about producers' marginal cost or consumers' marginal benefit does not fully capture *all* of the costs or benefits from the production/use of a product. In this tutorial, we explore these externalities (negative and positive ones) to think a bit deeper about ways to maximize total surplus not just for producers and consumers, but for society as a whole.

Scarcity, possibilities, preferences and opportunity cost

Production possibilities frontier
This tutorial goes back to the basics. You are a hunter-gatherer with only so much time to hunt or gather. How do you allocate your time and energy to maximize you happiness? This is what we try to understand through our study of the production possibilities frontier and opportunity cost.

Comparative advantage and gains from trade
Should you try to produce everything yourself or only what you are best at and trade for everything else? What if you're better than your trading partners at everything? This tutorial focuses on comparative advantage, specialization and gains from trade with a microeconomic lens.

Marginal utility and budget lines
In this tutorial we look at the utility of getting one more of something and put numbers to it. We then use this to construct a budget line and think about indifference curves.

Production decisions and economic profit

Economic profit and opportunity cost
Economic profit and accounting profit are two different things (the difference being that economic profit takes into account opportunity cost). Confused? This tutorial lays it all out with the example of a restaurant.

Average costs (ATC, MC) and marginal revenue (MR)
In this tutorial, Sal uses the example of an orange juice business to help us understand the ideas of average total cost (ATC), marginal cost (MC) and marginal revenue (MR). We then use this understanding to answer the age-old question, "how much orange juice should I produce?" Finally, we use these ideas to construct a long-run supply curve. A must watch if you're interested in making juice!

Average fixed, variable and marginal costs
Using a spreadsheet, Sal walks through an example of average costs per line of code as a firm hires more engineers. Really good primer to understand what average fixed costs, average variable costs, average total costs (ATC) and average marginal costs (MC) are (and how they are calculated).

Labor and marginal product revenue
Constructing a demand curve for an individual firm by thinking about how much increment benefit they get from an incremental employee (marginal product of labor (MPL) and marginal product revenue (MPR). We later think about how we can add these "demand" curves to construct a "demand" curve for the market for labor in this industry.

Price discrimination
This short tutorial explores how a wine business can utilize first-degree price discrimination to maximize economic profit (it uses many of the ideas we've explored in the rest of this tutorial).

Forms of competition

Perfect competition
This tutorial looks at markets that are deemed to have "perfect competition." This means that there are many players with identical products, no barriers to entry, no advantage for existing players and good pricing information. Few to no real market completely matches this theoretical ideal, but many are close. Even the example we use in this tutorial (the airline industry) isn't quite perfect (you should think about why).

Monopoly
No, we aren't talking about the board game although the game does try to approximate what this tutorial is about--notice that you can charge more rent at either Boardwalk or Park Place if you own both (you have a "monopoly" in the navy blue market). The opposite of perfect competition is when you have only one firm operating. This tutorial explores what this firm would do to maximize economic profit.

Between perfect competition and monopoly
Most markets sit somewhere in-between perfect competition and monopolies. This tutorial explores some of those scenarios--from monopolistic competition to oligopolies and duopolies.

Game theory and Nash equilibrium

Nash equilibrium
If you haven't watched the movie "A Beautiful Mind", you should. It is about John Nash (played by Russell Crowe) who won the Nobel Prize in economics for his foundational contributions to game theory. This is what this tutorial is about. Nash put some structure around how players in a "game" can optimize their outcomes (if the movie is to be fully believed, this insight struck him when he realize that if all his friends hit on the most pretty girl, he should hit on the second-most pretty one). In this tutorial, we use the classic "prisoner's dilemma" to highlight this concept.

Why parties in a cartel will cheat
You know what Nash equilibrium is (from the other tutorial). Now we apply it to a scenario that is fairly realistic--parties to a cartel cheating. A cartel is a group of actors that agree (sometimes illegally) to coordinate their production/pricing to maximize their collective economic profit. What we will see, however, is that this is not a "Pareto optimal" state and they will soon start producing more than agreed on.

Introduction to economics

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The demand curve

Law of Demand
Example of the law of demand

Change in Expected Future Prices and Demand
Summary

Price of Related Products and Demand
How changes in the price of related goods can shift demand

Changes in Income, Population, or Preferences
How demand can be affected by changes in income, population or preferences

Normal and Inferior Goods
How the demand for some goods could actually go down if incomes go up

Inferior Goods Clarification
More clarification on inferior and normal goods

The supply curve

Law of Supply
Introduction to the Law of Supply

Factors Affecting Supply
How the price of inputs, price of related goods, number of suppliers technology, and expected future prices affects the supply curve

Long Term Supply Curve
Summary

Market equilibrium

Market Equilibrium
Equilibrium price and quantity for supply and demand

Changes in Market Equilibrium
How the equilibrium price or quantity might change due to changes in supply or demand

What drives oil prices

Breakdown of Gas Prices
Where the dollars at the pump go

Short-Run Oil Prices
Thinking about what moves oil prices

Law of Demand

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Change in Expected Future Prices and Demand

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Price of Related Products and Demand

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Changes in Income, Population, or Preferences

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Normal and Inferior Goods

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Inferior Goods Clarification

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Law of Supply

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Factors Affecting Supply

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Long Term Supply Curve

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Market Equilibrium

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Changes in Market Equilibrium

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Breakdown of Gas Prices

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Short-Run Oil Prices

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Price Elasticity

Price Elasticity of Demand
Introduction to price elasticity of demand

More on Elasticity of Demand
Looking a bit deeper at why elasticity changes despite having a linear demand curve

Perfect Inelasticity and Perfect Elasticity of Demand
Extreme examples of price elasticity of demand

Constant Unit Elasticity
What a demand curve with constant unit elasticity would look like

Total Revenue and Elasiticity
Thinking about how total revenue and elasticity are related

More on Total Revenue and Elasticity
Clarification on the relationship between total revenue and elasticity

Cross Elasticity of Demand
Price of one good effecting quantity demanded of another

Elasticity of Supply
Thinking about elasticity of supply

Elasticity and Strange Percent Changes
Why we calculate percent changes in a strange way when calculating elasticities

Price Elasticity of Demand

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More on Elasticity of Demand

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Perfect Inelasticity and Perfect Elasticity of Demand

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Constant Unit Elasticity

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Total Revenue and Elasiticity

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More on Total Revenue and Elasticity

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Cross Elasticity of Demand

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Elasticity of Supply

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Elasticity and Strange Percent Changes

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Consumer and producer surplus

Demand Curve as Marginal Benefit Curve
Thinking about a demand curve in terms of quantity driving price

Consumer Surplus Introduction
Consumer surplus as difference between marginal benefit and price paid

Total Consumer Surplus as Area
Looking at consumer surplus as area between the demand curve and the market price

Producer Surplus
Looking at the supply curve as an opportunity cost curve. Understanding the producer surplus as the area between the supply curve and the market price

Deadweight Loss

Rent Control and Deadweight Loss
How instituting a price ceiling lower than the equilibrium price reduces the total surplus (dead weight loss)

Minimum Wage and Price Floors
How a minimum wage might effect the labor market

Taxation and Dead Weight Loss
The effect of taxation on the equilibrium price and quantity

Percentage Tax on Hamburgers
What would happen if we have a percentage tax instead of a fixed dollar amount

Taxes and Perfectly Inelastic Demand
Who bears the burden for the taxes when demand is inelastic

Taxes and Perfectly Elastic Demand
Who bears the burden for a tax on a good with perfectly elastic demand

Public goods and externalities

Negative Externalities
Taking negative externalities into account when thinking about the optimal equilibrium price and quantity

Taxes for Factoring in Negative Externalities
How to factor in negative externalities through taxation

Positive Externalities
Factoring in external benefits

Tragedy of the Commons
How public resources can be abused

Demand Curve as Marginal Benefit Curve

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Consumer Surplus Introduction

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Total Consumer Surplus as Area

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Producer Surplus

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Rent Control and Deadweight Loss

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Minimum Wage and Price Floors

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Taxation and Dead Weight Loss

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Percentage Tax on Hamburgers

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Taxes and Perfectly Inelastic Demand

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Taxes and Perfectly Elastic Demand

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Negative Externalities

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Taxes for Factoring in Negative Externalities

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Positive Externalities

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Tragedy of the Commons

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Production possibilities frontier

Production Possibilities Frontier
Tradeoffs for a hunter gatherer and the production possibilities frontier. Ceteris Paribus

Opportunity Cost
Opportunity cost (and marginal cost) based on the PPF

Increasing Opportunity Cost
Why the opportunity cost may increase as you pursue more rabbits

Allocative Efficiency and Marginal Benefit
Marginal Utility and maximization

Economic Growth through Investment
How investing for capital formation can expand the production possibilities frontier (PPF)

Comparative advantage and gains from trade

Comparative Advantage Specialization and Gains from Trade
How two parties can get better outcomes by specializing in their comparative advantage and trading

Comparative Advantage and Absolute Advantage
Showing that a party benefits from trade as long as there is a comparative advantage (and not necessarily an absolute advantage)

Marginal utility and budget lines

Marginal Utility
Marginal utility and marginal benefit. How you would spend $5 on chocolate and fruit

Equalizing Marginal Utility per Dollar Spent
Why the marginal utility for dollar spent should be theoretically equal for the last increment of either good purchased

Deriving Demand Curve from Tweaking Marginal Utility per Dollar
Seeing what happens to quantity demanded when price changes

Budget Line
What I can buy with my income

Indifference Curves and Marginal Rate of Substitution
Summary

Optimal Point on Budget Line
Using indifference curves to think about the point on the budget line that maximizes total utility

Types of Indifference Curves
Indifference curves for normal goods, substitutes and perfect complements

Production Possibilities Frontier

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Opportunity Cost

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Increasing Opportunity Cost

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Allocative Efficiency and Marginal Benefit

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Economic Growth through Investment

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Comparative Advantage Specialization and Gains from Trade

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Comparative Advantage and Absolute Advantage

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Marginal Utility

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Equalizing Marginal Utility per Dollar Spent

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Deriving Demand Curve from Tweaking Marginal Utility per Dollar

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Budget Line

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Indifference Curves and Marginal Rate of Substitution

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Optimal Point on Budget Line

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Types of Indifference Curves

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Economic profit and opportunity cost

Economic Profit vs Accounting Profit
Difference between a firm's accounting and economic profit

Depreciation and Opportunity Cost of Capital
How to account for things when you own the building instead of renting it

Average costs (ATC, MC) and marginal revenue (MR)

Marginal Cost and Average Total Cost
Looking at marginal and average total cost in the context of a juice business

Marginal Revenue and Marginal Cost
Thinking about a rational quantity of juice to produce

Marginal Revenue Below Average Total Cost
Why it is rational to produce at a loss

Long Term Supply Curve and Economic Profit
Understanding the long term supply curve in terms of economic profit

Average fixed, variable and marginal costs

Fixed, Variable, and Marginal Cost.
Thinking about average fixed, variable and marginal cost

Visualizing Average Costs and Marginal Costs as Slope
Graphing variable cost, fixed cost and total cost

Labor and marginal product revenue

A Firm's Marginal Product Revenue Curve
Thinking about how much incremental benefit a firm gets from hiring one more person

How Many People to Hire Give the MPR curve
Thinking about how many people it makes sense to hire. Brief discussion of a monopsony.

Adding Demand Curves
How to add demand curves

Price discrimination

First Degree Price Discrimination
Charging different consumers different amounts in an attempt to optimize economic profit

Economic Profit vs Accounting Profit

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Depreciation and Opportunity Cost of Capital

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Marginal Cost and Average Total Cost

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Marginal Revenue and Marginal Cost

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Marginal Revenue Below Average Total Cost

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Long Term Supply Curve and Economic Profit

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Fixed, Variable, and Marginal Cost.

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Visualizing Average Costs and Marginal Costs as Slope

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A Firm's Marginal Product Revenue Curve

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How Many People to Hire Give the MPR curve

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Adding Demand Curves

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First Degree Price Discrimination

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Perfect competition

Perfect Competition
Conditions for perfect competition. Looking at the airline industry

Monopoly

Monopoly Basics
Thinking about what would happen with one airline. The opposite of perfect competition

Monopolist Optimizing Price (part 1)- Total Revenue
Starting to think about how a monopolist would rationally optimize profits

Monopolist Optimizing Price (part 2)- Marginal Revenue
Plotting the marginal revenue curve for a monopolist

Monopolist Optimizing Price (part 3)- Dead Weight Loss
Showing that what is optimal for the monopolist is not optimal for society

Optional Calculus Proof to Show that MR has Twice Slope of Demand
Using some basic calculus to show that marginal revenue has twice the slope of the demand curve for a monopolist

Review of Revenue and Cost Graphs for a Monopoly
Summary

Between perfect competition and monopoly

Oligopolies and Monopolistic Competition
Thinking about different markets that are in-between monopolies and perfect competition

Monopolistic Competition and Economic Profit
Why it is hard for a monopolisitc competitor to make economic profit in the long run

Oligiopolies, Duopolies, Collusion, and Cartels
Thinking about when oligopolies behave more like monopolies or perfect competitors

Perfect Competition

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Monopoly Basics

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Monopolist Optimizing Price (part 1)- Total Revenue

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Monopolist Optimizing Price (part 2)- Marginal Revenue

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Monopolist Optimizing Price (part 3)- Dead Weight Loss

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Optional Calculus Proof to Show that MR has Twice Slope of Demand

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Review of Revenue and Cost Graphs for a Monopoly

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Oligopolies and Monopolistic Competition

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Monopolistic Competition and Economic Profit

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Oligiopolies, Duopolies, Collusion, and Cartels

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Nash equilibrium

Prisoners' Dilemma and Nash Equilibrium
Why two not-so-loyal criminals would want to snitch each other out

More on Nash Equilibrium
Looking more closely at the definition of Nash Equilibrium

Why parties in a cartel will cheat

Why Parties to Cartels Cheat
Why duopolists would benefit to form a cartel and why it makes sense for them to cheat

Game Theory of Cheating Firms
Pareto Optimality and more on Nash Equilibrium. Seeing how cheating duopolists parallels the prisoners dilemma

Prisoners' Dilemma and Nash Equilibrium

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More on Nash Equilibrium

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Why Parties to Cartels Cheat

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Game Theory of Cheating Firms

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