Teaching the Toughest Graphs

1. Teaching the Toughest Graphs David A. AndersonCentre College Chief Reader

4. Favorite Ways to Learn EconomicsThird Edition

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

6. Tough Graphs from the 2012 AP Microeconomics Exam

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

8. Price Elastic Range Inelastic range Demand 0 Quantity Marginal Revenue

9. Price Elastic Range Inelastic range Demand 0 Quantity Marginal Revenue Price Total Revenue 0 Quantity

10. Elastic: TR P Q • Unit Elastic: TR P Q • (no change) • Inelastic: TR P Q

11. Price Price Price Inelastic Elastic Unit Elastic P2 P2 P2 P1 P1 P1 D D D Q1 Q1 Q2 Q2 0 0 0 Quantity Quantity Quantity Q1 Q2 PTR PTR same PTR

12. 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.

13. World Price + Tariff 2 4 Imports

14. 5 Domestic Price 10 • Calculate the domestic consumer surplus for Loriland. You must show your work.

15. Consumer Surplus without the Tariff

16. Practice with Immediate Feedback • Personal White Boards

17. Practice with Immediate Feedback • Personal White Boards

18. See What They’re Drawing • Sidewalk Chalk

19. Posters

20. Other Toughies

21. Price ceilings and floors

22. Supply Price Price Ceiling PC Demand 0 QM QC Quantity Marginal Revenue

23. Supply Price Price Ceiling PC Demand 0 QM QC Quantity Marginal Revenue

24. The ECON CHEER • Supply • Demand • Equilibrium • Elastic • Inelastic • Substitutes • Complements • Production Possibilities • The Floors Up High • The Ceilings Down Low • And that’s the way the Econ Cheer Goes!

25. Deadweight Loss

26. Socially Efficient Quantity Price MSC 25 20 15 10 5 MSB 0 10 20 30 Quantity Qs

27. Deadweight loss Deadweight Loss of Overproduction Price MSC 25 20 15 10 5 MSB 0 10 20 30 Quantity Qp Qs

28. Deadweight loss Deadweight Loss of Overproduction Price MSC 25 Marginal External Cost 20 SUPPLY = MPC 15 10 5 DEMAND = MSB = MPC 0 10 20 30 Quantity Qp Qs

29. The “Arrow” Points to the Socially Optimal Quantity Price SUPPLY = MSC 25 20 15 10 5 DEMAND = MSB 0 10 20 30 Quantity Qp Qs

30. Deadweight Loss of Underproduction Supply + Tax Price Supply = MSC 25 20 15 10 5 Demand = MSB 0 10 20 30 Quantity Qp Qs

31. Deadweight Loss of Underproduction Price MSC 25 20 15 10 5 MSB 0 10 20 30 Quantity Qp Qs

32. Marginal Factor Cost A Firm Hiring in a Competitive Labor Market Wage 10 Labor Supply Quantity of Labor

33. Marginal Factor Cost A Firm Hiring in a Competitive Labor Market Wage 10 Labor Supply Quantity of Labor 5 4 How much does it cost to hire another worker?

34. Marginal Factor Cost A Firm Hiring in a Competitive Labor Market Wage 10 Labor Supply $10 Quantity of Labor 5 4 How much does it cost to hire another worker? $10

35. Marginal Factor Cost A Firm Hiring in a Competitive Labor Market Wage 10 Labor Supply $40 Quantity of Labor 5 4 How much does it cost to hire another worker?

36. Marginal Factor Cost A Firm Hiring in a Competitive Labor Market Wage 10 Labor Supply $50 Quantity of Labor 5 4 How much does it cost to hire another worker? $50 - $40 = $10

37. Marginal Factor Cost A Firm Hiring in a Monopsony Labor Market Wage Labor Supply 11 10 Quantity of Labor 5 4 How much does it cost to hire another worker? .

38. Marginal Factor Cost A Firm Hiring in a Monopsony Labor Market Wage Labor Supply 11 10 Quantity of Labor 5 4 How much does it cost to hire another worker? Total factor cost went from $40 to $55, so $15.

39. Marginal Factor Cost A Firm Hiring in a Monopsony Labor Market Wage Labor Supply 11 10 Quantity of Labor 5 4 How much does it cost to hire another worker? $11 for the 5th worker and $4 in wage increases for the first four. $11 + $4 = $15

40. Marginal Factor Cost A Firm Hiring in a Monpsony Labor Market Wage Marginal Factor Cost 15 Labor Supply 11 Quantity of Labor 5

41. Monopsony Wage Marginal Factor Cost Supply of Labor Marginal Revenue Product 10 100 Quantity of Labor

42. Monopsony Wage Marginal Factor Cost Supply of Labor 12.5 Marginal Revenue Product 10 100 150 Quantity of Labor

43. Wage Marginal Factor Cost Supply of Labor 12.5 Marginal Revenue Product 10 100 150 Quantity of Labor

44. 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?

45. 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

46. Graph jeapardy

47. Marginal Cost $/unit Long-Run Average Cost P Demand Quantity Q Marginal Revenue

48. Inflation Unemployment

49. Inflation Unemployment

50. Neat Applications