>> because they value those tomatoes a lot more.
>> So the demand curve is actually for the tomatoes at the farmers market is
actually to the right of that initial demand and the price of those tomatoes
would actually be higher >> [SOUND]
>> than the price of the tomatoes in the grocery store.
>> That's a very simple explanation, >> simply saying that there's, there's
just more people following that, those tomatoes.
>> And there are lines. >> So that,
>> At, at, at the farmer's market will be longer than the lines at the, at the
grocery store. >> So that could be one explanation.
>> it doesn't have to be the explanation,
>> but the model actually is useful >> to actually explain why would that
be the case. >> So that is a, a consumerist
explanation, a buyer's side of the market explanation as to why there's a
difference between the price in the farmer's market and the price at the
grocery store. >> Now let's say, if we can, if we give
a, a >> seller's explanation, farmer's
explanation, as to why the price of tomatoes is higher at the farmer's market
than at the grocery store. >> And for that we don't have
documentary video, but we actually can make the intuitions ourself.
>> What if the change in the prices at the farmers market from the prices at the
grocery store is simply because it costs different to provide the tomatoes at the
farmers market. >> Now why would it cost different to
produce. >> To farmers to provide the tomatoes
at the farmers market. >> Well, perhaps it's because the
farmers at the farmers market are small growers that use different technologies.
>> Perhaps they can not take advantage of large scale technologies of tractors
or any kind of technologies. >> We can expect the more, the larger
your operation is, the lower, the lower your cost because you can take advantage
of, of economical scale, like of the fact its just it just bigger to actually grow
the things. >> So I mean that's some of the reasons
why prices are big retailers like Walmart are usually lower
>> than prices of small retailers, is because you can take advantage of, of
cost saving technologies if you have a big operation that can warranty, warranty
you for actually buy those technologies, than if you are a small farmers.
>> In the, I think in one of the cases you talked to, you heard from 1 of the
farmers, that he basically grow the things
>> You know, pick up the things himself from the farm and he doesn't actually do
big tractors or things of that sort. >> So when that is the case it will be
a lot more expensive, to actually deliver those tomatoes to the farmers, to the
farmers market >> because, you know, you're not taking
advantage of big technologies that could save you money to, to grow the tomatoes.
>> So one of the reasons why it costs more to buy tomatoes at the farmer's
market simply be, is simply because it costs more.
>> Those tomatoes were more expensive to produce.
>> Right? Now, we can see that in the model, too.
>> And that will be not very difficult to see.
>> the, if we assume that S1 is really the cost of tomatoes to supply that,
>> that shows the cost of tomatoes that are at the grocery store.
>> We just said that at the farmer's market, the cost is a little more, so
that means that the supply of tomatoes at the farmer's market will be a lot to the
left of the tomatoes at the grocery store.
>> And that means that the price of tomatoes at the farmer's market will
probably going to be higher >> than the price of tomatoes at the
grocery store. >> So again, these are answers that,
that to which you can actually answer correctly.
>> The model provides a good solution. >> I think the moral of the story for
you is that the power of the model of supply and demand is that it forces you
to organize your >> thinking, to answer any questions.
>> And the more difficult the questions and the more connections you have, the
more useful the model is going to be because the easier it's going to be for
you to get confused, if you have to think this in your head.
>> And the, the better you are at keeping your work organized, to answer
your >> questions.
>> You have a lot of practice questions this week, and we have a very interesting
discussion on the discussion this week, >> which is not about a particular
good, but how to use the model supply and demand to determine what happens to the
power that women or men have in their relationship to the gender,
>> powers, and how more or less men or women in the relationship market changes
the power they have. >> we can use the supply and demand
model to actually evaluate those questions still, which which we
traditionally don't associate with, with economics.
>> This is the hallmark model of the course, this is the model we will use
throughout the course. >> it is the hallmark model of any
economic code. >> You have to learn it very well for
you to take benefit of anything else. >> We will afterward spend your time
this week, and it will definitely pay off in the following weeks.
>> Produced by OCE Atlas Digital Media at the University of Illinois Urbana
Champaign.