Teaching economics using clips from the AMC hit show, Breaking Bad.
After having the family car repaired at a local maintenance shop, Walt decides its time to get rid of it. He’s worried that his car is too easily recognized and offers to sell it to the shopkeeper for $50. While Walt Jr. finds this crazy, Walter is willing to get rid of it even if it’s well below what he could get somewhere else.
See more: consumer surplus, demand, preferences, subjective benefits, willingness to pay
Walter and Skyler are in the market for a new house. Walter is attempting to maximize his utility by proposing to Skyler a larger house instead. In other words, Walter is trying to move onto a higher indifference curve. However, their limited budget represents a constraint to Walter’s utility maximization problem.
See more: budget constraint, indifference curve, interdependent utility functions, preferences, tradeoffs, utility, utility maximization
Lydia comes to see Mike and is less than impressed with the diner’s tea selections. She goes through a variety of different drink options and then settles on just having hot water and lemon, which she values over Lipton (black) tea. Consumer theory requires that consumers should be able to rank their preferences, which Lydia clearly does in this scene.
See more: consumer choice, preferences, ranking, subjective preferences, transitivity
Todd cooks a methamphetamine batch of only 76% purity and not the distinct blue color expected by European customers. Lydia comments that consumers expect the “blue”, which is a signal of quality and purity, and will pay top dollar only for it. So while even though they are getting better, they aren’t as good as Walter’s blue meth. The blue coloring is important to signal to the European market that the product is high quality (even though it isn’t). If customers believe the meth is the same, they will pay top dollar for the product. Lydia recognizes that without the color, her profits are about to fall.
See more: demand, elasticity of demand, preferences, product differentiation, quality, signaling, value
Jesse and Walter debate on the best way to start the business. At first, Walter is surprised that Jesse doesn’t want to cook in the garage, but Walter is just as reluctant to cook at his house. The two consider renting a storage unit, but eventually settle on purchasing a recreational vehicle. When starting a business, companies must decide whether to start by renting property, which may have lower costs initially or building and owning their own property.
There are tradeoffs to the two, and this situation is explored often in the decision for young adults to continue renting or purchasing their own home. The clip also serves as a good introduction to risk and uncertainty. Although it would be cheaper to begin production in their own homes, it is also VERY risky. Safe options often mean spending more money upfront.
See more: buying vs renting, capital investment, fixed costs, inputs, preferences, risk, risk averse, tradeoffs, uncertainty
The Economics of Breaking Bad 