00:01
So here we're told that a consumer is maximizing utility between two goods, popcorn and apple pies.
00:07
The key thing there is maximizing utility because that implies something very particular, implies that these ratios have to be equal, right? these ratios say that the marginal dollar produces just as much utility, right? if i spend one more dollar, on popcorn versus one more dollar on apple pies, i must be getting the same utility from both of them.
00:41
Must be.
00:42
Otherwise, i wouldn't be maximizing.
00:44
If dollars spent on apple pies were much better than dollars spent on popcorn, i could make myself better off by reallocating money from the popcorn, which does not give me as much happiness, as much satisfaction, as the money spent on apple pies, right? so this quality has to hold.
00:58
If the person is not saying that dollars on popcorn are just as valuable on dollars in apple pies, then they can reallocate their expenditure and be better off.
01:07
So now what's going to happen, right? the shock that happens is the price of popcorn...