As the party unfolds, Badger orders a pizza from a special venue, which charges lower prices by not slices their pies. Jesse is not at all impressed by this sales approach and, in fact, is a bit irritated. Nevertheless, Badger attempts to link the resources spared by doing away with the pizza-cutting process and the savings passed onto the consumers. While this approach implies significant resource savings on a larger scale, the benefits may not outweigh the costs on an individual (i.e., consumer-by-consumer) basis.
Skyler takes Walter to a storage area she has rented and shows him the giant pile of money he has made from his meth business. She then asks him “How much is enough? How big does the pile have to be?” Walter appears to have the same determination to earning revenue, but Skyler recognizes that her utility has diminished. The first thousands that Walter brought in may have excited her, but at this point it has become a hassle and it doesn’t seem like another dollar will really change her happiness level.
The benefit ($1.5 million) relative to the cost (time and effort) of cooking meth is different for Walter and Jesse. The benefits are obviously lower than the costs in Jesse case but not for Walter; as he seems happy with trading his time and effort for the cash. Even with clear and predictable benefits, people’s own subjective costs of their time can still make them disagree on the cost benefit analysis.
Tuco shows up in a junkyard expecting to purchase 2 pounds of meth from Walter and Jesse, but the two of them only brought about half a pound. Tuco isn’t happy because he’s wasted his time coming out for such a small quantity and isn’t too keen on their excuses. He docks part of their pay for “wasting his time.” All of our actions, including taking time to do something, has costs even if the price is zero. People often forget the value of their time, but not Tuco.
Walter finds a distributor to sell his meth to, but it requires that the two of them produce two pounds per week when they were previously making only one pound. Walter doesn’t see the issue because it wouldn’t take that much more time, but he’s excited for the significant increase in income from this deal. What Walter doesn’t realize is that there are capacity constraints when it comes to the inputs. Jesse is responsible for acquiring pseudoephedrine, which is the necessary ingredient to produce meth. Because of various US laws aimed at preventing pseudoephedrine to be used in meth, customers at drugstores can only purchased a fixed quantity at a time. Jesse drives hundreds of miles to collect pseudoephedrine from “smurfs,” but that can only produce 1/2 pound of meth each week. He doesn’t realistically see how the two of them can find enough pseudoephedrine to produce the two pounds of meth per week their new distributor is requesting. Luckily, Walter is a VERY good chemist!
See more: capacity constraints, economies of scale, government regulation, incentives, inelastic, optimal output, profit, Resource market, scale of production, scarcity, supply elasticity, underground economy