Welcome to week four of Microeconomics. My name is Jose Vazquez and we are here again in a different location at Champaign-Urbana, which is where the University of Illinois is located. And we are at the Black Dog Smoke House and Bar. It's one of the most popular places in town. It's hard to get a table here if you come any time of the week after 4 o'clock. If you to come at lunch it's hard to get a table here period. This place is crowded from the moment they open the doors to the moment they close. And we wanted to come here, because this part of the week, we are going to try to transition from, from the general economy into more of the business side of the of economics. And we'll really go full fletch to the business side next week, but this week it's a good place to start here, because we're going to start talking about prices as we discuss the issue of elasticity. And elasticity is one of the most important issues in economics and one of the most interesting ones and so, we' ll do that this week. We have some interesting applications. We talk about taxes towards the end of the week, after we cover the concepts. We also talk a little bit go back to the example of the market for illegal drugs, particularly marijuana, and see what is the effect on crime. So we have some interesting applications of elasticity. Elasticity, actually, turns out to be one of the most interesting topics of economics. Now we're here starting this week, because, as we said, we're going to talk about prices, and in particularly, the effect of a change in price has both on the revenue side and on the expenditure side. For the revenue side, if you have a business, then you care about what is the effect of a change in price. For instance, one question that you can have to a person that owns this business is you sell a barbecue sandwich are really popular here for $7.95. Someone eating the sandwich and really thinking this is the best sandwich I ever had, one question they could have is like how come yo don't increase the prices of your sandwiches? You can make a lot more money if you do. So, before I give you the answer, and I won't give you the answer completely until the end of that week, so you'll have time to think about it. Let's hear what the owner of this establishment has to say about that. [music]. Black Dog restaurant, we do traditional barbecue sort of like a beef brisket pulled pork, and then, we like to have a little fun and do some specials, like our Cuban sandwich where we take American barbecue, the pulled pork, and add it to the Cuban sandwich to try to do something a little different. [music] Most of our sandwiches are priced around, are priced at 7.95 and we figure a, try to figure a food cost of 35%. So we'd start there with what it costs and essentially multiply by three to get our price and you have to include everything that goes in that sandwich. So the barbecue sauce, the coleslaw the protein, the bun, and then, we also do the same thing for the side order, but we're not necessarily greedy. I mean we're not out to try to make the most money. We're in it for the long haul. It's a business we want to do. We, we're not trying to make people mad. We'd like to see a lot of people coming through the door and I think that's one of the benefits of our business in what we're in is that we appeal to a broad range of people and that's what keeps us busy as we are. We already have a long line. We don't need another inhibition for people. We don't need it another way for people not to want to come to us. So we hear like a lot of things about what they're already established and has to say and we'll, we actually hear most about, more about him in the weeks to come. But in particular, into some prices, you heard that increase in the price for him is not necessarily such a done deal, right? It's not such an easy question. There's some reasons that he gave you as to why he wouldn't increase the, the price of the sandwiches, and one of them, is because it would probably reduce the number of people walking through the door. Right? So the price elasticity of demand, the topic we're going to talk about this week is that rate that he keeps his mind about the need, the price of the sandwich versus the people coming through the door. This is one of the most interesting topics that we're going to do throughout the course. We have some interesting applications toward the end. Elasticity, again, influence both sides of the of the equation, the revenue, and expenditures. But first, we need to actually do the nitty gritty and learn really what elasticity is. And we're going to, to do those things first and then start applying those concepts at the end of the week. [music] Produced by OCE Atlas Digital Media at the University of Illinois Urbana-Champaign.