Cupcake Economics 3

Using our spreadsheet to show why prices decrease when utilization is low and prices increase when utilization is high.

Category:

Education

Tags:

• economics
• finance
• inflation
• deflation
• income
• statement

[murdocdiesel]

Khan I've never attended a class that is more informative than your videos

[BigBruddah101]

Good job highlighting how prices increase in the short run when demand (capac util) is high. You also showed that in the long run they fall. This is seen when 2 new entrants opened shop upon recognizing Sal's Cupcakes was enjoying an "economic profit," depicting an increase in "capacity."

The last 3 minutes of video though you forget to mention the LONG term effects of prices falling once investment and the arrival of new entrants take place.

[takalotopopo]

@reenerbug oh... whoops, haha. Thanks :).

[reenerbug]

@takalotopopo The "cost of good sold" takes into account the price of all the cupcakes made, whether or not they are sold. That amount is subtracted form the revenue, and it doesn't change when the number of cupcakes sold changes. The reason he doesn't lose money is that he makes a profit with the cupcakes he does sell, enough to cover the total cost of production.

[takalotopopo]

The thing is, Imran produces 2 000 000 cupcakes a year and only sells maybe a fourth of that. He still pays money for those other cupcakes, but they go to waste, so he'd be losing money.

[pc815]

awesome video! but i was wondering how this would be in the case of a business that sells different products at varying prices

[junkman5555]

Great information, but please please please give this in higher quality

[fzshinobi]

Nicotine in cupcakes -priceless! lol ^-^

[WesterGod]

I love these videos, but at 3:36 you say Vikram is running at full capacity (which is 400'000/y) and you call it 100'000/y it seems?

Am i missing something or misreading some information? Thought id ask

[sallu05]

excellent khan sahib (hope u knows the meanings of sahib,if not let me know!) u are awesome person & have become a role model for me too!may ALLAH the almighty bless u even more so u can bless the world more in this beautiful way!aameen!

[Klasanov]

Love your videos.

Nicotine cupcakes and excess loan money on eating them. Goof stuff.

[vasaline06]

screw paying thousands of dollars going to college when we learn the same exact thing. THANK YOU KHAN!!!!!