masAng

  So the demand curve, in this case is represented by the equation Q equals 1,800 minus 400p. Now you're immediately saying well, where's the 1,800, 400 come from?  It doesn't matter right now. That's what I'm going to teach you in the next few lectures. Right now that's an equation that represents a line. And the critical aspect of that equation is that there's a negative relationship between price and quantity. As price goes up, consumers want fewer roses. Why is that? Well, it's just because of opportunity cost. The more expensive is a rose, the more youhave to give up to buy it. So it's opportunity cost is higher, so you want it less. So the higher is the price, the fewer roses you want. So we get a downward sloping demand curve. The blue line. Now the supply curve represents the same relationship between price and quantity but from the supplier's perspective. A supply curve in this case that we've drawn here has the equation q equals 200...

  AUDIENCE: What if you have just three indifference curves so there is none that hit the tangent? Do you just go for one that's like the most tangent I guess?  JONATHAN GRUBER: We could have lines, and the lines could end up - you could end up lying along a budget constraint. Or you could even have utility functions, which just touch a budget constraint at one extreme or another. And we'll talk about those cases.   Yeah? Mahasiswa: So utility function go through lines and the budget constraint, right?  Jonathan Gruber: Yeah Mahasiswa: Isn't this just Lagrange ?? Jonathan Gruber: Well, let's come to the math then. OK, let's come to the mathematical derivation. So that's the graphic. So let's come to the math.  Now, always a bit of a tightrope act when I'm doing math up here on the board, so bear with me.  OK? But the key thing is the math of constraint optimization is all about the marginal decision. Remember, it's hard to say how many cookies y...