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