Democratic ideals in the Declaration of Independence

WEBVTT
Kind: captions
Language: en

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- [Instructor] The goal of
this video is to appreciate how

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ideas of natural rights and
social contract and limited

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government and popular
sovereignty are embedded in

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America's founding documents.

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Before we start looking at the
documents themselves, let's

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just make sure we understand the context

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in which they were written.

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As we enter into the mid

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1770s,

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you have the beginning of

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the American Revolutionary
War, which begins in 1775.

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A little more than a year
after the beginning of the war,

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you have the Second Continental
Congress decide to formally

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declare independence on July 2nd

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and the Declaration of Independence,

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which we will study a bit in this video is

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formally approved on July 4th,

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1776,

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which is when we now

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celebrate Independence Day,
even though some could argue

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that it was July 2nd.

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Now, as soon as the colonies
decide that they are

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independent from the Kingdom
of Great Britain, they have to

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think about how do we govern ourselves?

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Within roughly a week, a little
more than a week after the

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Declaration of Independence
is approved, they start

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drafting the Articles of Confederation.

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Remember the Revolutionary
War is still going on.

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Eventually what will be
known as the Articles of

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Confederation go into effect in 1781.

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Now, this Articles of
Confederation really treat the

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various colonies as you could
almost view it as separate

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states that agree to work
together for purposes of getting

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independence from Great
Britain, for purposes of

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fighting the war, for
purposes of diplomacy.

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Now, over the course of the
next several years, it becomes

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clear, especially through
things like Shays' Rebellion,

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which we will look at in other
videos that the Articles of

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Confederation don't provide

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a strong enough central government.

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In May 1787, you have what
is called as a Constitutional

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Convention convening.

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It's presided over by George
Washington, who led the

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Americans in the Revolutionary
War, which they eventually

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will win as you see and obviously

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we're independent country now.

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The original intent of the
Constitutional Convention was to

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revise the Articles of
Confederation, but folks like

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Madison and Hamilton were
really intent on just completely

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replacing it.

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What they replace it with
was what is now the US

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Constitution, which goes
into effect in March of 1789

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and shortly thereafter,
you have the beginning

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of Washington's two terms.

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To be clear, the idea of even
having a powerful executive,

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the idea of even having a
president was not present in the

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Articles of Confederation that
comes with the Constitution.

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With that context out of the
way, let's look at, especially

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the Declaration of Independence
and the US Constitution.

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Here's the beginning of the
Declaration of Independence,

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written by Jefferson and edited by

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Benjamin Franklin and John Adams.

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I encourage you to pause this
video and first try to read

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it on your own and see if you
can identify these ideas of

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natural rights, limited
government, popular sovereignty,

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republicanism and social contract.

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Let's read this together now.

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When in the course of human
events, it becomes necessary

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for one people to dissolve the
political bonds, which have

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connected them with another ...

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Remember, this is a
Declaration of Independence.

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They are dissolving the political
bonds with the Kingdom of

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Great Britain and to assume
among the powers of the earth,

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the separate and equal station
to which the laws of nature

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and of nature's God entitle
them, so that's starting to

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refer a little bit to natural
rights, a decent respect to

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the opinions of mankind requires
that they should declare

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the causes which impel
them to the separation.

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They're saying, "Hey, we're
writing this document because

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"we're trying to show the rest
of mankind why the reasons

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"for which we are deciding to declare

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"our independence from Great Britain."

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We hold these truths to be self-evident

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that all men are created equal,

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let me underline this, that all men are

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created equal, that they are
endowed by their creator with

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certain unalienable rights,

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that among these are life,

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liberty and the pursuit of happiness.

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This is a direct reference
to natural rights.

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In fact, the phrase life,
liberty and the pursuit of

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happiness, most historians
believe is in direct reference

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to John Locke's phrase
life, liberty and property

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when he talks about natural rights.

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This is direct reference to
the enlightenment ideas or even

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the pre-enlightenment
ideas of natural rights.

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That to secure these rights,
governments are instituted

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among men, deriving their
just powers from the consent

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of the governed.

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This is worth underlining as
well because they're talking

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about governments being
instituted among men to secure

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these rights.

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This is all about social
contract, so that's social

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contract that we form a government

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in order to secure rights.

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We might give it some
rights, but in exchange the

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government has to protect our rights.

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They derive their powers from
the consent of the governed.

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Let me underline that actually
in a different color, derive

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their powers from the
consent of the governed.

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That is popular sovereignty,

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popular.

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I'll just write as pop sov,

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popular sovereignty right over here.

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That the people are the sovereigns.

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That whenever any form of
government becomes destructive to

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these ends, it is the right
of the people to alter or to

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abolish it and to institute
a new government, laying its

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foundation on such principles
and organizing its powers in

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such form as to them shall
seem most likely to effect

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their safety and happiness.

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This is more about social contract.

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They're like, "Look, if a
government breaks its social

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"contract, we have a right to replace it."

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The document also makes reference
to organizing its powers

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in such form, so that's really talking

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about limited government.

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They're talking about, "Hey,
this government just won't

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"have the absolute right to do anything,"

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so that right over there is limited

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government.

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Prudence, indeed, will
dictate that governments long

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established should not be changed for

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light and transient causes.

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They're essentially saying,
"Look, you shouldn't just

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"overthrow your government on
a whim," and accordingly all

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experience hath shown that
mankind are more disposed to

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suffer while evils are sufferable,
than to right themselves

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by abolishing the forms to
which they are accustomed.

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They're saying, "Look, if you're
prudent, you wouldn't just

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"overthrow your government on
a whim," but they're kind of

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saying, "We're not so worried
about that because history

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"has shown us, experience has
shown us that if anything,

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"people are more likely to
keep suffering even when they

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"should be overthrowing their government."

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But when a long train of abuses
and usurpations, pursuing

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invariably the same object
evinces a design to reduce them

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under absolute despotism,
it is their right,

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it is their duty to
throw off such government

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and to provide new guards

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for their future security.

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They're saying, "Hey, look,
the Kingdom of Great Britain,

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"they are abusing us,
they are usurping power."

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Usurping is taking something
from you that is yours and so

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we need to throw off such a government

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for our own future security.

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Here it says,

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"Provide new guards for
their future security,"

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so this provide new
guards, once again making

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reference to limited government.

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Now, let's fast forward
roughly 13 years to the US

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Constitution, which continues
of course to be in effect.

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This over here is a picture
of the Constitutional

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Convention, which we
mentioned happened in 1787.

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The original intent of the
Constitutional Convention was to

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revise the Articles of
Confederation, but folks like

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Alexander Hamilton and James
Madison really wanted to

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replace the Articles of Confederation.

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You can see it's being presided
over by George Washington.

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It starts, the preamble says,

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"We the people of the United
States, in order to form a more

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"perfect Union, establish justice,

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"insure domestic
tranquility, provide for the

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"common defense, promote the
general welfare and secure the

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"Blessings of Liberty to
ourselves and our posterity, do

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"ordain and establish
this constitution for

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"the United States of America."

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Once again, pause this video
and think about whether you

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see ideas of popular
sovereignty, limited government,

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social contract, natural
rights going on even in this

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preamble or even from the fact
that they took the trouble

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to create this constitution.

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Well, let's start at the beginning.

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It starts with, "We the people,"
we the people are the ones

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that are creating this
Constitution and not only does it

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start with we the people,
but we the people is

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intentionally written in
this very, very large writing

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right over here.

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This is a picture of the Constitution.

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It's really of all about we
the people, the people are

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sovereign, so

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this idea of popular sovereignty comes out

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loud and clear in not just the
Declaration of Independence,

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but also the US Constitution.

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The fact that we the people
are setting up this government,

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this is all about social contract.

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They are forming a government.

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They're forming a social contract
with a government that is

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going to protect, that is
going to establish justice,

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provide for the common defense,
promote the general welfare.

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Let me make this clear.

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That is this, this is all social contract.

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This is what we expect, this
government that we're creating

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to do, promote the general
welfare and secure the blessings

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of liberty to ourselves and our posterity.

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Now, what about things
like limited government?

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Well, just the very fact
that we have a constitution

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is a sign of limited government

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that it isn't just a pure

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democracy that whoever is governing

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is going to be constrained.

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The rights of the government
are going to be described by

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this constitution.

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We also talk about the
Blessings of Liberty, so this is

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another reference to natural rights.

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The Declaration of Independence
is a little bit more clear

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about natural rights or a little
bit more explicit, but the

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Blessings of Liberty does
talk about or that's maybe in

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reference to natural rights.

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I will leave you there.

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As we study US government,
both the Declaration of

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Independence and even more
so, the US Constitution are

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going to be things that we keep
going back to to understand

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how we are trying to form a
more perfect union and what is

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in line with the vision of our

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Founding Fathers and what isn't.


Natural rights, social contract, democracy, republicanism and limited government

WEBVTT
Kind: captions
Language: en

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- [Instructor] The goal of this video

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is to give an overview of some terms

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that you will see as we study government

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and they come out of political philosophy,

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either from the Enlightenment

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or even well before the Enlightenment.

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Some of these ideas are
referred to in scripture

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or from the classical Greeks.

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So, let's say we have a little community

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of human beings right over here

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and we talk about this in
our social contract video,

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so this right over here is our community

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and so, the first idea
is maybe all individuals

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are endowed with some type

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of what we could call natural rights,

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that just by being a human being,

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you should have these rights

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and once again, these go
back to the Enlightenment

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or well before the Enlightenment,

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even to something like scripture

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and some notions of natural rights

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might be the right to your life,

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the right to liberty,

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the right to the pursuit of happiness.

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Those should sound very familiar

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and we're going to study these ideas more

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in future videos.

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The right to have your
own personal property.

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Well, in theory, if
you don't have any type

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of overarching enforcement body

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or some type of code of conduct,

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some people might also say well,

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I'm gonna give myself some other rights,

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maybe the right to seek revenge,

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maybe the right to imprison folks,

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revenge, I could say also to punish,

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if I think someone has wronged me

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or if I even don't like them,

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I could revenge or punishment.

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The right to take property

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and we clearly see a conflict here

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because these things that I'm
writing in this pink color,

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if I assume to have these rights,

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that would allow me to infringe

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on other people's natural rights

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and so, the idea behind social contract

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is well, what if we as a society

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we decide to give up these rights

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as an individual

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and we give them to something
we call a government,

00:02:20.252 --> 00:02:22.402
so we'll give these rights

00:02:22.402 --> 00:02:23.997
to a government

00:02:23.997 --> 00:02:27.949
and in exchange, the
government should protect

00:02:27.949 --> 00:02:29.325
my other rights,

00:02:29.325 --> 00:02:30.426
not only these natural rights

00:02:30.426 --> 00:02:31.928
but maybe I have other rights

00:02:31.928 --> 00:02:34.746
that I will expect my
government to protect

00:02:34.746 --> 00:02:37.045
and that notion is what we talked about

00:02:37.045 --> 00:02:38.437
in the social contract video

00:02:38.437 --> 00:02:41.086
as well, the social contract

00:02:41.086 --> 00:02:42.887
which is a nice term to know.

00:02:42.887 --> 00:02:44.204
We're giving up rights to the government

00:02:44.204 --> 00:02:46.840
in exchange for the
government doing things for us

00:02:46.840 --> 00:02:49.804
but that still leaves a very big question.

00:02:49.804 --> 00:02:52.625
What type of government do we have?

00:02:52.625 --> 00:02:54.005
Even in that social contract video,

00:02:54.005 --> 00:02:55.294
people said well, maybe we don't need

00:02:55.294 --> 00:02:56.506
a full government,

00:02:56.506 --> 00:02:58.688
maybe just all of us can agree

00:02:58.688 --> 00:03:00.201
not to do these things to each other

00:03:00.201 --> 00:03:01.493
and if someone does,

00:03:01.493 --> 00:03:03.085
we can come up with some policies

00:03:03.085 --> 00:03:05.684
of what would be the punishment etc. etc.

00:03:05.684 --> 00:03:07.532
And then maybe we could get some people

00:03:07.532 --> 00:03:08.906
to enforce it just to make sure

00:03:08.906 --> 00:03:10.418
that people know it's going to happen.

00:03:10.418 --> 00:03:12.361
Well, even in that very primitive state,

00:03:12.361 --> 00:03:17.280
you are starting to create
some form of a government.

00:03:17.280 --> 00:03:21.441
Now, if we think about
larger communities of people,

00:03:21.441 --> 00:03:23.455
the predominant form of government

00:03:23.455 --> 00:03:26.091
that we've seen throughout
most of human history

00:03:26.091 --> 00:03:27.674
has been a monarchy

00:03:28.813 --> 00:03:31.529
where you have some type of a king

00:03:31.529 --> 00:03:35.289
or a queen or an emperor
who rules over a country,

00:03:35.289 --> 00:03:36.398
who rules over a nation,

00:03:36.398 --> 00:03:38.572
who rules over a state.

00:03:38.572 --> 00:03:41.615
Now, with the birth of the United States,

00:03:41.615 --> 00:03:43.728
you start having a major country

00:03:43.728 --> 00:03:46.169
with an alternate form of government

00:03:46.169 --> 00:03:49.002
and that's a notion of a democracy

00:03:52.198 --> 00:03:54.649
which you can imagine is
another important term to know

00:03:54.649 --> 00:03:58.213
and this comes from the classical Greeks.

00:03:58.213 --> 00:04:00.390
During the golden age of Athens,

00:04:00.390 --> 00:04:03.472
you have what was first
referred to as a democracy.

00:04:03.472 --> 00:04:04.855
That was just a city state.

00:04:04.855 --> 00:04:06.125
With the United States you start having

00:04:06.125 --> 00:04:08.593
a democracy for a fairly large country

00:04:08.593 --> 00:04:10.681
even when it was formed at the time,

00:04:10.681 --> 00:04:13.301
obviously the United
States is now much larger

00:04:13.301 --> 00:04:15.626
and the core idea behind a democracy

00:04:15.626 --> 00:04:18.250
is that you don't have a monarch who rules

00:04:18.250 --> 00:04:19.950
who is the sovereign,

00:04:19.950 --> 00:04:22.169
you have the people who rule,

00:04:22.169 --> 00:04:25.198
the people are the sovereign

00:04:25.198 --> 00:04:27.769
and so, this is another
term that you will see.

00:04:27.769 --> 00:04:30.186
You have popular sovereignty.

00:04:37.330 --> 00:04:39.573
It's a fancy word but
sovereign is just well,

00:04:39.573 --> 00:04:40.567
what rules over it?

00:04:40.567 --> 00:04:43.617
You see the term right over here to reign.

00:04:43.617 --> 00:04:45.156
What rules over things?

00:04:45.156 --> 00:04:47.518
And here you have the people are ruling

00:04:47.518 --> 00:04:51.980
and that's what's happening
here in a democracy,

00:04:51.980 --> 00:04:54.480
so here the people are ruling.

00:04:56.052 --> 00:04:59.705
Now, in either case of a
monarchy or a democracy

00:04:59.705 --> 00:05:01.168
you have to ask the question

00:05:01.168 --> 00:05:03.867
of well, regardless of who's ruling,

00:05:03.867 --> 00:05:07.285
can they just rule on
anything arbitrarily?

00:05:07.285 --> 00:05:09.949
If all of these people decide to vote

00:05:09.949 --> 00:05:12.463
on taking maybe someone else's rights,

00:05:12.463 --> 00:05:14.753
maybe this person's
rights right over here,

00:05:14.753 --> 00:05:16.041
is that okay?

00:05:16.041 --> 00:05:18.867
Or if this monarch wants to
take this person's rights,

00:05:18.867 --> 00:05:20.538
is that okay?

00:05:20.538 --> 00:05:22.379
And so, because of that fear

00:05:22.379 --> 00:05:25.851
that either with a monarchy
or even with a democracy,

00:05:25.851 --> 00:05:28.419
the democracy you might
have the majority to rule

00:05:28.419 --> 00:05:31.006
to do something to a minority

00:05:31.006 --> 00:05:32.450
that is not so good,

00:05:32.450 --> 00:05:35.099
that starts to infringe
on their natural rights,

00:05:35.099 --> 00:05:36.650
in order to avoid that

00:05:36.650 --> 00:05:40.150
you have this notion of limited government

00:05:45.516 --> 00:05:48.478
which is this idea that
regardless of who's ruling

00:05:48.478 --> 00:05:50.985
whether it's a monarch or the people,

00:05:50.985 --> 00:05:53.081
you need to put some laws in place,

00:05:53.081 --> 00:05:54.963
maybe put a constitution in place

00:05:54.963 --> 00:05:57.312
that very explicitly states

00:05:57.312 --> 00:06:00.586
well, what are the
powers of the government,

00:06:00.586 --> 00:06:02.260
what rights does the government have

00:06:02.260 --> 00:06:04.855
and what rights do the people have?

00:06:04.855 --> 00:06:07.579
And so, you could implement a constitution

00:06:07.579 --> 00:06:10.398
and you can actually do it in either case.

00:06:10.398 --> 00:06:12.148
Constitution and laws

00:06:15.425 --> 00:06:18.290
of which the constitution helps set up

00:06:18.290 --> 00:06:20.027
and if you're talking about a monarchy

00:06:20.027 --> 00:06:21.970
that is limited by a constitution,

00:06:21.970 --> 00:06:23.747
so if you have a king or a queen

00:06:23.747 --> 00:06:25.912
but even they can't just rule anything,

00:06:25.912 --> 00:06:29.224
that's often known as a
constitutional monarchy

00:06:29.224 --> 00:06:33.134
but when you have a
democracy that is constrained

00:06:33.134 --> 00:06:35.878
that has limited government by these laws

00:06:35.878 --> 00:06:38.996
that is protecting the rights of people,

00:06:38.996 --> 00:06:43.653
we refer to this as a
republic or republicanism.

00:06:43.653 --> 00:06:47.403
So, this is another good
word, republicanism.

00:06:50.673 --> 00:06:53.971
This is the limited
government and republicanism

00:06:53.971 --> 00:06:57.313
are often strongly
associated with each other

00:06:57.313 --> 00:06:59.891
and that's why the United States today

00:06:59.891 --> 00:07:01.692
and many countries that have actually

00:07:01.692 --> 00:07:03.154
in fact modeled themselves

00:07:03.154 --> 00:07:04.315
after the United States

00:07:04.315 --> 00:07:07.982
refer to themselves as
democratic republics.

00:07:11.073 --> 00:07:12.969
And so, with just these terms,

00:07:12.969 --> 00:07:14.807
you have been well armed

00:07:14.807 --> 00:07:18.159
to better study not just the US government

00:07:18.159 --> 00:07:20.276
but governments in general

00:07:20.276 --> 00:07:22.385
and in future videos we will see

00:07:22.385 --> 00:07:24.994
how some of the founding
documents of the United States

00:07:24.994 --> 00:07:26.829
like the Declaration of Independence,

00:07:26.829 --> 00:07:28.482
like the United States Constitution

00:07:28.482 --> 00:07:30.649
really embody these ideas.


The social contract

WEBVTT
Kind: captions
Language: en

00:00:00.849 --> 00:00:02.172
- [Instructor] Before we dive deep

00:00:02.172 --> 00:00:04.437
into our study of government and politics,

00:00:04.437 --> 00:00:06.750
it's worth asking a fundamental question.

00:00:06.750 --> 00:00:10.077
And that's whether we
even need government,

00:00:10.077 --> 00:00:12.107
or why do we need government?

00:00:12.107 --> 00:00:13.838
And I encourage you to pause this video

00:00:13.838 --> 00:00:14.887
and think about this.

00:00:14.887 --> 00:00:16.492
Do you think we need government, and why?

00:00:16.492 --> 00:00:19.637
Or do you think we don't
need government, and why?

00:00:19.637 --> 00:00:22.231
Okay, now let's start to reason
through this a little bit

00:00:22.231 --> 00:00:24.627
and start to think about the benefits

00:00:24.627 --> 00:00:26.872
or the pitfalls of a government.

00:00:26.872 --> 00:00:30.194
So let's say that we are in
a world without a government.

00:00:30.194 --> 00:00:31.970
And this is me right over here.

00:00:31.970 --> 00:00:33.792
And at first, it sounds pretty good.

00:00:33.792 --> 00:00:36.011
I have unlimited rights here.

00:00:36.011 --> 00:00:37.767
There's no one infringing on my right.

00:00:37.767 --> 00:00:39.405
I can say what I want.

00:00:39.405 --> 00:00:42.238
I have the freest possible speech.

00:00:43.148 --> 00:00:44.739
There are no laws that I could break.

00:00:44.739 --> 00:00:47.739
I have the freest possible religion.

00:00:48.794 --> 00:00:51.047
I have no government
telling me what to practice

00:00:51.047 --> 00:00:52.794
or what I can't practice.

00:00:52.794 --> 00:00:54.456
I have,

00:00:54.456 --> 00:00:57.104
I can own what I want.

00:00:57.104 --> 00:00:58.240
I have property.

00:00:58.240 --> 00:01:00.274
I can go anywhere,

00:01:00.274 --> 00:01:01.857
so I have movement.

00:01:03.140 --> 00:01:04.997
And I also have some freedoms

00:01:04.997 --> 00:01:06.831
that those of us who live in a government

00:01:06.831 --> 00:01:08.629
don't typically have.

00:01:08.629 --> 00:01:11.462
So I would have the freedom to tax

00:01:13.130 --> 00:01:16.354
others or to take from others,

00:01:16.354 --> 00:01:18.230
take property.

00:01:18.230 --> 00:01:19.761
If I'm stronger than them,

00:01:19.761 --> 00:01:21.781
or if I'm just sneakier,
I go in the middle night,

00:01:21.781 --> 00:01:23.775
I can just take their property from them.

00:01:23.775 --> 00:01:26.436
I could just settle on their land.

00:01:26.436 --> 00:01:30.564
I could have the freedom to punish others

00:01:30.564 --> 00:01:33.752
or imprison others if I don't like 'em.

00:01:33.752 --> 00:01:35.376
It doesn't even have to be for a reason.

00:01:35.376 --> 00:01:38.004
This is a freedom that
most of us don't have

00:01:38.004 --> 00:01:39.386
in the world that we live in today.

00:01:39.386 --> 00:01:42.203
But without a government,
I would have this freedom,

00:01:42.203 --> 00:01:44.660
this freedom to go and
take stuff from others

00:01:44.660 --> 00:01:49.459
and to do physical harm or
imprison them or enslave them.

00:01:49.459 --> 00:01:52.179
Now, this might sound good
to you as an individual,

00:01:52.179 --> 00:01:56.367
but remember everyone in
this government-less society

00:01:56.367 --> 00:01:58.817
would have these same,

00:01:58.817 --> 00:02:01.267
would have these same freedoms.

00:02:01.267 --> 00:02:04.668
And I especially like the
ability to have my own property

00:02:04.668 --> 00:02:07.947
and to have my own freedom of movement.

00:02:07.947 --> 00:02:10.326
But what if this person right over here

00:02:10.326 --> 00:02:12.788
doesn't like me to have
freedom of movement?

00:02:12.788 --> 00:02:14.818
And so they say they're
going to invoke, look,

00:02:14.818 --> 00:02:17.911
I can punish or imprison you
because I don't like you.

00:02:17.911 --> 00:02:19.237
And so they're going to infringe

00:02:19.237 --> 00:02:21.489
on my freedom of movement
by imprisoning me,

00:02:21.489 --> 00:02:25.029
or maybe I might do it to someone else.

00:02:25.029 --> 00:02:27.776
And so even though you
have all of these freedoms,

00:02:27.776 --> 00:02:31.434
because everyone else does,
especially these latter few,

00:02:31.434 --> 00:02:33.489
they might be able to take
some of these from you,

00:02:33.489 --> 00:02:37.841
including your freedom to live,
your health, your happiness.

00:02:37.841 --> 00:02:42.331
And this is well-described
in political philosophy.

00:02:42.331 --> 00:02:44.483
In particular, you have a gentleman

00:02:44.483 --> 00:02:46.248
by the name of Thomas Hobbes,

00:02:46.248 --> 00:02:49.034
who's considered one of the
fathers of political philosophy.

00:02:49.034 --> 00:02:53.201
And this is what he had to say
about this state of nature.

00:02:54.502 --> 00:02:57.690
"As long as men live
without a common power

00:02:57.690 --> 00:03:00.285
"to keep them all in awe,

00:03:00.285 --> 00:03:02.945
"they are in the condition known as war,

00:03:02.945 --> 00:03:07.226
"and it is a war of every
man against every man.

00:03:07.226 --> 00:03:09.868
"In war, the two chief virtues

00:03:09.868 --> 00:03:11.701
"are force and fraud."

00:03:12.663 --> 00:03:14.769
I can do something by physical force,

00:03:14.769 --> 00:03:15.839
or I could trick you,

00:03:15.839 --> 00:03:18.079
or I could sneak around you
and take something from you,

00:03:18.079 --> 00:03:19.426
or imprison you.

00:03:19.426 --> 00:03:21.468
"A further fact about the state of war

00:03:21.468 --> 00:03:23.839
"of every man against every man,

00:03:23.839 --> 00:03:26.455
"in it there is no such
thing as ownership,

00:03:26.455 --> 00:03:30.210
"no legal control, no distinction
between mine and thine,"

00:03:30.210 --> 00:03:31.870
between mine and yours.

00:03:31.870 --> 00:03:34.600
"Rather, anything that
a man can get is his

00:03:34.600 --> 00:03:37.320
"for as long as he can keep it.

00:03:37.320 --> 00:03:41.328
"In such a condition, every
man has a right to everything,

00:03:41.328 --> 00:03:44.069
"even to someone else's body.

00:03:44.069 --> 00:03:46.903
"As long as this continues, therefore,

00:03:46.903 --> 00:03:49.175
"that is, as long as every man continues

00:03:49.175 --> 00:03:52.317
"to have this natural right to everything,

00:03:52.317 --> 00:03:55.632
"no man, however strong
or clever he may be,

00:03:55.632 --> 00:03:57.936
"can be sure of living out the time

00:03:57.936 --> 00:04:01.422
"that nature ordinarily
allows men to live."

00:04:01.422 --> 00:04:05.589
This was written in Leviathan,
which was published in 1651.

00:04:06.646 --> 00:04:08.475
So he's framing the same thing.

00:04:08.475 --> 00:04:10.410
If everyone has a right to everything,

00:04:10.410 --> 00:04:12.280
well, they can infringe on other people,

00:04:12.280 --> 00:04:15.336
including their life, their
health, their happiness,

00:04:15.336 --> 00:04:17.965
their freedom to movement.

00:04:17.965 --> 00:04:19.728
Now some of you might
be skeptical of this.

00:04:19.728 --> 00:04:22.223
You might say, look, humans
are fundamentally good.

00:04:22.223 --> 00:04:24.818
If you give 'em that freedom,
they have a conscience.

00:04:24.818 --> 00:04:27.999
They're not going to try
to do this to other people.

00:04:27.999 --> 00:04:31.263
But some of you might be
able to cite times in society

00:04:31.263 --> 00:04:33.013
where there's more of an anarchy

00:04:33.013 --> 00:04:34.789
where actually people might devolve.

00:04:34.789 --> 00:04:36.585
And even if one or two or three,

00:04:36.585 --> 00:04:39.318
or even if a majority of
the people have a conscience

00:04:39.318 --> 00:04:41.608
and aren't willing to imprison others

00:04:41.608 --> 00:04:43.848
and punish people arbitrarily,

00:04:43.848 --> 00:04:45.823
if even a few people are not willing

00:04:45.823 --> 00:04:47.765
to respect other people's rights,

00:04:47.765 --> 00:04:49.647
everything might devolve.

00:04:49.647 --> 00:04:52.478
And it's worth talking about
the historical context here

00:04:52.478 --> 00:04:56.560
because this was near the
end of the English Civil War,

00:04:56.560 --> 00:04:58.066
where there was chaos,

00:04:58.066 --> 00:04:59.954
where people were asking these questions.

00:04:59.954 --> 00:05:02.234
Well, what type of
government should we have?

00:05:02.234 --> 00:05:04.201
And when there isn't a strong government,

00:05:04.201 --> 00:05:08.336
all of this chaos is really
all about person versus person.

00:05:08.336 --> 00:05:11.757
It wasn't this degree of chaos
that Hobbes is writing about,

00:05:11.757 --> 00:05:14.081
this kind of natural
state without government,

00:05:14.081 --> 00:05:16.774
but this was a context where
there was a lot of bloodshed,

00:05:16.774 --> 00:05:19.514
a lot of war, and a lot of chaos.

00:05:19.514 --> 00:05:21.287
Now, Hobbes had a solution,

00:05:21.287 --> 00:05:24.469
and this is actually why the
book was called Leviathan.

00:05:24.469 --> 00:05:29.453
He was an advocate of a very
strong central government.

00:05:29.453 --> 00:05:33.300
This keeps people in awe alludes
to what he's thinking of.

00:05:33.300 --> 00:05:37.031
Leviathan comes from the Old
Testament or the Hebrew Bible.

00:05:37.031 --> 00:05:39.124
It's the name of a sea monster.

00:05:39.124 --> 00:05:42.565
But Hobbes thinks that a
government should be a Leviathan

00:05:42.565 --> 00:05:44.433
to keep everyone in check.

00:05:44.433 --> 00:05:45.266
He wrote,

00:05:46.217 --> 00:05:49.962
"When a man thinks that peace
and self-defense require it,

00:05:49.962 --> 00:05:53.118
"he should be willing,
when others are too,

00:05:53.118 --> 00:05:55.920
"to lay down his right to everything,

00:05:55.920 --> 00:05:57.166
"and should be contented

00:05:57.166 --> 00:05:59.965
"with as much liberty against other men

00:05:59.965 --> 00:06:04.165
"as he would allow other
men against himself."

00:06:04.165 --> 00:06:06.582
Now, this idea that he's talking about,

00:06:06.582 --> 00:06:09.082
this is today referred to as a

00:06:10.867 --> 00:06:12.200
social contract.

00:06:13.284 --> 00:06:15.159
And this term social contract

00:06:15.159 --> 00:06:17.536
is first formally used by Rousseau,

00:06:17.536 --> 00:06:19.262
another Enlightenment author,

00:06:19.262 --> 00:06:21.670
about a hundred years later,

00:06:21.670 --> 00:06:25.291
talking about this willingness
to give up some rights

00:06:25.291 --> 00:06:26.948
in order to protect the ones

00:06:26.948 --> 00:06:29.070
that you really, really,
really want to have.

00:06:29.070 --> 00:06:30.941
And you would be giving up those rights

00:06:30.941 --> 00:06:33.220
to some form of a government.

00:06:33.220 --> 00:06:36.653
That is the social
contract between the people

00:06:36.653 --> 00:06:40.397
that are governed and the
government that governs them.

00:06:40.397 --> 00:06:42.814
So going back to that previous example

00:06:42.814 --> 00:06:46.215
where every person was out for themselves,

00:06:46.215 --> 00:06:48.478
what the social contract is saying is,

00:06:48.478 --> 00:06:51.353
well, look, certain of these
rights, I really want to keep,

00:06:51.353 --> 00:06:53.220
my freedom of speech,
my freedom of property,

00:06:53.220 --> 00:06:57.758
my freedom to move around,
my freedom to have my life,

00:06:57.758 --> 00:06:59.414
my health, my happiness.

00:06:59.414 --> 00:07:01.402
In order to protect those freedoms,

00:07:01.402 --> 00:07:05.904
maybe I'm willing to give
some of my other freedoms over

00:07:05.904 --> 00:07:07.759
to a central authority,

00:07:07.759 --> 00:07:11.345
as long as everyone is
willing to give these up.

00:07:11.345 --> 00:07:13.900
And this central authority
that we give it up to

00:07:13.900 --> 00:07:15.233
is a government.

00:07:16.185 --> 00:07:18.495
And the government, because it has this,

00:07:18.495 --> 00:07:22.558
it uses these rights in order
to protect the other rights,

00:07:22.558 --> 00:07:24.961
the ones that I really want to keep.

00:07:24.961 --> 00:07:27.338
So the government enforces
these other rights,

00:07:27.338 --> 00:07:29.365
and that's the social contract.

00:07:29.365 --> 00:07:31.578
I give away these rights

00:07:31.578 --> 00:07:34.231
in order to protect the ones

00:07:34.231 --> 00:07:36.537
that I really, really care about.

00:07:36.537 --> 00:07:37.845
And that makes sense,

00:07:37.845 --> 00:07:40.665
but it still leaves a
very, very big question.

00:07:40.665 --> 00:07:44.097
What form should this government take?

00:07:44.097 --> 00:07:46.523
I'm willing to engage
in this social contract,

00:07:46.523 --> 00:07:48.734
but how does this government govern?

00:07:48.734 --> 00:07:50.939
How are the leaders selected?

00:07:50.939 --> 00:07:53.541
What are the constraints
on that government?

00:07:53.541 --> 00:07:55.390
And that will be our focus

00:07:55.390 --> 00:07:58.390
as we study government and politics.


Constructing linear and exponential functions from graph

WEBVTT
Kind: captions
Language: en

00:00:00.936 --> 00:00:03.003
- [Instructor] The graphs of
the linear function f of x

00:00:03.003 --> 00:00:04.380
is equal to mx plus b

00:00:04.380 --> 00:00:06.569
and the exponential function g of x

00:00:06.569 --> 00:00:09.168
is equal to a times r to the x

00:00:09.168 --> 00:00:11.067
where r is greater than zero

00:00:11.067 --> 00:00:14.564
pass through the points
negative one comma nine,

00:00:14.564 --> 00:00:16.801
so this is negative one
comma nine right over here,

00:00:16.801 --> 00:00:18.352
and one comma one.

00:00:18.352 --> 00:00:19.906
Both graphs are given below.

00:00:19.906 --> 00:00:22.575
So this very clearly
is the linear function.

00:00:22.575 --> 00:00:24.835
It is a line right over here.

00:00:24.835 --> 00:00:28.545
And this right over here is
the exponential function,

00:00:28.545 --> 00:00:30.444
so right over here.

00:00:30.444 --> 00:00:34.037
And given the fact that
this exponential function

00:00:34.037 --> 00:00:38.227
keeps decreasing as x gets
larger and larger and larger

00:00:38.227 --> 00:00:40.942
is a pretty good hint that
our r right over here,

00:00:40.942 --> 00:00:42.488
they tell us that r is greater than zero,

00:00:42.488 --> 00:00:43.321
but it's a pretty good hint

00:00:43.321 --> 00:00:46.268
that r is going to be
between zero and one.

00:00:46.268 --> 00:00:48.817
The fact that g of x keeps approaching,

00:00:48.817 --> 00:00:50.970
it's getting closer and
closer and closer to zero

00:00:50.970 --> 00:00:53.303
as x increases.

00:00:53.303 --> 00:00:55.260
But let's use the data they're giving us,

00:00:55.260 --> 00:00:56.945
the two points of intersection,

00:00:56.945 --> 00:01:00.995
to figure out what the equations
of these two functions are.

00:01:00.995 --> 00:01:03.472
So first we can tackle
the linear function.

00:01:03.472 --> 00:01:06.389
So f of x is equal to mx plus b.

00:01:08.477 --> 00:01:09.767
So they give us two points.

00:01:09.767 --> 00:01:12.887
We could use those points
first to figure out the slope.

00:01:12.887 --> 00:01:17.466
So our m, our m right over
here, that's our slope.

00:01:17.466 --> 00:01:20.371
That's our change in y over change in x.

00:01:20.371 --> 00:01:22.216
The rate and change of the vertical axis

00:01:22.216 --> 00:01:24.490
with respect to the horizontal axis.

00:01:24.490 --> 00:01:27.060
So let's see, between those two points,

00:01:27.060 --> 00:01:29.153
what is our change in x?

00:01:29.153 --> 00:01:30.486
Our change in x,

00:01:31.453 --> 00:01:35.620
we're going from x equals
negative one to x equals one.

00:01:38.223 --> 00:01:39.211
X equals one.

00:01:39.211 --> 00:01:41.836
So we could think of it
as we're finishing at one.

00:01:41.836 --> 00:01:43.729
We started at negative one.

00:01:43.729 --> 00:01:47.647
So one minus negative one,
our change in x is two.

00:01:47.647 --> 00:01:49.318
We see that right over there.

00:01:49.318 --> 00:01:51.405
And what about our change in y?

00:01:51.405 --> 00:01:53.681
Well, we start at nine.

00:01:53.681 --> 00:01:55.497
Let me do this in maybe
another color here.

00:01:55.497 --> 00:01:58.747
We start at nine, and we end up at one.

00:02:01.379 --> 00:02:03.157
So we end up at one.

00:02:03.157 --> 00:02:04.698
We started at nine.

00:02:04.698 --> 00:02:08.096
One minus nine is negative eight.

00:02:08.096 --> 00:02:12.179
And just to be clear,
when x is one, y is one.

00:02:15.846 --> 00:02:18.929
When x is negative one, y is nine.

00:02:21.297 --> 00:02:22.619
Another way to think about it,

00:02:22.619 --> 00:02:24.002
the way I drew it right over here,

00:02:24.002 --> 00:02:26.713
we're finishing at x
equals one, y equals one.

00:02:26.713 --> 00:02:31.209
We started at x equals
negative one, y equals nine,

00:02:31.209 --> 00:02:32.863
and so we just took the differences.

00:02:32.863 --> 00:02:34.883
We get negative eight over two,

00:02:34.883 --> 00:02:37.263
which is equal to negative four.

00:02:37.263 --> 00:02:39.410
Which is equal to negative four.

00:02:39.410 --> 00:02:42.327
And so now we can write that f of x

00:02:44.066 --> 00:02:46.171
is equal to negative four,

00:02:46.171 --> 00:02:50.117
negative four, that's our slope, times x.

00:02:50.117 --> 00:02:52.784
Negative four times x plus b.

00:02:53.825 --> 00:02:55.729
And you can see that
slope right over here.

00:02:55.729 --> 00:02:58.312
Every time you increase your...

00:03:04.880 --> 00:03:07.769
Every time you increase your x by one.

00:03:07.769 --> 00:03:09.704
I gotta be careful here,
I got a little bit.

00:03:09.704 --> 00:03:12.546
Every time you increase your x by one,

00:03:12.546 --> 00:03:14.719
you're decreasing your y.

00:03:14.719 --> 00:03:18.320
And here on the x axis,
we're marking off every half.

00:03:18.320 --> 00:03:20.672
So every time you increase your x by one,

00:03:20.672 --> 00:03:23.051
you are decreasing your y.

00:03:23.051 --> 00:03:25.504
You are decreasing your y by four there,

00:03:25.504 --> 00:03:29.135
so that makes sense that
the slope is negative four.

00:03:29.135 --> 00:03:31.678
So now let's think about what b is.

00:03:31.678 --> 00:03:34.628
So to figure out b, we could
use either one of these points

00:03:34.628 --> 00:03:37.682
to figure out, given an x, what f of x is,

00:03:37.682 --> 00:03:39.949
and then we can solve for by.

00:03:39.949 --> 00:03:44.116
Let's try one, 'cause one
is a nice, simple number.

00:03:45.175 --> 00:03:47.609
So we could write f of one,

00:03:47.609 --> 00:03:51.442
which would be negative
four times one plus b.

00:03:52.317 --> 00:03:56.427
And they tell us that f of
one is one, is equal to one.

00:03:56.427 --> 00:03:58.341
And so this part right over here,

00:03:58.341 --> 00:04:02.975
we could write that as negative
four plus b is equal to one,

00:04:02.975 --> 00:04:06.507
and then we could add four to
both sides of this equation,

00:04:06.507 --> 00:04:10.119
and then we get b is equal to five.

00:04:10.119 --> 00:04:14.286
So we get f of x is equal
to negative 4x plus five.

00:04:16.179 --> 00:04:17.253
Now, does that make sense

00:04:17.253 --> 00:04:18.807
that the y-intercept here is five?

00:04:18.807 --> 00:04:19.998
Well, you see that right over here.

00:04:19.998 --> 00:04:23.123
By inspection, you could
have guessed, actually,

00:04:23.123 --> 00:04:25.051
that the y-intercept here is five,

00:04:25.051 --> 00:04:26.025
but now we've solved it.

00:04:26.025 --> 00:04:28.708
Maybe this was 5.00001 or something,

00:04:28.708 --> 00:04:32.742
but now we know for sure
it's negative 4x plus five.

00:04:32.742 --> 00:04:33.636
Or another way you could've said it,

00:04:33.636 --> 00:04:35.266
if the slope is negative four,

00:04:35.266 --> 00:04:37.468
if this right over here is nine,

00:04:37.468 --> 00:04:39.913
you increase one in the x direction,

00:04:39.913 --> 00:04:41.940
you're gonna decrease
four in the y direction,

00:04:41.940 --> 00:04:44.313
and that will get you
to y is equal to five,

00:04:44.313 --> 00:04:45.538
so that is the y-intercept.

00:04:45.538 --> 00:04:49.636
But either way, we have figured
out the linear function.

00:04:49.636 --> 00:04:52.816
Now let's figure out the
exponential function.

00:04:52.816 --> 00:04:54.933
So here we could just use the two points

00:04:54.933 --> 00:04:56.884
to figure out these two unknowns.

00:04:56.884 --> 00:05:00.432
So, for example, let's
try this first point.

00:05:00.432 --> 00:05:03.746
So g of negative one, which if we look

00:05:03.746 --> 00:05:04.579
at this right over here,

00:05:04.579 --> 00:05:07.829
would be a times r to the negative one.

00:05:09.040 --> 00:05:11.880
They tell us that g of negative one

00:05:11.880 --> 00:05:13.708
is going to be equal to nine.

00:05:13.708 --> 00:05:16.625
G of negative one is equal to nine.

00:05:17.527 --> 00:05:21.962
And so we could write this a
times r to the negative one.

00:05:21.962 --> 00:05:26.758
That's the same thing as
a over r is equal to nine,

00:05:26.758 --> 00:05:29.379
or we could multiply both sides by r,

00:05:29.379 --> 00:05:32.212
and we could say a is equal to 9r.

00:05:33.165 --> 00:05:35.023
Now let's use this other point.

00:05:35.023 --> 00:05:37.401
This other point, they tell us.

00:05:37.401 --> 00:05:40.212
They tell us that g of one,

00:05:40.212 --> 00:05:41.159
which would be the same thing

00:05:41.159 --> 00:05:45.895
as a times r to the first
power or just a times r,

00:05:45.895 --> 00:05:50.062
that that is equal to one,
or a times r is equal to one.

00:05:52.415 --> 00:05:54.797
So how can we use this
information right here,

00:05:54.797 --> 00:05:57.404
a is equal to 9r and a
times r is equal to one,

00:05:57.404 --> 00:05:59.154
to solve for a and r?

00:06:00.270 --> 00:06:01.956
Well, I have a little system here.

00:06:01.956 --> 00:06:04.823
It is a non-linear system,
but it's a pretty simple one.

00:06:04.823 --> 00:06:06.521
We could just take this a

00:06:06.521 --> 00:06:09.254
and substitute it in
right over here for a,

00:06:09.254 --> 00:06:11.671
and so we would get 9r for a.

00:06:13.897 --> 00:06:16.518
This first constraint tells
us a must be equal to 9r.

00:06:16.518 --> 00:06:20.256
So 9r, instead of writing
an a here, I'll write 9r,

00:06:20.256 --> 00:06:22.256
times r is equal to one.

00:06:24.695 --> 00:06:29.232
Or we could write, let me
scroll down a little bit.

00:06:29.232 --> 00:06:32.711
We could write 9r squared is equal to one.

00:06:32.711 --> 00:06:34.777
Divide both sides by nine.

00:06:34.777 --> 00:06:38.202
R squared is equal to one over nine.

00:06:38.202 --> 00:06:39.791
And now to figure out r,

00:06:39.791 --> 00:06:43.433
you might wanna take the
positive and negative square root

00:06:43.433 --> 00:06:48.104
of both sides, but they tell
us that r is greater than zero,

00:06:48.104 --> 00:06:50.883
so we can just take the
principal root of both sides

00:06:50.883 --> 00:06:54.216
and we get r is equal to 1/3.

00:06:56.200 --> 00:06:57.655
And then we could substitute this back

00:06:57.655 --> 00:07:00.721
into either one of these other
two to figure out what a is.

00:07:00.721 --> 00:07:04.610
We know that a is equal to nine times r.

00:07:04.610 --> 00:07:08.777
So nine times 1/3, a is equal to three.

00:07:10.016 --> 00:07:14.594
So our exponential function
could be written as g of x

00:07:14.594 --> 00:07:18.761
is equal to a, which is
three, times r, which is 1/3,

00:07:21.930 --> 00:07:23.930
1/3 to the x power.


Value added approach to calculating GDP

WEBVTT
Kind: captions
Language: en

00:00:00.261 --> 00:00:01.531
- [Instructor] In previous videos

00:00:01.531 --> 00:00:02.948
we talk about GDP

00:00:04.078 --> 00:00:07.995
as the market value of
final goods and services

00:00:09.102 --> 00:00:13.172
produced in a country
in a given time period,

00:00:13.172 --> 00:00:15.248
let's say in a given year

00:00:15.248 --> 00:00:16.373
and we gave the example

00:00:16.373 --> 00:00:19.973
of producing jeans where
maybe the farmer helps produce

00:00:19.973 --> 00:00:22.946
the cotton and then the thread maker

00:00:22.946 --> 00:00:24.928
takes that cotton and makes thread

00:00:24.928 --> 00:00:28.728
and then the fabric maker takes the thread

00:00:28.728 --> 00:00:31.035
and makes fabric and then the jean maker

00:00:31.035 --> 00:00:33.136
takes the fabric and produces jeans

00:00:33.136 --> 00:00:37.610
and then the market value
of those jeans was $50

00:00:37.610 --> 00:00:41.122
and so, assuming all of
this happened in one year,

00:00:41.122 --> 00:00:44.032
in the time period that
we're measuring GDP for,

00:00:44.032 --> 00:00:46.908
then we would just count the $50,

00:00:46.908 --> 00:00:49.354
if we're looking at the final market value

00:00:49.354 --> 00:00:51.931
or the market value of
final goods and services.

00:00:51.931 --> 00:00:55.261
You would say the GDP for
at least for this component

00:00:55.261 --> 00:00:58.094
of the GDP from these jeans is $50

00:01:00.139 --> 00:01:01.923
but I do wanna clarify

00:01:01.923 --> 00:01:03.724
that there are multiple ways

00:01:03.724 --> 00:01:05.314
that you can measure GDP

00:01:05.314 --> 00:01:06.411
and you could even think about it

00:01:06.411 --> 00:01:08.661
from a value added approach

00:01:11.473 --> 00:01:14.186
but the key idea is no
matter how you measure it

00:01:14.186 --> 00:01:16.756
you should get to the same value,

00:01:16.756 --> 00:01:20.048
so let's think about
the various actors here

00:01:20.048 --> 00:01:22.653
and what their value add was.

00:01:22.653 --> 00:01:27.222
So, first, let's think about
the framer right over here.

00:01:27.222 --> 00:01:29.583
So, this is the farmer,

00:01:29.583 --> 00:01:32.011
my not so elegantly drawn rectangle

00:01:32.011 --> 00:01:33.560
around what he's doing.

00:01:33.560 --> 00:01:36.477
So, the farmer's value add is what?

00:01:39.421 --> 00:01:42.516
Well, before you just had some dirt

00:01:42.516 --> 00:01:44.488
and things and so, maybe you could say

00:01:44.488 --> 00:01:45.709
that the market value was zero

00:01:45.709 --> 00:01:47.448
and then he's able to produce something

00:01:47.448 --> 00:01:48.893
or she's able to produce something

00:01:48.893 --> 00:01:51.296
that now has a market value of $10,

00:01:51.296 --> 00:01:53.463
so their value add is $10.

00:01:54.560 --> 00:01:58.727
Now, from there, the cotton
goes to the thread maker.

00:02:00.194 --> 00:02:03.944
The threader maker they
take that $10 cotton,

00:02:05.718 --> 00:02:07.718
so this is thread maker,

00:02:10.136 --> 00:02:12.181
they take the $10 cotton

00:02:12.181 --> 00:02:15.063
and are able to produce
$20 worth of thread?

00:02:15.063 --> 00:02:17.565
What is their value add?

00:02:17.565 --> 00:02:18.815
Value add here?

00:02:20.056 --> 00:02:22.976
Well, they took something worth $10

00:02:22.976 --> 00:02:24.772
and they were able to do something to it

00:02:24.772 --> 00:02:26.664
to make it worth $20,

00:02:26.664 --> 00:02:29.747
so their value add is now another $10

00:02:30.853 --> 00:02:33.093
and then, this is the thread maker,

00:02:33.093 --> 00:02:37.010
and then from there it
goes to the fabric maker

00:02:38.457 --> 00:02:40.898
and I think you see where this is going,

00:02:40.898 --> 00:02:42.802
the fabric maker is this part

00:02:42.802 --> 00:02:44.052
of our process,

00:02:45.462 --> 00:02:46.462
fabric maker

00:02:50.723 --> 00:02:52.968
and their value add is what?

00:02:52.968 --> 00:02:56.107
Pause this video and think about it.

00:02:56.107 --> 00:02:58.188
Well, they take something worth $20

00:02:58.188 --> 00:03:00.562
and they're to turn it into something

00:03:00.562 --> 00:03:02.446
that has a market value of $30,

00:03:02.446 --> 00:03:05.111
so their value add is also $10

00:03:05.111 --> 00:03:06.716
and then last but not least,

00:03:06.716 --> 00:03:09.074
you have the jean company,

00:03:09.074 --> 00:03:11.409
so the jean manufacturer,

00:03:11.409 --> 00:03:13.928
I'll call them the jean producer,

00:03:13.928 --> 00:03:17.095
the jean producer, they take something

00:03:18.943 --> 00:03:21.766
that has a market value of $30

00:03:21.766 --> 00:03:24.923
and they're able to sell it for $50,

00:03:24.923 --> 00:03:26.923
so their value add here,

00:03:28.396 --> 00:03:32.260
if you take something for
30 and you make it worth 50,

00:03:32.260 --> 00:03:34.837
then you've added $20 of value

00:03:34.837 --> 00:03:37.858
and so, the value added approach to GDP

00:03:37.858 --> 00:03:40.506
will just sum up these value adds,

00:03:40.506 --> 00:03:44.332
so this is going to be
this $10 from the farmer

00:03:44.332 --> 00:03:47.147
plus the value add of the thread maker,

00:03:47.147 --> 00:03:49.647
plus $10 from the thread maker

00:03:51.737 --> 00:03:54.237
plus $10 from the fabric maker

00:03:58.408 --> 00:03:59.241
plus $20

00:04:02.663 --> 00:04:03.878
from the jean maker

00:04:03.878 --> 00:04:06.585
and what will that all add up to?

00:04:06.585 --> 00:04:09.356
Well, that's all going to
add up to 10 plus 10 is 20

00:04:09.356 --> 00:04:11.689
plus 10 is 30 plus 20 is $50

00:04:12.662 --> 00:04:16.704
and lucky for us that is
added up to the same amount

00:04:16.704 --> 00:04:18.191
as we had before where we just looked

00:04:18.191 --> 00:04:21.994
at the market value of the
final goods and services.

00:04:21.994 --> 00:04:25.172
Now, one benefit of the
value added approach

00:04:25.172 --> 00:04:29.165
is that real supply
chains are quite complex

00:04:29.165 --> 00:04:31.374
and things might be going from one country

00:04:31.374 --> 00:04:34.032
to another, they might
as we've talked about

00:04:34.032 --> 00:04:38.032
in another video, the year
might end right over here

00:04:38.032 --> 00:04:40.972
and so, when something is made in China

00:04:40.972 --> 00:04:42.944
and there's value add in China

00:04:42.944 --> 00:04:44.729
but then it's shipped to the US

00:04:44.729 --> 00:04:47.006
and some value add is placed on it

00:04:47.006 --> 00:04:49.216
and then it's shipped
back to China or Mexico,

00:04:49.216 --> 00:04:50.703
you have to be careful

00:04:50.703 --> 00:04:53.626
to only count the value add in the country

00:04:53.626 --> 00:04:55.596
for which you are measuring the GDP.

00:04:55.596 --> 00:04:59.653
So, that's one useful
way or one useful reason,

00:04:59.653 --> 00:05:02.261
or one way in which the
value added approach

00:05:02.261 --> 00:05:04.042
might be useful.

00:05:04.042 --> 00:05:06.566
The key idea though is that you're getting

00:05:06.566 --> 00:05:07.824
to the same value.

00:05:07.824 --> 00:05:09.025
You should get to the same value

00:05:09.025 --> 00:05:12.534
as the market value of the
final goods and services

00:05:12.534 --> 00:05:14.812
produced in a given time period.


Equilibrium price and quantity from changes in both supply and demand

WEBVTT
Kind: captions
Language: en

00:00:00.833 --> 00:00:03.288
- [Instructor] Now in these bottom four,

00:00:03.288 --> 00:00:04.422
let's think about the situation

00:00:04.422 --> 00:00:07.455
where both of the curves might move,

00:00:07.455 --> 00:00:09.568
so let's first imagine a scenario

00:00:09.568 --> 00:00:11.235
where supply goes up

00:00:13.316 --> 00:00:15.066
and demand goes down,

00:00:16.815 --> 00:00:18.990
so once again, maybe a major producer

00:00:18.990 --> 00:00:20.366
is entering into the market,

00:00:20.366 --> 00:00:22.497
supply goes up and that study comes out

00:00:22.497 --> 00:00:24.540
that ice cream is less
healthy than suspected,

00:00:24.540 --> 00:00:25.892
so demand goes down.

00:00:25.892 --> 00:00:26.778
What is going to happen

00:00:26.778 --> 00:00:28.958
to your equilibrium price and quantity?

00:00:28.958 --> 00:00:31.904
Pause this video and try to figure it out.

00:00:31.904 --> 00:00:34.295
Well, if the supply goes up,

00:00:34.295 --> 00:00:36.123
the supply curve is going to shift

00:00:36.123 --> 00:00:39.290
to the right just like we saw up here,

00:00:40.454 --> 00:00:44.589
so our supply curve is
going to shift like this,

00:00:44.589 --> 00:00:47.496
so this would be S2, it's
going to shift to the right

00:00:47.496 --> 00:00:49.641
and down and so, our demand,

00:00:49.641 --> 00:00:52.565
if it goes down for a given price,

00:00:52.565 --> 00:00:53.840
people would demand less quantity,

00:00:53.840 --> 00:00:57.234
so we're shifting to the left and down,

00:00:57.234 --> 00:00:59.711
this is D2 right over here,

00:00:59.711 --> 00:01:01.236
shifted to the left and down

00:01:01.236 --> 00:01:03.199
and so, what is our new equilibrium point,

00:01:03.199 --> 00:01:05.413
at least how we've drawn
it right over here?

00:01:05.413 --> 00:01:07.657
So, our new equilibrium
point looks like this.

00:01:07.657 --> 00:01:10.533
It's clear that our price went down,

00:01:10.533 --> 00:01:13.166
so price has gone down

00:01:13.166 --> 00:01:15.121
but what about quantity?

00:01:15.121 --> 00:01:17.246
Well, this is actually
an interesting thing.

00:01:17.246 --> 00:01:18.580
Depending on how I draw it,

00:01:18.580 --> 00:01:20.210
if we don't know the exact numbers here,

00:01:20.210 --> 00:01:22.337
I could have drawn it so that the quantity

00:01:22.337 --> 00:01:23.592
might have stayed the same,

00:01:23.592 --> 00:01:24.815
I could have drawn it here,

00:01:24.815 --> 00:01:26.409
it looks like the quantity
went up a little bit

00:01:26.409 --> 00:01:29.603
but if I drew my new
demand curve like this,

00:01:29.603 --> 00:01:31.860
my quantity would have
gone down a little bit,

00:01:31.860 --> 00:01:34.169
so actually in this situation,

00:01:34.169 --> 00:01:37.667
price for sure is going to go down,

00:01:37.667 --> 00:01:40.304
you have more competition
amongst the suppliers

00:01:40.304 --> 00:01:41.905
and there's less demand

00:01:41.905 --> 00:01:44.389
but it's unclear what happens to quantity,

00:01:44.389 --> 00:01:46.096
so quantity in this situation

00:01:46.096 --> 00:01:48.596
is indeterminate we could say.

00:01:49.646 --> 00:01:52.111
Now let's go the other way around.

00:01:52.111 --> 00:01:55.028
Let's assume that supply goes down,

00:01:55.923 --> 00:01:58.923
supply goes down and demand goes up.

00:02:01.584 --> 00:02:02.785
So, what would happen in that case?

00:02:02.785 --> 00:02:04.937
Pause the video and try to figure it out.

00:02:04.937 --> 00:02:05.969
Or if supply goes down,

00:02:05.969 --> 00:02:09.256
our supply curve is going
to shift to the left and up.

00:02:09.256 --> 00:02:12.190
At a given price we will supply less

00:02:12.190 --> 00:02:15.190
and so, this would be S2 right over here.

00:02:15.190 --> 00:02:18.732
We're gonna shift to the left and up

00:02:18.732 --> 00:02:21.533
and our demand has gone up.

00:02:21.533 --> 00:02:23.803
At a given price we would demand more

00:02:23.803 --> 00:02:26.270
or at a given quantity we
would be willing to pay more,

00:02:26.270 --> 00:02:29.753
so we would shift our
demand curve now, D2,

00:02:29.753 --> 00:02:31.852
we would shift to the right and up

00:02:31.852 --> 00:02:33.291
and our new equilibrium point,

00:02:33.291 --> 00:02:34.658
the way that I've drawn it

00:02:34.658 --> 00:02:36.158
is right over here

00:02:37.217 --> 00:02:39.134
and so, here we have P2

00:02:41.025 --> 00:02:42.708
and then here, at least
the way I've drawn it,

00:02:42.708 --> 00:02:45.883
I have Q2, my graph is
getting a little bit messy

00:02:45.883 --> 00:02:46.860
but what happened?

00:02:46.860 --> 00:02:50.353
Well, the price unambiguously goes up.

00:02:50.353 --> 00:02:51.186
It makes sense.

00:02:51.186 --> 00:02:52.587
Our supply has gone down

00:02:52.587 --> 00:02:55.432
and more people wanna buy the ice cream

00:02:55.432 --> 00:02:56.735
but what about quantity?

00:02:56.735 --> 00:02:59.306
Well, once again, depending
on how you draw it,

00:02:59.306 --> 00:03:01.001
I could make the quantity
go up a little bit,

00:03:01.001 --> 00:03:02.202
I could make it stay neutral,

00:03:02.202 --> 00:03:03.053
I could make it go down,

00:03:03.053 --> 00:03:05.751
so you would actually
have to know the specifics

00:03:05.751 --> 00:03:07.905
of those curves exactly their shapes

00:03:07.905 --> 00:03:10.814
in order to figure out
what happens to quantity.

00:03:10.814 --> 00:03:11.669
You can't make a judgment

00:03:11.669 --> 00:03:13.787
just based on these general upward

00:03:13.787 --> 00:03:16.242
and downward sloping curves.

00:03:16.242 --> 00:03:19.398
Now let's go and make
both of them increase.

00:03:19.398 --> 00:03:22.924
So, let's say that both supply goes up

00:03:22.924 --> 00:03:24.507
and demand goes up.

00:03:26.719 --> 00:03:28.572
So, supply going up,

00:03:28.572 --> 00:03:31.094
the curve would shift to the right

00:03:31.094 --> 00:03:34.023
and down, so that's supply two

00:03:34.023 --> 00:03:36.924
and then demand going up,

00:03:36.924 --> 00:03:38.613
demand at a given quantity,

00:03:38.613 --> 00:03:41.302
people would be willing
to pay a higher price

00:03:41.302 --> 00:03:43.167
or at a given price,

00:03:43.167 --> 00:03:45.033
people would be willing to take on

00:03:45.033 --> 00:03:46.926
a higher quantity,

00:03:46.926 --> 00:03:49.681
so demand has gone over here,

00:03:49.681 --> 00:03:51.805
so we've shifted to the right and up

00:03:51.805 --> 00:03:55.548
and our new equilibrium point
looks like right over there,

00:03:55.548 --> 00:03:57.210
so it's clear, it's unambiguous

00:03:57.210 --> 00:04:01.027
that our new equilibrium
quantity Q2 has gone up.

00:04:01.027 --> 00:04:03.327
Q, quantity has gone up

00:04:03.327 --> 00:04:04.962
but price now is ambiguous.

00:04:04.962 --> 00:04:07.369
Depending on how I drew these curves,

00:04:07.369 --> 00:04:09.720
I could make it look like
the price is the same,

00:04:09.720 --> 00:04:11.114
I could make it look like it's gone up

00:04:11.114 --> 00:04:13.483
or I could make it look
like it's gone down

00:04:13.483 --> 00:04:16.397
and so, the price here is ambiguous.

00:04:16.397 --> 00:04:18.016
And last but not least,

00:04:18.016 --> 00:04:19.346
let's imagine a situation

00:04:19.346 --> 00:04:21.112
where they both go down,

00:04:21.112 --> 00:04:22.503
where supply goes down

00:04:22.503 --> 00:04:24.253
and demand goes down.

00:04:25.900 --> 00:04:30.200
So, supply going down will
shift to the left and up.

00:04:30.200 --> 00:04:32.071
Once again, one way to think about it

00:04:32.071 --> 00:04:36.027
at a given price you would
be willing to supply less,

00:04:36.027 --> 00:04:39.048
so that's S2 right over here

00:04:39.048 --> 00:04:42.961
and demand, I'll do demand
in a different color,

00:04:42.961 --> 00:04:44.313
it's nice to do it in a different color,

00:04:44.313 --> 00:04:47.128
if my demand has gone down,

00:04:47.128 --> 00:04:48.819
if my demand goes down,

00:04:48.819 --> 00:04:50.236
at a given price,

00:04:51.186 --> 00:04:53.007
people will demand less,

00:04:53.007 --> 00:04:54.772
so my demand has gone down,

00:04:54.772 --> 00:04:58.012
something like that or at a given quantity

00:04:58.012 --> 00:04:59.519
people would be willing to pay less

00:04:59.519 --> 00:05:02.053
and so, my equilibrium
point right over here,

00:05:02.053 --> 00:05:04.220
my equilibrium quantity Q2

00:05:05.560 --> 00:05:06.854
has clearly gone down.

00:05:06.854 --> 00:05:08.315
That makes sense, they're supplying less

00:05:08.315 --> 00:05:09.643
and people want it less,

00:05:09.643 --> 00:05:11.482
so quantity clearly went down,

00:05:11.482 --> 00:05:13.206
quantity goes down

00:05:13.206 --> 00:05:16.002
but price once again is ambiguous

00:05:16.002 --> 00:05:17.499
depending on how I draw it.

00:05:17.499 --> 00:05:19.476
I could make it look
like it stays the same,

00:05:19.476 --> 00:05:21.315
I could make it go up,
I can make it go down,

00:05:21.315 --> 00:05:23.189
it would depend on the particulars

00:05:23.189 --> 00:05:24.950
of those curves to actually determine

00:05:24.950 --> 00:05:28.589
what would happen to
price in that situation

00:05:28.589 --> 00:05:31.955
and of course, let's not forget
to label our curves here.

00:05:31.955 --> 00:05:34.524
That was D2 in the previous example

00:05:34.524 --> 00:05:37.851
and this is D2 in that last example.

00:05:37.851 --> 00:05:39.143
The only reason why I'm
making sure we do that

00:05:39.143 --> 00:05:40.696
is one, it makes it clearer

00:05:40.696 --> 00:05:42.131
and also, when you need to do this

00:05:42.131 --> 00:05:43.876
on something like an AP exam,

00:05:43.876 --> 00:05:46.040
it's really important that
you label all of the things,

00:05:46.040 --> 00:05:50.100
the title of your chart,
your equilibrium prices

00:05:50.100 --> 00:05:52.103
and quantities, you label the curves,

00:05:52.103 --> 00:05:53.808
you say the vertical axis is P,

00:05:53.808 --> 00:05:55.371
the horizontal axis is Q

00:05:55.371 --> 00:05:58.608
and that when you have a
shift that you show that shift

00:05:58.608 --> 00:06:01.608
and actually here I forgot
to draw that shift as well,

00:06:01.608 --> 00:06:05.402
so that you have arrows that
show your shift in supply

00:06:05.402 --> 00:06:07.524
or demand, so all of these components,

00:06:07.524 --> 00:06:09.072
make sure that you're able to draw it

00:06:09.072 --> 00:06:11.905
when you see it on say an AP exam.


Changes in equilibrium price and quantity when supply and demand change

WEBVTT
Kind: captions
Language: en

00:00:02.514 --> 00:00:03.483
- [Instructor] What we're going to do

00:00:03.483 --> 00:00:07.130
in this video is think about
all of the different ways

00:00:07.130 --> 00:00:10.695
that a supply curve or
a demand curve can shift

00:00:10.695 --> 00:00:13.004
and that's why we actually
have eight versions

00:00:13.004 --> 00:00:15.562
of the exact same diagram.

00:00:15.562 --> 00:00:17.204
Each of them is showing

00:00:17.204 --> 00:00:20.181
where we are right now,
let's say in a given region

00:00:20.181 --> 00:00:22.177
in the ice cream market.

00:00:22.177 --> 00:00:24.080
It's important to title your graphs,

00:00:24.080 --> 00:00:25.085
especially if you were taking some type

00:00:25.085 --> 00:00:28.005
of a standardized exam like an AP exam

00:00:28.005 --> 00:00:29.595
and in the vertical axis

00:00:29.595 --> 00:00:31.410
we have P representing price,

00:00:31.410 --> 00:00:34.779
and then the horizontal axis,
Q representing quantity,

00:00:34.779 --> 00:00:37.204
we have our upwards sloping supply curve.

00:00:37.204 --> 00:00:40.504
I'm calling this S1 just as
kind of our starting point

00:00:40.504 --> 00:00:44.143
and then we have our downwards
sloping demand curve, D1

00:00:44.143 --> 00:00:45.566
and where they intersect,

00:00:45.566 --> 00:00:48.921
that gives us our equilibrium price, P1

00:00:48.921 --> 00:00:51.611
and our equilibrium quantity, Q1

00:00:51.611 --> 00:00:52.657
and once again, if you were taking

00:00:52.657 --> 00:00:53.965
some type of a standardized test,

00:00:53.965 --> 00:00:55.923
it's important that you
label all of these things

00:00:55.923 --> 00:00:57.325
including P1 and Q1

00:00:57.325 --> 00:00:59.317
and show this dotted line

00:00:59.317 --> 00:01:01.100
where it intersects the horizontal axis,

00:01:01.100 --> 00:01:03.606
this is Q1 and where it
intersects the vertical axis,

00:01:03.606 --> 00:01:04.744
it is P1.

00:01:04.744 --> 00:01:06.216
Now with that out of the way,

00:01:06.216 --> 00:01:09.867
let's think about what happens
to the equilibrium price

00:01:09.867 --> 00:01:11.173
and the equilibrium quantity

00:01:11.173 --> 00:01:14.003
given different shifts in the supply

00:01:14.003 --> 00:01:17.258
or the demand curve or both of them.

00:01:17.258 --> 00:01:19.197
So, in this first scenario,

00:01:19.197 --> 00:01:21.663
let's imagine that all of a sudden

00:01:21.663 --> 00:01:24.413
a major ice cream producer enters

00:01:25.539 --> 00:01:26.922
into the market,

00:01:26.922 --> 00:01:29.701
so here we're going to this first one,

00:01:29.701 --> 00:01:30.757
we're gonna think about a situation

00:01:30.757 --> 00:01:32.962
where the supply goes up.

00:01:32.962 --> 00:01:34.402
So, one way to think about it

00:01:34.402 --> 00:01:36.383
is at any given price,

00:01:36.383 --> 00:01:40.260
people are willing to
supply more quantity,

00:01:40.260 --> 00:01:44.427
so here we would have our
supply curve shift to the right,

00:01:45.713 --> 00:01:48.546
I'll call this S2 right over here,

00:01:49.820 --> 00:01:51.947
it's shifting to the right and down

00:01:51.947 --> 00:01:52.914
and so, given this,

00:01:52.914 --> 00:01:54.634
what happens to our equilibrium price

00:01:54.634 --> 00:01:57.442
and our equilibrium quantity?

00:01:57.442 --> 00:01:59.175
Well, you see it right over here.

00:01:59.175 --> 00:02:01.978
If I draw a dotted line,

00:02:01.978 --> 00:02:05.958
we see our equilibrium price P2 is lower

00:02:05.958 --> 00:02:09.458
and our equilibrium quantity Q2 is higher,

00:02:12.321 --> 00:02:13.786
once again, assuming that we have

00:02:13.786 --> 00:02:15.835
a downwards sloping demand curve like this

00:02:15.835 --> 00:02:18.326
which is what you would typically see

00:02:18.326 --> 00:02:20.166
and so, in this case,

00:02:20.166 --> 00:02:21.605
let me just write it here,

00:02:21.605 --> 00:02:23.355
we have our quantity,

00:02:24.772 --> 00:02:26.125
actually, let me write it this way,

00:02:26.125 --> 00:02:28.375
we have our price goes down

00:02:29.836 --> 00:02:31.919
and our quantity goes up.

00:02:33.163 --> 00:02:35.115
All right, now let's do this example

00:02:35.115 --> 00:02:37.222
and let's imagine the other way,

00:02:37.222 --> 00:02:39.529
let's imagine in this scenario

00:02:39.529 --> 00:02:41.279
our supply goes down.

00:02:42.817 --> 00:02:45.560
What is going to happen to this graph

00:02:45.560 --> 00:02:46.562
and in particular, what's going to happen

00:02:46.562 --> 00:02:50.597
to our equilibrium price and
our equilibrium quantity?

00:02:50.597 --> 00:02:54.014
Well, in this situation for a given price

00:02:54.902 --> 00:02:57.003
people are willing to supply less,

00:02:57.003 --> 00:02:59.010
that's how I would like to think about it,

00:02:59.010 --> 00:03:00.408
so we would have a shift to the left

00:03:00.408 --> 00:03:04.575
and up and so, we could
call this supply curve two

00:03:05.944 --> 00:03:09.762
right over here and that what
is our equilibrium point?

00:03:09.762 --> 00:03:11.512
It's right over there

00:03:13.215 --> 00:03:16.517
and so, this would be our new price,

00:03:16.517 --> 00:03:17.694
it has gone up

00:03:17.694 --> 00:03:20.171
and this would be our new quantity,

00:03:20.171 --> 00:03:21.789
it has gone down,

00:03:21.789 --> 00:03:23.507
so price has gone up

00:03:23.507 --> 00:03:25.428
and quantity has gone down

00:03:25.428 --> 00:03:28.153
and once again, in
either of these scenarios

00:03:28.153 --> 00:03:31.129
hopefully this feels a
little bit like commonsense.

00:03:31.129 --> 00:03:34.390
If you have a supplier
enter into the market,

00:03:34.390 --> 00:03:35.746
quantity might go up

00:03:35.746 --> 00:03:37.620
and there's more competition

00:03:37.620 --> 00:03:39.500
and so, a lot more suppliers

00:03:39.500 --> 00:03:41.227
and so, the price would go down.

00:03:41.227 --> 00:03:43.668
Here where the supply goes down,

00:03:43.668 --> 00:03:46.734
maybe some of the ice
cream stores close down,

00:03:46.734 --> 00:03:49.122
well, now the quantity will go down,

00:03:49.122 --> 00:03:50.578
there's just less people supplying

00:03:50.578 --> 00:03:52.808
but the price goes up.

00:03:52.808 --> 00:03:54.181
For the ice cream that's there,

00:03:54.181 --> 00:03:57.520
the equilibrium price
is going to be higher.

00:03:57.520 --> 00:03:59.989
Now let's do the same thing
with the demand curve.

00:03:59.989 --> 00:04:01.290
Let's think about a situation

00:04:01.290 --> 00:04:04.619
where first let's think about a scenario

00:04:04.619 --> 00:04:06.369
where demand goes up.

00:04:09.359 --> 00:04:12.526
What is going to happen in this world?

00:04:13.879 --> 00:04:15.559
Well, demand might go up

00:04:15.559 --> 00:04:18.442
because maybe there's some type of report

00:04:18.442 --> 00:04:20.373
that ice cream is much healthier for you

00:04:20.373 --> 00:04:23.422
than expected and so, at a given price,

00:04:23.422 --> 00:04:27.808
people are willing to
demand a higher quantity,

00:04:27.808 --> 00:04:28.828
so for example, at that price,

00:04:28.828 --> 00:04:30.367
people would demand a higher quantity

00:04:30.367 --> 00:04:33.033
and so, we would have a
shift to the right and up,

00:04:33.033 --> 00:04:36.126
let's call this D2 right over here

00:04:36.126 --> 00:04:39.045
and this is our new equilibrium point

00:04:39.045 --> 00:04:42.712
and then notice what
has just happened here.

00:04:43.584 --> 00:04:45.618
At our new equilibrium point,

00:04:45.618 --> 00:04:48.951
this is Q2 and then this right over here

00:04:51.857 --> 00:04:55.294
is P2, our new equilibrium price

00:04:55.294 --> 00:04:56.690
or our new equilibrium quantity.

00:04:56.690 --> 00:04:58.818
In this situation where demand goes up,

00:04:58.818 --> 00:05:02.318
both price and quantity are going to go up

00:05:05.783 --> 00:05:10.038
assuming we have this upwards
sloping supply curve again.

00:05:10.038 --> 00:05:11.408
And once again, that makes sense.

00:05:11.408 --> 00:05:13.458
More people just wanna buy ice cream,

00:05:13.458 --> 00:05:17.381
the supply curve dynamics
have not changed,

00:05:17.381 --> 00:05:19.652
so we're gonna move
along that supply curve

00:05:19.652 --> 00:05:21.754
to the right and up,

00:05:21.754 --> 00:05:23.894
so both price and quantity go up.

00:05:23.894 --> 00:05:25.745
Well, if demand goes down,

00:05:25.745 --> 00:05:28.735
you could imagine the
opposite is going to happen.

00:05:28.735 --> 00:05:31.818
So, here if we have demand goes down,

00:05:35.011 --> 00:05:36.773
let's say a big study comes out

00:05:36.773 --> 00:05:38.909
that ice cream is even unhealthier

00:05:38.909 --> 00:05:40.215
than we originally thought,

00:05:40.215 --> 00:05:41.481
well, then at a given price,

00:05:41.481 --> 00:05:43.514
people are going to want,

00:05:43.514 --> 00:05:45.929
they're going to demand less ice cream

00:05:45.929 --> 00:05:48.878
and so, our demand curve
would shift to the left

00:05:48.878 --> 00:05:52.518
and down, so we'll call
this D2 right over here

00:05:52.518 --> 00:05:55.938
and then we can see our
equilibrium price and quantity,

00:05:55.938 --> 00:05:59.655
so let's show that new equilibrium price

00:05:59.655 --> 00:06:01.405
is P2 right over here

00:06:02.776 --> 00:06:05.356
and then our new
equilibrium quantity is Q2

00:06:05.356 --> 00:06:08.736
and notice, both price
and quantity go down.

00:06:08.736 --> 00:06:10.068
People just don't wanna
buy ice cream as much

00:06:10.068 --> 00:06:11.795
because they think it's unhealthy now,

00:06:11.795 --> 00:06:14.929
so price goes down and quantity goes down.


Change in supply versus change in quantity supplied

WEBVTT
Kind: captions
Language: en

00:00:00.291 --> 00:00:01.757
- [Instructor] We're going
to continue our discussion

00:00:01.757 --> 00:00:03.283
on the law of supply

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and in particular in this video

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we're gonna get a little bit deeper

00:00:07.103 --> 00:00:08.533
to make sure we understand the difference

00:00:08.533 --> 00:00:11.277
between a change in supply

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and I'm just using the
Greek letter delta here

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for shorthand for change in supply

00:00:15.243 --> 00:00:18.243
versus a change in quantity supplied

00:00:21.742 --> 00:00:23.085
and just as a bit of review,

00:00:23.085 --> 00:00:24.834
we've talked about it in other videos,

00:00:24.834 --> 00:00:27.824
supply is referring to
the entire supply curve

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and this curve right over here

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has the typical shape of a supply curve

00:00:31.267 --> 00:00:32.597
following the law of supply.

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At low prices, suppliers
would provide low quantities

00:00:36.499 --> 00:00:37.580
and at higher prices,

00:00:37.580 --> 00:00:40.190
suppliers would provide higher quantities,

00:00:40.190 --> 00:00:42.605
so a change in supply would be a shift

00:00:42.605 --> 00:00:44.121
in this entire curve,

00:00:44.121 --> 00:00:46.769
so for example, if you
were to go from this curve,

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let's call this S1 and
we were to have a shift

00:00:50.055 --> 00:00:51.280
to the right,

00:00:51.280 --> 00:00:55.363
this right over here would
be a change in supply,

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so we'd call this S2

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and we would have this shift,

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you could view it as to the right

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or to the right and down,

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so this would be our change in supply.

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Likewise, you could have a
change in supply the other way

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where you go to the left

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and up depending on
how you want to view it

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and so, this would be,

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we could call that supply curve three.

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These would all represent shifts in supply

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or changes in supply.

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When we talk about quantity supplied,

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we're talking about shifts
along one of these curves,

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so for example, at some price,

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so let's say we have this
price P1 right over here,

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associated with that price

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we would have some quantity supplied,

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we have some quantity supplied.

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Let's call it quantity supplied one

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and then let's say for some reason,

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we have a shift in price

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with the market forces not changing

00:01:51.318 --> 00:01:53.158
from a supplier's point of view

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and so, let's say we go to price two,

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let's say we go to price two,

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we would shift along that same curve,

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the curve itself wouldn't have shifted

00:02:02.433 --> 00:02:06.100
and so, then you have
quantity supplied two,

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so change in supply is
a shift of the curve

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to the left and up or
to the right and down

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versus a change in quantity supplied

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is moving along the curve

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and the associated quantities.

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Now, with that out of the way,

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let's do some tangible examples

00:02:23.732 --> 00:02:25.519
and think about would
it result in a change

00:02:25.519 --> 00:02:29.407
in supply or a change
in quantity supplied?

00:02:29.407 --> 00:02:32.824
So, let's say that the government decides

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that gas prices are too high

00:02:36.741 --> 00:02:39.163
and so, they institute a price cap

00:02:39.163 --> 00:02:41.056
and we're gonna talk much
more about price caps

00:02:41.056 --> 00:02:42.358
in future videos

00:02:42.358 --> 00:02:44.264
but a price cap might just say,

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and let's say that price cap

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is below the current price.

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So, let's say the current price is at P2

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and that the price cap is at P3,

00:02:55.060 --> 00:02:55.893
so the government says,

00:02:55.893 --> 00:03:00.539
no one is allowed to charge
more than P3 for gasoline.

00:03:00.539 --> 00:03:01.662
What would that result in?

00:03:01.662 --> 00:03:03.680
Would that result in a change in supply

00:03:03.680 --> 00:03:07.439
or a change in the quantity supplied?

00:03:07.439 --> 00:03:09.110
Well, this is a classic case

00:03:09.110 --> 00:03:11.777
of a shift along a supply curve,

00:03:12.752 --> 00:03:14.123
the price was there before,

00:03:14.123 --> 00:03:15.924
now it shifts here and so,
now we're going to have

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a different quantity supplied,

00:03:18.270 --> 00:03:21.479
so this would be quantity supplied three,

00:03:21.479 --> 00:03:24.812
so this is a change in quantity supplied

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and in this case, the
change in quantity supplied

00:03:31.761 --> 00:03:34.889
would go down assuming that the price cap

00:03:34.889 --> 00:03:39.495
is below what the price
was before the price cap.

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Now, let's give another scenario.

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Let's say that the price
of refining gas goes up.

00:03:47.128 --> 00:03:51.045
Price of refining goes up.

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What would that do?

00:03:54.809 --> 00:03:56.153
Would that be a change in supply

00:03:56.153 --> 00:03:58.515
or a change in quantity supplied?

00:03:58.515 --> 00:04:01.484
And pause this video to think about it.

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Well, this is something
that would increase the cost

00:04:05.659 --> 00:04:07.409
of producing gasoline

00:04:08.728 --> 00:04:11.349
which is refined from oil across the board

00:04:11.349 --> 00:04:13.293
regardless of what price we're at,

00:04:13.293 --> 00:04:15.353
so this would be a general shift,

00:04:15.353 --> 00:04:18.020
this would be a change in supply

00:04:19.032 --> 00:04:20.521
and the entire supply curve,

00:04:20.521 --> 00:04:22.556
think about which way it would shift,

00:04:22.556 --> 00:04:26.473
think about it from a
supplier's point of view.

00:04:27.369 --> 00:04:29.424
At a given quantity,

00:04:29.424 --> 00:04:31.898
so let's say we're at this
quantity right over here,

00:04:31.898 --> 00:04:33.071
at a given quantity,

00:04:33.071 --> 00:04:35.862
they would now want to
charge a higher price

00:04:35.862 --> 00:04:39.098
and it doesn't apply
to just that quantity,

00:04:39.098 --> 00:04:40.602
it could be this point in the curve,

00:04:40.602 --> 00:04:42.439
this point in the curve,
this point of the curve,

00:04:42.439 --> 00:04:43.682
they'd want to charge a higher price

00:04:43.682 --> 00:04:46.493
to make up for the fact that refining

00:04:46.493 --> 00:04:47.762
is now more expensive

00:04:47.762 --> 00:04:49.305
and so, this would be a shift,

00:04:49.305 --> 00:04:51.822
you could view it up or shift upward

00:04:51.822 --> 00:04:53.452
and to the left.

00:04:53.452 --> 00:04:54.560
You could also view it the other way.

00:04:54.560 --> 00:04:55.977
At a given price,

00:04:57.419 --> 00:05:00.487
suppliers would want to
provide less quantity

00:05:00.487 --> 00:05:01.907
because they need to make up the fact

00:05:01.907 --> 00:05:06.356
that they're paying more
for refining that gasoline

00:05:06.356 --> 00:05:08.145
and so, you could view
that as a shift to the left

00:05:08.145 --> 00:05:10.649
or a shift of up and to the left

00:05:10.649 --> 00:05:13.207
and so, that would be in that direction,

00:05:13.207 --> 00:05:15.517
we're kind of shifting like that

00:05:15.517 --> 00:05:17.319
and then of course we
could talk about a scenario

00:05:17.319 --> 00:05:18.907
that goes the other way.

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Well, let's say that the property tax

00:05:23.744 --> 00:05:24.866
in the entire market,

00:05:24.866 --> 00:05:27.199
property tax on gas stations

00:05:31.497 --> 00:05:32.330
goes down,

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so in theory, if the
property tax goes down,

00:05:37.956 --> 00:05:41.009
the cost of running a
gas station goes down

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and this is for everyone in the market,

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not just one player in the market

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and so, they might for a given price

00:05:47.679 --> 00:05:50.764
be able to supply more of a quantity

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or for a given quantity

00:05:52.923 --> 00:05:54.840
be able to lower the price.

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Either way you could imagine shifting

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from S1 to something that looks like S2,

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going down and to the right

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and so, once again,

00:06:02.876 --> 00:06:05.543
this would be a change in supply

00:06:06.507 --> 00:06:09.189
because you would have a shift regardless

00:06:09.189 --> 00:06:11.868
of what price and quantity supplied

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you are actually at.