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♪ [music] ♪

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- [Tyler] Now Socrates --
I actually disagree with him --

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he said the only true wisdom
is in knowing that you know nothing.

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So I'm an economist.

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I'm not a philosopher.

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So what does the economist say?

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The economist does not say
that he or she knows nothing.

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The economist says 
"I know one thing --

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maybe it's only one thing,
but it's one thing."

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And that one thing is

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that the demand curve 
slopes downward.

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(audience laughing)

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And I know some 
of you are thinking

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what about Giffen goods?

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But there are no Giffen goods,

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certainly not in wealthy, modern, 
contemporary America.

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We have at least one thing to teach
and in my imaginary lesson

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or I just have someone,
and they're paying attention.

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First thing I tell them is 
the demand curve slopes downward,

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and then I would discuss for awhile,
how many applications of economics

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are really instances 
or generalizations of this principle.

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If something becomes more expensive,
you do less of it.

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So I just came here from Montreal,
and originally my wife and I were

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going to spend the weekend
in Montreal

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before what I was doing there,
my event there.

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She went to Orbitz
and she saw that the price

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of flying to Montreal 
was about $800,

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and I said, "Oh, come on,
go anyway."

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Her demand curve 
sloped downwards.

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It's very, very simple.

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So that's like what we do know,

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and what we don't know is

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well, the world changes 
in many ways.

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There are a lot of effects going on
that are not just price effects.

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People may change their tastes 
or their expectations, right?

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Then you're not always sure 
how the law of demand applies there

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in a simple way.

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Another set of things
we don't know --

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we don't always know 
what is the real price?

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So if you go to the store --

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say, you need 
to buy ping pong balls.

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You know the price, right?

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They're pretty cheap.

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It's not really 
a very ambiguous decision.

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You buy the ping pong balls
or you don't -- the price is clear.

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Economic theory applies very well
to this kind of circumstance.

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But say you're dealing 
with one of your children