Increasing opportunity cost | Microeconomics | Khan Academy

Increasing opportunity cost | Microeconomics | Khan Academy


What I want to do
in this video is think about how the
opportunity cost can change as we move from
scenario to scenario. And this is going to be
particular to this example, but it’s a phenomenon
that you will see in many economic scenarios. So let’s say we’re
starting off in Scenario F. We are vegetarians. We are only getting berries. We are not spending any
time going after rabbits. But now we’re starting to,
I guess, crave protein. And we say, well, what is
going to be the opportunity cost if I go for
that extra rabbit? If I go for that extra rabbit,
then what’s going to happen? Well, I’m going to have to stay
on my production possibilities frontier. And so I’m going to
move to Scenario E. So if I go after that
one extra rabbit, I’m going to give up 20 berries. So my opportunity
cost in Scenario F, sitting in Scenario
F, of going after that 1 rabbit is 20 berries. Now let’s keep going. What happens if
I’m in Scenario E? I’m already, on
average, eating 1 rabbit or finding 1 rabbit a day. And I want to go
to 2 rabbits a day. What am I going to give up? Let me do that in
that same color. What will I give up? Well, now I am going
to give up 40 berries. This is interesting. Now let’s say
we’re in Scenario D and we want even more rabbits. We’re really starting to
become carnivores now. What am I going to give up? Well, I’m going to
give up 60 berries. If I’m able to get 3 rabbits,
every day, on average then I’m only going to get 180
berries now instead of 240. And let’s just keep going. So if I want yet another
rabbit every day, then I’m going to have
to give up 80 berries. And then finally, just to
feel some sense of completion, if I become a complete
carnivore and if I want to get on average,
5 rabbits a day, I’m going to have to give
up another 100 berries and go to not having
any berries at all. And so you might see
something interesting. The more squirrels–
sorry, not squirrels although I guess they’re
similar– the more rabbits that I’m going
after, every time I try to go after another
incremental rabbit I’m giving up more and more berries. My opportunity
cost is increasing. And so this phenomenon,
it’s not always the case but it’s the case in this
example, increasing opportunity cost. Increasing
opportunity cost as we increase the number of
rabbits we’re going after. And you could do
it the other way. You could say, OK,
as we increase– especially if you did
it on a unit basis, if you said every incremental
berry or every incremental 100 berries we’re going after,
but the numbers aren’t as easy right over here–
you’ll actually see something going
the other way. But the question, an interesting
question is, OK, Sal. You set up the numbers like
this earlier two videos ago. But why would this make sense? Why is this idea of
increasing opportunity cost showing up in a lot
of different economic, and you can call this
an economic model. We have simplified our economic
reality, the choices that we have to make, down
to two variables the number of rabbits
we have to go after or the number of berries. But why does this show
up in economic models? And just to be clear, it does
not show up in all of them. But to think about our
example, as a hunter gatherer, we started here in
Scenario F. In Scenario F, we’ve decided to not
pursue any rabbits. Even the slower,
not so quick witted rabbit who maybe likes to hang
out with you, next to you, and it likes to play with your
spears or your bow and arrow– you are not even going
after that rabbit. Instead you are choosing
to spend all of your time on the berries. And not only are you
getting, literally, the low hanging fruit,
the easy berries, you’re getting the
berries that are further up the bush, the berries that
you have to get cut by thorns to get, the berries that you
have to climb trees to get. So you’re getting even
hard to get berries and you’re not going after
even easy to get rabbits. But now all of a
sudden if you say, well, you know, that rabbit
who’s been hanging out with me, he’s been kind of asking for it. And so that was
very easy to get. It didn’t take much
time on a given day to get those really easy rabbits
who like to hang out with you. You’re not give a lot
in terms of berries. One, it didn’t take you much
time to get those, literally, those slow and maybe less
quick witted rabbits. And you’re giving up,
in that same amount of time, the very
hard to get berries. So you’re only going to
give up about 20 of them. Now if you want to
2 rabbits a day, not only are you going to get
the slowest of the rabbits, the ones that aren’t
afraid of humans, now you’re going to have go get
the slightly faster rabbit– the slightly faster rabbit, who
wants to die a little bit less and is maybe a
little bit sharper. And you’re now not
giving up the berries that are way up in the tree and
that are protected by thorns. You’re giving up berries that
are closer down the trees. So this is going to take
you a little bit more time to do than this
right over here. And in that little
bit more time, you’re also giving up berries
that were easier to get. And so this phenomenon is
going to happen all the way until in this scenario we’re
trying to get 5 rabbits a day. You are literally going after
the quickest and the smartest rabbits. But you insist on going for
them and in your pursuit of these quick, fast rabbits
you’re even ignoring berries. You’re literally, like,
stepping on berries. You’re not eating the berries
that are right next to you because you’re so obsessed
with eating rabbits. So hopefully that
gives you a sense of why increasing opportunity
cost does show up. And when you graphically show
it in terms of a production possibilities frontier, it shows
up in this bow-shaped curve. And you can see it, because
as we go from this point to this point, you see
that as we increase one the slope, the negative
slope, is increasing. Or another way to think
about, in Scenario F, the slope is roughly like this. And I encourage you to
review the algebra playlist if the idea of slope
is confusing to you. But at F, the
slope is like that. I’m drawing the slope of the
tangent line right over here. At E it gets even steeper. You’re giving up even more of
the berries per unit rabbit. And now in D you’re
giving up even more. And then you’re
giving up even more. And so whenever you
see a bow-shaped curve like this, so a curve that
literally looks like this, this shows that you have
increasing opportunity costs. As you increase
more and more units, you’re going to
have to give up more and more of the alternative.

74 Comments

  1. Paypal Support says:

    First!

  2. Justan Edwards says:

    NOT FIRST!!

  3. ncbookz.com llc says:

    khan = khazar = mongol = caucus = bill gates agenda = one world education agenda = nwo

  4. WobbleKun says:

    Are there any videos on investing/stock trading?

  5. kroovyandcal says:

    Until the development of the rifle and we no longer have to move along the production possibilities frontier of old and a new production possibilities frontier begins

  6. MrMarson123456 says:

    @arminask gosh its not 5 its 22…..noob

  7. animals0feel1pain2 says:

    @xKurogashi lots of finance videos already made, though i dont know about stock trading

  8. animals0feel1pain2 says:

    vegetarians ftw 😀

  9. chindoo says:

    so what?

  10. RbtV92 says:

    because you're so obsessed with, with eating rabbits

  11. justincreimer says:

    When you said squirrel in this video it sounded like "Square Rule" hahaha, I started thinking about math for a second.

  12. jwiderstra says:

    which member of the team does these narrations/lessons?

  13. imbagogo says:

    Rabbit that likes to hangout with you

  14. f0revern0ty0urs2 says:

    mmm i feel like eating a rabbit…

  15. Alex Thompson says:

    haha squirrels. this is the most insane one of these videos i've watched, he really got into that rabbit hunting story

  16. Tarek Smili says:

    the software you're using is awesome !

  17. Alex Milanov says:

    Rabbit Killer! 😀

  18. walruss111 says:

    if you just ate rabbits you would die, weird but true

  19. DigitizedSelf says:

    I'd be going for the rabbit with weapons last :-/

  20. kevxv says:

    lol the way he explains and his examples makes me laugh X 3
    rabbit playing with your spear : D
    good video

  21. MrOdsplut says:

    It can synthesise protein, but it needs amino acids to do that, which have to come from an external source.

  22. G says:

    The slower rabbit lol

  23. UnitedPebbles says:

    So can you apply this in real life? students of the academy?
    hahaha

  24. vaandouche says:

    wiser words than this have never been said before

  25. danny_keem says:

    "the rabbit that has been hanging out with me. well, he's been asking for it" LOL ahaha

  26. Alex Vidakovic says:

    ew that must be gross to step on berries lol i would be all like turn this into jamba juice

  27. nimal perera says:

    It would be a shame if you did not make extra income when these other normal people do it easily by using Certor Cash Code (Look it up on google).

  28. Coreen Ketchen says:

    Awesome strategy! It's very similar to the Osack Online Income scheme. Search Google for the phrase Osack Online Income (NOW)…

  29. ujwalskiujwalski shakya says:

    Pretty nice way to earn money! It's very similar to the Osack Online Income scheme. Search Google for the term Osack Online Income (NOW)…

  30. Benjamin Jimomi says:

    Yes! Especially when u work in multiple production facility as a production manager and above….JERK!!

  31. UnitedPebbles says:

    that meant you got high paid and you don't even want to take a course? real smart!!!

  32. Caroline O says:

    Everyone has their place in society & are entitled to have differing interests. You won't see many judges and surgeons watching this, doesn't make them dim. It's unlikely a waitress or sales assistant will watch it either, doesn't make them twats. I'm here purely out of interest, i'm not studying economics but find it interesting, not every one is like me, but i wouldn't put them down because of it. Besides, I'm sure they have strengths that i don't have. I'm off to Google "Ray William Johnson".

  33. Caroline O says:

    Ok, thanks a lot Mike i just wasted 2 minutes researching nothingness, 2 minutes that shall never be returned.. i hope you can sleep at night, no, i hope you can live with yourself for what you have done to me! I only hope others don't fall into your trap.

  34. Patrick Malysza says:

    dont starve, berries or rabbits

  35. Adeel Azad says:

    Excellent!!!!!!!!

  36. Pamela Pio says:

    awesome 🙂

  37. Vicki Bee says:

    My brother would understand this example best, b/c he does both. He hunts for his own food and he's caught rabbit for us. I think he used a gun though.
    I can't even imagine being in anything but Scenario F, but I understand the lesson.

  38. Liz Z says:

    ppf assumes no technological advancement

  39. Moe says:

    khan academy > Chuck Norris

  40. Leo Abady says:

    Great

  41. Vicki Bee says:

    That's why they use robots to replace PEOPLE and increase an opportunity cost.
    They think machines are cheaper until the machine breaks down as it will sooner or later and you miss a whole day of work hiring a person to FIX the damn thing.
    I've lost more jobs through this idea of giving jobs to robots than I can tell you, and I work in HEALTH care.
    And the doctors never give up their OWN jobs to a robot.

  42. Dilma K. says:

    lol
    the rabbit that's been hanging out with you – he's been asking for it

  43. Wanda L. says:

    thanks for the tutoring ! Lol your funny 🙂

  44. curryeater259 says:

    berries?

  45. MrKebato says:

    more about The Marginal Rate of Transformation please

  46. Jamir Tan-Torres says:

    Great tutorial! Very informative and concepts are explained in a basic manner. At the same time, very entertaining. Kudos!

  47. Andrew Lee says:

    You're the best!

  48. Fantastic says:

    Rabbit and square are not the same! I hate u.

  49. math bone says:

    wow just had a class today and i didn't even understand anything bc I'm new to ECON, but you explained it real good plus your other videos that continues for this example I've watched all of them and thank you so much for explaining this i get the idea, but a little confused on how to set up the graph and how would i know how to set up the RABBITS on the Y axis or X axis and for the BERRIES,

  50. making money says:

    A level economics right here guys 
    can pretty much do the course before even taking one lesson 
    start my economics course in 6 weeks 
    Think i've got this nailed 🙂

  51. Vishal Kular says:

    "Hes been asking for it"

  52. Mike C says:

    "per unit rabbit" lol

  53. Jason Moabelo says:

    thanx for the lesson

  54. Anoy Chowdhury says:

    3:16 LOL hahahaha

  55. Vicki Bee says:

    I wish he and Robb would've been my Consumer Economics teacher. The one I had wasn't even 1/20 as clear about it as they are. I liked her as a person though.
    I got a B in Consumer Economics and I think she was being nice to give it to me. I didn't understand Consumer Economics very well after I graduated. I didn't understand it very well until after I met Robb. I didn't know that wealthy people can almost entirely avoid paying federal taxes by using tax shelters until after I met him.

  56. Dinda Yadnya Swari says:

    I'm a student from Indonesia and i love watching video here, ^^

  57. dedsaysftw says:

    You are helping me through out my economics course, and im portuguese, you are really good teaching, thanks!

  58. Emran Hasib says:

    The rabbit wants to hang out with me…how cute is this.. hahaha!

  59. NonchalantThief says:

    How does this connect with Comparative Advantage? I'm so lost

  60. Brian Moya says:

    Poor rabbit ,all he wanted to do was to be your friend but nooo,you had to kill him and eat him

  61. Faizeh Javed says:

    How can we relate his explanation to the fact that opportunity cost increases as you reallocate resources to produce one good that was better suited to produce the original good. Isn't this a more theoretical and relevant explanation?

  62. M A says:

    I love you man

  63. Vlaw says:

    If you only eat rabbits you'll get protein poisoning

  64. sonya says:

    thank you

  65. lemontea says:

    Is increasing opportunity cost linked to the law of​ diminishing returns?

  66. CeilingTapestry says:

    Vegans, back off, the rabbit was asking for it.

  67. Natalie Rand says:

    SQUARRELS

  68. Donald J. Trump says:

    12 vegans disliked this video.

  69. 21AintMyNumber says:

    It doesn't make sense to me. Why is giving up more alternatives an increase in opportunity cost?

  70. amod roshode says:

    Thanks I manage to finish my assignment thanks to this video.

  71. joseph okonofua says:

    I laughed so hard when he said squirrels

  72. Alex Creznic says:

    This is a great model to change the way of thinking towards prioritizing worker tasks properly. Everything that I want workers to accomplish removes them from accomplishing another thing that I want done, which is opportunity cost in a nutshell. Priorities really are very important.

  73. Lim Kaiser says:

    Rabbits vs Berries; Virgin vs Thotties

Leave a Reply

Your email address will not be published. Required fields are marked *