[Script Info]
Title: 
[Events]
Format: Layer, Start, End, Style, Name, MarginL, MarginR, MarginV, Effect, Text
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,♪ [music] ♪
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,To get a better understanding\Nof how we make choices,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,we first need to understand \Nthe elements that go
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,into making a decision.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And not all of them are \Nwithin our control.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,The world is constantly, \Ninvisibly determining the prices
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,of goods and services.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Take the price of a cup of coffee.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,It depends on so many variables.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Think culture, demographics, \Nthe cost of beans, the weather,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,the supply and demand for oil,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,even the high rent at your hip \Nneighborhood coffee shop.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,You get the idea.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,All of this economic activity is \Nmagically being simplified
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,into a price for a cup of coffee.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,How about your salary -- the price \Nof one hour of your labor?
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,It depends on you, of course,\Non your skills and effort,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,but it also depends \Non many factors outside
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,of your control -- for example, \Nthe demand for your services,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,nearby competition, \Neven how fun your job is.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Every day you make decision \Nafter decision about what to buy,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,comparing hundreds \Nof different goods and services.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,There are so many choices.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,To simplify things, let's think \Nabout what you would do
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,if you had a weekly budget of $50\Nto spend on just two goods,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,coffee and pizza.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Coffee costs $5 and pizza cost $10.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So pizza is twice \Nas expensive as coffee.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,There are several different \Ncombinations of coffee and pizza
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,you could buy with this money.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Let's plot a few \Nof your options on a graph.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,On the "x"-axis, we have the number\Nof pizzas per week.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And on the "y"-axis, we have\Nthe cups of coffee per week.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,You could buy two cups of coffee\Nand four pizzas,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,four cups of coffee \Nand three pizzas,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,five pizzas with no coffee,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,or 10 cups of coffee but no pizza.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,When you connect \Nto different options that represent
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,the ways you can spend your $50,\Nyou get a straight line.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,This is your budget constraint.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And it represents all possible \Ncombinations of coffee and pizza
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,you can buy -- given your budget\Nand the prices of coffee and pizza.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,This budget line also separates \Nwhat you can afford
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,from what you cannot afford.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Maybe you wish you could buy\Ntwo cups of coffee and six pizzas,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,or four cups of coffee \Nand 10 pizzas.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,But these are not in your budget.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Sorry.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,All these different combinations\Ncost more than you have.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So they're unaffordable,\Ngiven your budget
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,and the prices of these two goods.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Combinations of coffee and pizza\Nbelow the budget line,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,on the other hand, \Nare within your means.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,So they're affordable,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,and you could buy them\Nif you wanted.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,The budget constraint also reflects\Nhow the market substitutes
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,between the two goods.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Remember, pizzas are twice\Nas expensive as coffee.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,And this simply means \Nthat the relative price
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,of one pizza is two cups of coffee.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,You see this on the slope\Nof the budget constraint,
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,which is 2.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Well, actually it's -2,\Nbut we're less concerned
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,about the sign.
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,Although, it does remind us\Nthat having more of one good
Dialogue: 0,9:59:59.99,9:59:59.99,Default,,0000,0000,0000,,requires giving up \Nsome of the other.