teaching the toughest graphs david a. anderson centre college chief reader

Teaching the Toughest Graphs

David A. AndersonCentre CollegeChief Reader

Favorite Ways to Learn Economics

Third Edition

Confidential and Proprietary –Not for Distribution

Agenda

• Tough Graphs on 2012 AP Micro Exam• Other Tough Graphs• Teaching Methods• Active Learning Activities• Discussion

Tough Graphs from the 2012 AP Microeconomics Exam

Question: If Steverail raised its price above Pm identified in part (a)(i), would total revenue increase, decrease, or not change? Explain.

Price

Quantity

Demand0

Marginal Revenue

Inelastic range

Elastic Range

Price

Quantity

Demand

0

Marginal Revenue

Inelastic range

Elastic Range

Price

Quantity0

Total Revenue

Elastic: TR P Q

Unit Elastic: TR P Q (no change)

Inelastic: TR P Q

Price

Quantity

D

0

Elastic

Q1Q2

P1

P2

P TR

Price

Quantity

D

0

Unit Elastic

Q1Q2

P1

P2

P TR same

Price

Quantity

D

0

Inelastic

Q1Q2

P1

P2

P TR

Question: Suppose that Loriland imposes a per-unit tariff on sugar imports and the new domestic price including the tariff is $4.

Calculate the total tariff revenue collected by the government. You must show your work.

2

4

World Price + Tariff

Imports

Calculate the domestic consumer surplus for Loriland. You must show your work.

Domestic Price

5

10

Consumer Surplus without the Tariff

Practice with Immediate Feedback

• Personal White Boards

Practice with Immediate Feedback

• Personal White Boards

See What They’re Drawing

• Sidewalk Chalk

Posters

Other Toughies

Price ceilings and floors

Price

Quantity

Demand

0

Marginal Revenue

PC

Price Ceiling

QCQM

Supply

Price

Quantity

Demand

0

Marginal Revenue

PC

Price Ceiling

QCQM

Supply

The ECON CHEER

o Supplyo Demando Equilibriumo Elastico Inelastico Substituteso Complementso Production Possibilitieso The Floors Up Higho The Ceilings Down Lowo And that’s the way the Econ Cheer Goes!

Deadweight Loss

Quantity

Price

5

10

15

20

25

0 10 20 30

MSC

MSB

Socially Efficient Quantity

Qs

Quantity

Price

5

10

15

20

25

Deadweight Loss of Overproduction

Deadweightloss

0 10 20 30

MSC

MSB

Qs Qp

Quantity

Price

5

10

15

20

25

Deadweight Loss of Overproduction

Deadweightloss

0 10 20 30

MSC

DEMAND = MSB = MPC

SUPPLY = MPC

Marginal External Cost

Qs Qp

Quantity

Price

5

10

15

20

25

The “Arrow” Points to the Socially Optimal Quantity

0 10 20 30

SUPPLY = MSC

DEMAND = MSB

Qs Qp

Quantity0 10 20 30

Price

5

10

15

20

25

Deadweight Loss of Underproduction

Supply = MSC

Demand = MSB

QsQp

Supply + Tax

Quantity0 10 20 30

Price

5

10

15

20

25

Deadweight Loss of Underproduction

MSC

MSB

QsQp

Wage

Labor Supply

Quantity of Labor

A Firm Hiring in a Competitive Labor Market

10

Marginal Factor Cost

Wage

Labor Supply

Quantity of Labor

A Firm Hiring in a Competitive Labor Market

10

Marginal Factor Cost

4 5

How much does it cost to hire another worker?

Wage

Labor Supply

Quantity of Labor

A Firm Hiring in a Competitive Labor Market

10

Marginal Factor Cost

4 5

How much does it cost to hire another worker?

$10

$10

Wage

Labor Supply

Quantity of Labor

A Firm Hiring in a Competitive Labor Market

10

Marginal Factor Cost

4 5

How much does it cost to hire another worker?

$40

Wage

Labor Supply

Quantity of Labor

A Firm Hiring in a Competitive Labor Market

10

Marginal Factor Cost

4 5

How much does it cost to hire another worker?

$50

$50 - $40 = $10

Wage

Labor Supply

Quantity of Labor

A Firm Hiring in a Monopsony Labor Market

10

Marginal Factor Cost

4 5

How much does it cost to hire another worker?.

11

Wage

Labor Supply

Quantity of Labor

A Firm Hiring in a Monopsony Labor Market

10

Marginal Factor Cost

4 5

How much does it cost to hire another worker?Total factor cost went from $40 to $55, so $15.

11

Wage

Labor Supply

Quantity of Labor

A Firm Hiring in a Monopsony Labor Market

10

Marginal Factor Cost

4 5

How much does it cost to hire another worker?

11

$11 for the 5th worker and $4 in wage increases for the first four. $11 + $4 = $15

Wage

Labor Supply

Quantity of Labor

A Firm Hiring in a Monpsony Labor Market

Marginal Factor Cost

5

11

Marginal Factor Cost

15

Wage

Supply of Labor

Quantity of Labor

Marginal Revenue Product

Marginal Factor Cost

100

10

Monopsony

Wage

Supply of Labor

Quantity of Labor

Marginal Revenue Product

Marginal Factor Cost

100

12.510

150

Monopsony

Wage

Supply of Labor

Quantity of Labor

Marginal Revenue Product

Marginal Factor Cost

100

12.510

150

Teaching Each Other

• Half the class leaves the room• You teach the remaining half a tough graph,

such as the graph for Natural Monopoly, Monopsony, or Public Goods

• The students who left come back in• The students who stayed teach the graph to the

students who left• Check comprehension with some questions for

those who left the room• Prizes?

Blind curves• Pair up students• Arrange so that one student in each pair is facing

the chalkboard• Place a divider between the students in each pair• Draw a new graph on the board• Have the students facing the board describe the

curves to their partners without naming the curves.• Examine the results• Have the students switch places and repeat the

activity

Graph jeapardy

$/unit

Marginal Revenue

Demand

Marginal Cost

P

Q Quantity

Long-Run Average Cost

Inflation

Unemployment

Inflation

Unemployment

Neat Applications

2-part TariffPrice

Quantity

Demand

0

PTicket Price

Q

2-part TariffPrice

Quantity

Demand

0

PTicket Price

Q

Admission Fee

Ticket Revenue

2-part TariffPrice

Quantity

Demand

0P

Ticket Price

QC

Admission Fee