My notes on this lecture for you guys, enjoy. - What is Microeconomics? - Scarcity is what drives microeconomics - Constraint optimization exercises where economic agents (firms or individuals) try to make themselves as well off as possible given their constraints. - It's about trade-offs. How do you make trade-off things to make you as well off as possible. - Opportunity costs is an important concept in microeconomics - Every action or inaction has a cost in that you could've been doing something else instead. - If you buy a shirt, you could've bought pants - If you stayed at home and watched TV, you could've been out working. - Everything you do has a next best alternative you could have done instead. - They get referred to as the dismal science - because their whole point is that nothing is free. There's always a trade-off, there's always an opportunity cost. - your constraint optimization means you're going to have to pass up one thing to do another. - because of Microeconomics, you can understand the decisions that drive our economy. - Supply and Demand model - Models aren't 100% true, but always pretty true, "pretty" being between 10% and 95% true. - The idea is to make a trade-off. We want to write down in our models a set of simplifying assumptions that'll allow us, with a small set of steps, to capture relatively broad phenomena. - To capture those broad phenomena, you want to do it in the most tractable possible way. - Positive analysis - is the study of the way things are - Normative analysis - is the study of the way things should be - Example of eBay auctions - Auctions are a terrific example, they're like the textbook example of a competitive market. Demand comes as a bunch of people going on and bidding. People who want it more, bid more. So you get a demand curve. The higher the price, the fewer people you're getting to bid. Supply is how many units of it are for sale on eBay. You bid until those two meets. And then you have a market equilibrium at that bidding price. - Example: someone offered their kidney for auction. The bidding went nuts. It started at $25,000. It climbed to $5m before the auction was shut down, and eBay wouldn't allow you to sell your bodily parts on eBay. - This raises two questions: - The Positive analysis question: Why did the price go so high? - Because the demand is high (because I'd die without it). Supply is low because not a lot of us are willing to sell their kidneys to eBay. Low supply, high demand led to a higher price. - The Normative analysis question: Should you be allowed to sell your kidneys on eBay? - The standard economics answer to start would be, of course, you should. We're in a world of thousands of people die every year because there's a waiting list for a kidney transplant. And these are people who would happily pay a lot of money to stay alive. Meanwhile, there are hundreds of millions of people walking around with two kidneys who only need one. And many of these people are poor. And lives could be changed by being paid $1m. So this is a transaction that makes both parties better off. So the standard answer would be that you should be able to sell your kidneys on eBay. The question is, why would we want to stop this transaction? - The first type of problem comes out of the category we call: Market failures. And MF are reasons why the market doesn't work in the wonderful way economists like to think it should. For this example, there could be the problem of fraud. People might not be able to tell if they're getting a legit kidney or not. - There could be an example of imperfect information. Do you know what the odds are that you can spend the rest of your life with only one kidney? We ought to know that before we start selling our kidneys. - A second problem is what we call equity or fairness, which is we would end up with a world where only rich people get kidneys. - The third problem has to do with behavioral economics., which is essentially, that people don't always make decisions in the perfectly rational, logical way we'll model them. People make mistakes. - You do the positive analysis to understand the economic framework before you start jumping to drawing conclusions. We have to be disciplined. We have to start with the fundamental economic framework. - Economics at its core is all about how the market knows best, and that basically governments only mess things up. - How freely should a market, should an economy function? - We have a capitalistic economy. And in a capitalistic economy, firms and individuals decide what to produce and consume, may be subject to some rules of the road set by the government. There are some minimum rules of the road to try to avoid fraud or misinformation, but otherwise, we let the dice roll. - The other extreme is a command economy. In this case, the government makes all the production and consumption decisions. The government doesn't just set the rules of the road, the government owns the road. The government says we're going to produce this many cars this year. And people can get them in some way. It could be a lottery, could be waiting in line. We'll allocate how many get produced and who gets them. The government decided how many shirts, cars, TV's, everything decided how much to produce. Problems with this model: - Too many opportunities for corruption when the government controls everything. - It's hard to control human nature. - Adam Smith's invisible hand is that the capitalist economy will manage to distribute things roughly in proportion to what people want. Folks who want a certain kind of car are going to want to get to that kind of car. - Adam Smith's view (the invisible hand view) is that consumers and firms serving their own best interest will do what is best for society. - The fundamental core of the capitalistic view is that consumers and firms serving their own best interests will do what ends up being best for society. - It can lead to outcomes that aren't fair.

I don't know why I like these lectures, it's better than Netflix!

Great work MIT. Open education done right.

"Microeconomics was born in this room".-7:10 Yup, you got my attention.

Damn man you just can't deny Economics is a hell of an interesting course!

im an economics major student and omfg this guy makes things so fascinating. its not boring at all

13:32 , 14:20 : beware, the image shown has probably been made afterwards (as "Handouts" for the Course, see the website links), and the colours are reversed (blue-yellow).

Impossible to get tired by listening Professor J. Gruber. He has an AMAZING way to teach Micro. Again and again, MIT doing A GREAT JOB with the online community.

I normally don't write reviews but this course is so freaking amazing that I have to do it. The course is rich in content, yet very easy to understand. Prof. Jonathan Gruber just did an awesome job and thank you guys for sharing these lectures with the rest of the world.

I missed all my long and boring online micro economic classes this semester and I am now binge watching a whole semester of MIT classes. What a good decision I´ve made.

One of the best teachers in the world. Better than Netflix. Highly Recommended. I have done this complete playlist.

I would highly recommend reading "Basic Economics: Theory and Cases" by Attiyeh, Bach, Lumsden as an introduction. Wonderful "programmed learning" type of text book - you need to focus and keep answering questions (fill in the blanks in the text) as you read the book. Answers are at the bottom of the page. There are review questions with answers at the end of each chapter followed by a case study (no answers). Calculus not required. I learnt basic Economics from this book. It is fantastic.

Thank you for making this available. I appreciate that it has subtitles. I struggle with hearing and I’m anxious about upcoming classes I’m enrolled in, so I wanted to get a head start. I found some cheat sheets off of Amazon so I can focus on listening to reading the lecture rather than trying to write everything down. Awesome professor and incredible school, thank you so very much.

I love that I can go for a run and absorb this information at the same time. What a well-organized, clear and useful lecture!

the 2010 course gave me an A in my micro economics exam and led me to give the micro economics tutorial at my university for 2 years. really excited to see the 2018 version.

" THIS CLASS IS SO GOOD I'm WATCHING ON UKposts AND I ALMOST RAISED MY HAND TO ANSWER A QUESTION LOL"

A truly great professor at 34:12 he is perfectly aware of his limitations and delegates to those that are better. 🙏🏻 Respect.

I'm glad Mr Gruber is still teaching this course. I'm using one of this older videos for my lessons and it was again Principles of Micro but 9 years ago. I like his style.

13:20 Demand Curve is yellow, Supply curve is blue (it's switched in the lecture)

MIT is doing a great job by providing free videos of classes. Love you for that

Thank you for donating your knowledge to the world so a middle-age nobody like myself can learn something that I didn’t get to learn in my younger years.

Phenomenal professor. Hope to be somewhat like him in the future

Thank you MIT. This is a wonderful public service you offer allowing education to be more accessible.

It's free yet I feel that it is more informative and more interested than my current Economics and Finance class that we paid heavy to attend. Great works MIT and thank you so much!

This materials helps me to understand about my subjects, thank you for uploading this material, and the method of teaching approaches is epic

I loved Gruber's economics series form a few years back, this will help me remember what i learned from that.

bruh my life is a series of bad choices for opportunity costs

amazing proffesor, l learn more voluntarily watching these videos than I do in classes I have to take and do school work for.

I learned economics from Samuelsons popular textbook in the early 80s. Great economist, great man. Never forget Paul Anthony Samuelson. He was one of if not t h e last generalist in economics. He knew and developed everything: Macro, Micro, History of economics, Econometrics etc. So well done that he reminds the students of MIT‘s founder of modern economics, Samuelson.

I cries watching this. I am a course 14 alum, and this has brought me such good memories!!!!!! Thank you MIT!

It's really good to watch these lectures so I can be motivated in high school

I watched his older lectures and loved them, I'm glad he is still teaching

Such a stupendous lecture live recoreded! I hope they continue doing this for a while! 📀🎞🎦

Awesome to see this course being covered again

0. Individuals and firms’ decisions & constrained optimization ... 1. Supply and demand .. equilibrium 2. Positive vs. normative 16:40

The description of difference between models and laws was excellent.

I am a CS graduate, I don't know why I clicked this video, but I just love it.

I'm a practicing economist and work in policy and this course is brilliant! Helping people understand welfare maximising and trade-offs made to get there are so many people that think this reality doesn't apply to "them", and yet...

him dropping the line about modern economics being created in that room was crazy, but makes so much sense (as an ex engineer)

i just loved the way he always look for the questions from the audience ... complete teacher he is 👍

After graduated from University for more than two years, I pick up Microeconomics through this course, many thanks to Professor Gruber

Huge fan that I can comment on your guy’s stuff. Thanks for posting these videos!! MIT, you guys are truly awesome

The best possible lecture out there on micro economics

You taught it so vividly professor👏🏻Thank you....Didn't even studied properly this subject during my 1st Sem of my college

Below are timestamps: 1. Introduction and Supply & Demand Introduction to the Course and Professor 00:00 Teaching Style and Responsibilities 00:55 Engagement and Gender-Neutral Language 01:40 Defining Microeconomics 02:26 Coverage of Irrationality 03:08 Importance of Opportunity Cost 04:08 The Dismal Science and Trade-offs 04:55 Economics as Constrained Optimization 05:52 Microeconomics as Applied Engineering 06:42 Simplified Models in Economics 07:39 Teaching with Simplifying Assumptions 08:40 Understanding Models at Multiple Levels 09:40 Adam Smith and the Water-Diamond Paradox 10:34 Supply and Demand Scissors 11:30 Introduction to Market for Roses 12:23 Demand and Supply Curves 13:24 Deriving the Supply Curve 14:24 Market Equilibrium 15:10 Positive vs. Normative Analysis 16:07 eBay Auctions as a Competitive Market 17:14 Positive Analysis of Kidney Auction 18:03 Normative Analysis of Kidney Auction 18:48 Regulation and Market Failures 19:52 Challenges of Imperfect Information 20:42 Equity and Fairness in Kidney Allocation 21:42 Black Market and Fraud 22:36 Behavioral Economics and Decision-Making 23:23 Challenges of Evaluating Trade-offs 24:13 Positive vs. Normative Analysis 24:58 Economics and the Role of Government 25:41 The Capitalistic Economy and Inequality 26:22 Challenges of Inequality and Regulation 27:18 The Command Economy 28:12 Challenges of Command Economies 29:03 in Capitalism 29:54 The Invisible Hand and Economic Efficiency 30:51 Demand and Utility Maximization 31:42 Market Equilibrium and Market Failures 32:31 Course Structure and Problem Sets 33:17 Mathematics and Supply and Demand 34:03

Thanks MIT for sharing the content. Open content is the way to go :)

thank you prof Jonathan Gruber and MIT . i'm from indonesia. and i decided to 'trade off' my time by watching your lecture instead of watching Netflix and other crap soap opera. Thats the best thing to explain "opportunity cost" concept

I'm a PPE undergrad at Warwick and I've really been struggling to get interested in economics at all, this first lecture by MIT is way more engaging than anything I've seen so far!

That was an amazing class. So important to understand.

The law of demand and supply, otherwise is a fragile law between natural and artificial phenomena. For example, when an engineer at MIT desgin a device and prove utility, depending on its intensity, it can absolutely change economic environment. This turns attention to new demand and supply sources to a certain extent.

Hi, Currently , I'm a student of The College of Economics in Viet Nam and I'm appreciate about this course. MIT is doing a great job by sharing free lectures for all students around the world, and yeah ,it easy to understand . I love it💯💯💯😍😍😍

이공계에 대학을 진학하고 있는 학생으로서 상경계열의 수업들을 들을 기회가 많이 없었습니다. 하지만 엠아이티에서 이렇게 제공해주신 기회를 통해서 전세계 어디서든 인터넷만 되는곳이라면 수업을 들을 수 있게 해주셔서 감샇바니다.

I am glad to see John Gruber is still teaching. Kuddos to MIT for not resorting to any PR stunts by throwing this man under the bus after Gruber's controversial comments on some show, but he was just being real & telling the truth abt how ppl vote their politicians. At least MIT didnt do what Obama did to him.

Thank you Professor! May I point out a small verbal slip at 13:35, it is should be "a yellow, downward-sloping line is the demand curve"

Hii..I am from India and taken Economics as my graduation major subject...by this lecture I have learnt so many stuffs that my college is not able to provide... Thanking you for helping me to braoden my mind..!❤

This lecture was just awesome. For someone like me who is studying economics masters from a well known university; Karnataka University Dharwad. This Professor just places things in place.

3:25 starts

amazing course by a passionate professor

The professor is much older than in the latest video I saw when I was freshman. Now I am a junior, and I still love microeconomics because him and my own teacher in my university.

Thank you for recording these lectures and making them free. I am studying to succeed in my retakes, you are of immense help.

Fantastic!! More Videos.Profs have high energy and full clarity about what he is teaching .MIT MOOC is very popular in India and Indian students.

Did my Master's in Economics next door to MIT at Northeastern University decades ago. This lecture brought vivid memories of great Economics lectures by superb Professors who made this subject so damn interesting. This is a subject one can apply to every day life.

The fact that he had to explain his usage of the term guys says a lot about where we are in society. Great lecture.

Studying economics at UWE and the teacher is insufferable so now im here and the comparison in teachers in monumental to my studying. Appreciate it.

I'm a math student currently in second year, but watching these videos makes me want to re-learn economics!

These are the good lecturers i can easily understand and learn from this channel

5 Things I learnt: - Microeconomics is the study of decision making under scarcity. It is basically a series of constraint optimisation exercises where economic agents (firms or individuals) try to make themselves as well off as possible given their constraints. - Opportunity cost: Every action or inaction has a cost that you could’ve been doing something else instead. - A model is a description between two or more economic variables. Models are never 100% true, but are generally true, about 90 to 95% of the time. George box said, “All models are false but some models are useful.” - Positive analysis is the study of the way things are and normative analysis is the the study of way things should be. We should consider two things to see why something shouldn’t be the way it is: market failures (fraud, imperfect information), equity or fairness and failing to understand that people make mistakes and that their decisions aren’t perfectly rational. - Economics at its core is that the market knows what is best and that governments only mess things up.

So good lecture, really happy to find this. Best thing it is open for people who want to learn and understand more about economics. Thanks so much Prof.

THANKS FOR MAKING THIS AVAILABLE FOR EVERYONE GREAT LECTURE WITH EXECELLENT EXAMPLES

Wow, the teaching content and quality at MIT are sensational. I went to the wrong uni

Presentation on supply and demand is understandable. Thank you MIT!

Now this is something I can binge watch. Awesome!

What a great Professor 👍🏻👍🏻 I like his way and how he simplified everything well, thank you

World's best teaching hub🖤

Couldn't find a better book on Public Finance than the one he wrote... Excited to listen to these lectures now

2:47 What is Microeconomics? -Scarcity -Constrained Optimization - Trade-offs & Opportunity cost *How to study models?* Intuitive level (The mom test) Graphical Mathematical 7:38 Supply & Demand model Water-Diamond (Adam Smith) Supply-Demand graph Positive analysis: How things are Normative analysis: How things should be *(Selling kidneys on eBay)* -Market failure -Incomplete Information -Equity/Fairness -Behavioral economics/Irrationality

Sir I r too brilliant ..I never see such teacher like you ..tq soo much sir ..luv from India Bihar 🇭🇺

Nice to see Gruber is still teaching. What lecture is on Obamacare?

Flashbacks of college days. Some good, some bad. I can't help but think how much better suited I am today to process and absorb these materials at this late stage of life than I was back in my 20s.

Thank you so much for these amazing lectures!

In Economics what duration of time is Short- Term, Medium - Term and Long -Term ?

"Governments only mess things up" 😂😂😂 holy hell im blessed

Exceptionally good video editing! Thank you very much!- the explanations are also very powerful :) I'm glad i found your channel :D Subscribed

i did an online course of 14.01 from edX, this guy rocks

This makes me want to study in MIT... but damn my math sucks.

Mom is watching this now, so there will be no need to explain.. 😂

Love his enthusiasm! Kept me wicked hooked 👍

I adore Prof. Jonathan Gruber. He is remarkable man indeed! I love to meet him.

I'm studying economics and this lecture is amazing. I think I picked the wrong uni

My school's online eco. Class was going on And i preffered to attend this one, putting that on mute..

I need more such economics videos..pls do upload 🙏..by the way loved the explanation

Wonderful session thoroughly enjoyed and of course understood basic concepts.Thank you

Where do we watch the recitations of this course? Please reply if you know. Thanks

Backtothegoodolddays💔💔

well explained, at 13.37, its the orange sloping line which is the demand curve.

The best professor I've ever learnt from. That too, microeconomics

Are are any exisitng knowledge of these concepts required before beginning this course? Because I feel I am having trouble understanding some of the things

Who else saw this back in ‘09 and came back 9 years later to see his grey hair

This is a great lecture series.

Some random UKposts Macro got me here. I don't even google Economics. But Dr Gruber, your humour shines through, and probably the first time I have bothered to understand what the term Microeconomics means.