Note: This is post #70 in a weekly video series on basic microeconomics.
There are numerous variables that determine the price of goods and services—including your willingness to pay the price. Because we have choices in what we buy, the price is relative to other goods. For example, one pizza may cost the equivalent to two cups of coffee so we have to make tradeoffs between goods.
We also have budget constraints, which are a crucial variable in helping you decide whether to spend $5 on a cup of coffee, or $5 on something else. In this video by Marginal Revolution University, economist Joana Girante examines how such budget constraints function by graphing a simple example: $50 to spend on $5 coffees or $10 pizzas.
(If you find the pace of the videos too slow, I’d recommend watching them at 1.5 to 2 times the speed. You can adjust the speed at which the video plays by clicking on “Settings” (the gear symbol) and changing “Speed” from normal to 1.25, 1.5 or 2.)
Click here to see other videos in the Introduction to Economics series.
