Seeing the forest for the trees – An introduction to Macroeconomics

Most Economics courses begin with a semester or more of Microeconomics before moving into Macroeconomics. The transition between these two distinct areas of study is less smooth than that between units in other courses, as the tools, models and terminology employed in Macro will appear completely new to most students. I find it important, therefore, to prepare new Macroeconomics students for the months ahead by introducing them to some of the differences between Micro and Macro. A teacher of mine once explained the difference between Micro and Macro using the example of a tree and a forest. Microeconomics is the … Read more

Reflections on Educating Students for Happiness and Success in the 21st Century

Today we returned to work after a relaxing week of holiday-making for a day of “professional development”. The day kicked off with our school’s director sharing some information about a recent audit of our school’s parent community, which revealed that there is great anxiety among the parents at our school about their children’s experiences in school today, mostly relating to how well they will achieve on their examinations and whether their levels of achievement will assure them entrance to the top universities to which they (both the parents and the students) aspire. The ultimate source of this anxiety, it would … Read more

Negative Externalities of Production

In our last lesson we defined and introduced the different types of market failures we’ll study in future lessons. The first we examine is negative production externalities, which arise when the production of a good creates spillover costs on society as a whole.

This lesson looks at one market in which negative externalities result from production and carefully walks through how we can use marginal benefit and marginal cost analysis to illustrate and explain this market failure.


Introduction to Market Failures

Markets are thought to be the most efficient system for allocating society’s scarce resources. However, what if markets FAIL to achieve the efficiency we so desire as a society? Market failures arise when the free market quantity is either greater than or less than the “socially optimal” quantity of a good.

This lesson introduced different ways markets may fail to achieve a socially optimal level of output. In part 2 of this lesson we’ll explore in more detail one type of market failure: negative externalities of production.


The Total Revenue Test of Price Elasticity of Demand

By looking at how a change in price affects the total revenues of producers in a market (whether TR increases or decreases) we can draw some quick and accurate conclusions about whether demand for a good is elastic, inelastic or unit elastic between two prices. We’ll also learn that even along a straight-line demand curve there is a RANGE of elasticities of demand for every good.

 

Part 1

Part 2

Introduction to Dead Weight Loss (Welfare Loss)

As we’ve learned in earlier lessons, markets tend to achieve equilibrium prices and quantities that are efficient, as the marginal benefit of a product to its consumers equals the marginal cost to producers. But what makes outcomes other than equilibrium inefficient? This lesson looks at the impact of disequilibria on consumer and producer surplus, introducing the concept of “deadweight loss” or “welfare loss”, which will further help us understand what makes outcomes other than the equilibrium quantity and price inefficient.

Introduction to the Central Themes of Economics

In our final lesson of the introductory unit in the Economics course we’ll explore some of the central themes that will guide our inquiry of the subject going forward. From the tradeoff between equity and efficiency to the distinction between growth and development to the role of government in the economy, several themes will form the basis of all inquiry in our study of Economics.

Scarcity, the Basic Economic Problem

What would you do if you showed up to class and there weren’t nearly enough chairs to go around? Well, you’re facing and economic problem that requires an economic system to solve! This lesson introduces the basic economic problem of scarcity and defines “Economics” and “Economic systems”, both key concepts for a student starting out on his or her journey to study the “dismal science”!