Sunday, September 30, 2012

Using Cartoons To Teach About Inflation

For the past year, I have been studying the use of cartoons in teaching economics.  I have come to the conclusion that the use of cartoons is loosely correlated to learning.  While collecting data, I made this PowerPoint on Cartoons and Inflation.

This presentation explains how to use cartoons to teach.

My conclusion is that cartoons are independent of learning.  If you have had another experience, please comment.

Saturday, September 29, 2012

Free Market Competition and Baseball

This is my econ thought for the day.  Last night, my favorite television show, Monk, was preempted for a Chicago White Sox game.  I don't know anything about baseball and playoffs, but this is my thought.  Both teams have the motivation to win the game even though they are mathematically out of the race.  But other teams also have the same incentives.  As a result of these motivation, teams acting in their own self interests, the best team will advance to the pennant race.  This is an example of how perfect competition works and manifests itself in the way people behave.

Last night, Muscatine played Pleasant Valley in 4A football.  There were only 5000 seats available for the 8000 people who attended.  When the supply is inelastic and there's an increase in demand, prices for tickets should increase.  Of course, in high school the prices of tickets are fixed.  But the costs could be passed on to the consumers in other ways such as how far people had to sit to see the game or walk to get to the stadium.

Thursday, September 27, 2012

Marriage Market and Contraception

This is an exceptionally well written article.  HT to Freakonomics.
The Wikipedia entry is here.  Mr. Reagan lowered taxes and increased spending increasing the deficit.  Some of this policy  was a result of the theory of Arthur Laffer.

The only reason for this post was to give me an excuse to draw.

Tuesday, September 25, 2012

Study for Quiz Wednesday

This post is for the unfortunate students in my AP Microeconomics class this semester.

Here is the cheat sheet for tomorrow's exam.


This book is provocative and stirs the creative juices. I have read parts of the book as a colleague loaned a copy of her book to me. When mine book arrives, I'm going to begin blogging the book. You can buy yours using the link above.

Monday, September 24, 2012

Cartoon on 47%

Does this cartoon offend you?

The cartoon makes a solid point, but I challenge you to remember it two hours from now.  Why is it that jokes and cartoons are funny at the moment but seldom stick with us?

As a learning tool, I think cartoons are a complementary good with a low marginal cost.  So if I am studying economics and the cost of the material I'm studying increases, I demand less cartoons and jokes.

Cartoons might be a great way to end a lecture, kind of like the icing on the cake, but shouldn't be the bulk of the lesson.

Sunday, September 23, 2012

Monday's Lecture on Perfect Competition

Here are my notes.

In Perfect Competition, there are many buyers and sellers all selling a homogeneous good.  These buyers and sellers have no control over price.  I recommend the following links on  Perfect Competition.  Perfect Competition Characteristics.  Perfect Competition and Demand. Perfect Competition and Efficiency.  Perfect Competition and Long Run. Perfect Competition and Loss Minimizing Position.  Perfect Competition and Profit Maximization.  Perfect Competition and Shutdown.

Perfect competition is microeconomics major contribution to theory.  In this theory prices will be driven down to their marginal cost.  Because producers and suppliers have no control over the price, if the price falls, each producer must lower their price or leave the market.  For this reason, economists call the tendency for prices to reach their marginal cost--the race to the bottom.

Choice and Institutions

Economics assumes that choices are free, rational, and based on well defined preferences.  Lately, I have been wondering what affect institutions have on choice.  Let me give you an example.

Suppose that I have $10 and I want to buy a Greebie that costs $10.  The government imposes a tax of $1 on the good.  Now, I cannot afford to buy the good.  My choice has been defeated by an exogenous decision outside of my scope and influence.  This might be a stupid example, but I now maintain that most of my choices are influenced by institutions.

For example, suppose I want to go to the gym to workout.  If the gym is not open, I have to make different choices.  If I want to go to work early, but I can't clock in, then I have to make different choices.  If the Internet is shut down because of a maintenance update, I have to make different decisions.  If the store is out of avocados because of a Teamsters strike,  I have to make different choices.  I challenge you to find any choice that you have made that wasn't on some level influenced by an institution.

The next challenge is to challenge all assumptions of choice.


Using the data from Saturday's post, I constructed a Variable Cost, VC, curve.  Note dip in the curve between output 4 and 12.  I suggest that this dip is the result of specialization of labor.  Then diminishing marginal returns set in and costs increase exponentially.

The next challenge was to plot Average Variable Cost, AVC, and Marginal Cost, MC.  The graph is posted below.

I think it's hard to make the connections among MP, MC, and AVC.  AP students should know that the MC intersects the AVC curve at the lowest point.

Saturday, September 22, 2012

MP and MC

This is from a lecture on cost curves given to my economics class.  The intent is to show that the Wage, W, divided by the Marginal Product, MP, equals Marginal Cost, MC.

Why make this connection?  Because this shows that as diminishing marginal returns set in, the marginal cost of the next employee increases.

Given the data above, can you calculate Total Variable Cost, TVC, and Average Variable Cost, AVC, and graph?  It might be instructive to graph AVC and MC on the same graph.  Why?

Any AP economics student should be able to show that MC intersects AVC at the lowest point.

Emotion and Decision Making

A paper that describes how emotion interferes with decision making is here. This is heavy reading and is part of a group on behavior economics on Linkedin.

Why is something so obvious something that needs to be proven?  I think this is because people's behavior changes when there are changes in social forces.

Thursday, September 20, 2012

Krugman on Romney

This statement is exactly one of intuitions of the Lorenz Curve.  This is a question for law students.  Is the omission of facts a lie?

Sunday, September 16, 2012

How Gas Prices Relate to Oil Prices

In class, I was talking about how the free market determines the price of gas and that anyone could predict the movement in gas prices by looking at crude oil prices.  You can see from this chart that gas prices and crude oil move in unison.

Every morning, our local television network, KWPC, compares gas prices in Iowa, Illinois, and and Nation in a chart.  My observation has been that Illinois pays 20 cents more than residents in Iowa and the national average is about 10 cents more.  There are institutional factors too that determine the price of gas such as local taxes, ethanol subsidies, logistics, and location. (See chart).  But, the bulk of gas prices are determined by the cost of the inputs that make gasoline.

Just about everyone thinks that the oil companies make the prices high in order to gouge the consumer.  The problem with that argument is that some will raise their prices and some will not.  Those who do not raise the prices will sell out their inventory fast and make a larger profit than at the higher price.  This characteristic  makes it impossible for gas stations to raise their prices unless all gas stations raise their prices.  If the prices get too large, alternative sources of energy becomes viable.

Saturday, September 15, 2012

US News and World Reports Cartoons

This is an excellent collection of cartoons about the economy.  I especially like the widget.  There are 72 cartoons covering all aspects.

Fiscal Policy has a nice collection of economic statistics here.  It would take a very, very big man to wrestle the economy into submission.  I believe that that man doesn't exist.

Now that all of my students have a MacBook Air computer, I could make my textbook.   I believe that this site is the best site for teaching economics to high school students.

An excellent video source of economics for the serious student can be found on and watching Intromediate Microeconomics.

Friday, September 14, 2012

Law of Demand

This video explains how to make a unit elastic curve from a utility function.

Wednesday, September 12, 2012

National Debt

Research on Gas Prices From St. Louis Fed

Drivers may wonder whether the most recent spike in gasoline prices in temporary or will be longer lasting. Will prices eventually decline--maybe even to below $3 per gallon? Or is it time for drives to alter their driving habits, maybe by buying a hybrid car? Get the latest Page One Economics Classroom Editionnewsletter to learn about Higher Gasoline Prices: Temporary or Time to Buy a Hybrid?
This is an introduction from an excellent article describing demand and demand elasticites from the St. Louis Fed.   

The article is intended for teachers to use in their classroom.

Monday, September 10, 2012

Cartoon Introduction to Economics

Dr.Yorman Bauman has updated his website to include resources for teachers.  This is an excerpt from Dr. Bauman's website:

Cartoon Introduction to Economics: For teachers and others using Cartoon Micro, I've added some nifty online resources, including detailed page notes, chapter summaries (in haiku form!), and PPTs. Let me know if you find them useful since that will encourage me to do the same for Cartoon Macro

You will find Dr. Bauman's books to be an outstanding addition to your classroom.  

Various Links

1.  Marginal Revolution University.

2. A2Z Home's Cool Homeschooling.

3.  Gene Hayward is one of the best AP Economics teachers in the country.  He is hosting an online economics class for AP instruction.  Click on the link and watch the video.  I think he had about 95% pass rate last year for his macro students.

4.Study Tube.  This will be operational later this week or next.  Study Tube has the most rigorous microeconomics instruction I have seen since Hal Varian's Intermediate Microeconomics textbook.  The instruction is in Dutch so make sure to translate it into English.  I often hear about the differences between instruction in the Netherlands and in the United States. Now you can benefit from the same instruction.

Sunday, September 09, 2012

Graphic Novel Is Right On The Money

The title is from an article written by Michael Goodwin.
Michael Goodwin hasn't just written a great graphic novel -- he's written one that should be required for every school, newsroom and library in the United States.

Cartoon Lesson for Monday

First, analyze the cartoon with this worksheet.

Second, answer these questions:

There are three questions every economic system must answer.  Which of the three questions does this cartoon address?

What kind of economic system has no government intervention?

What is the fundamental question in economics?

Explain how the fundamental question, motivates the three questions every economic system must answer in 25 words or less.

The serious student should study the Lorenz Curve.

How Quaility is Influenced by Choice

Consumers offered a richer array of relevant choices in a given product category grow engaged & interested in quality & are prepared to pay more for the perceived higher quality.

When shoppers are offered many choices of a product, they discriminate among choices and are willing to pay more according to this paper.  

Dan Ariely covered something like this in his book, Predictably Irrational.

Saturday, September 08, 2012

Greek Debt Crisis Explained

Greek Debt Recession and Austerity (part 1): A primer of why Greece is in a tough situation (more in future videos)
I find Macroeconomics beyond my grasp. This video will well done and coincides with textbook theory on interest rates. However, many of the monetary crisis that theory predicts isn't happening?

Friday, September 07, 2012

Financial Fables

The Federal Reserve Bank of Kansas City once again has created an interesting and imaginative way to teaching about saving.  Financial Fables can be found here.

You will find Penny Pigeon and the Missing Nest Egg and Oscar Ostrich Faces the Future.

As technology reinvents how we learn, these resources will be valuable to the teacher who cares about a child's future.

Price Ceiling

This cartoon is for my class today.

1.  How does this cartoon show the relationship between scarcity and price?

2.  How come prices don't shoot through the roof?

3.  What would happen if the government decided to put a ceiling on the price of gas?

Bill Clinton Cartoon -- Obama's Knowledge of the Economy

When something is funny look for the simple truth.  This is an old maxim for humor and cartoon writers. The truth is, Mr. Obama hasn't improved the economy.

I don't think Mr. Clinton improved the economy either.  His election coincided with the internet boom and a run up on housing prices.  Mr. Obama's term coincided with the housing bust and a number of world events to resulted in a large deficit.

The economy has too many variables and exogenous events to be controlled.  Even if Mr. Obama could find a way to tax the rich, the rich would change their behavior.  I believe there are forces that shape consumption, investment, and trade that are beyond policy.

Mr. Obama is a gentle and kind man.  If he could change the economy, don't you think he would?

Wednesday, September 05, 2012

Opportunity Cost

A woman once rushed up to famous violinist Fritz Kreisler after a concert and cried, "I'd give my life to play as beautifully as you do."  Kreisler replied, "Well, I did."

This is an example of opportunity cost.  Why do people make the choices to pursue a career or a sport and risk everything for it?  For me, it was wrestling.  I gave up my leg.  Others have given their lives for their country.  Man and woman want to make a significant contribution to their world and they work to make this significant contribution.

Tuesday, September 04, 2012

Today's Notes

Microeconomics is learning about supply and demand.  Today, we lectured over equilibrium and then practiced moving the supply and demand curve.  The specific cases we worked through has been converted to a Google Document.

Chapter 3 problems are extra credit.

Breaking Bad Economics

Breaking Bad is a television show about a teacher who makes meth after being diagnosed with cancer.

Readers of Freakonomics will recognize that Walter White is in a tournament.  The following paragraph is lifted from the link above:

A 1-in-4 chance of being killed! Compare these odds to being a timber cutter, which the Bureau of Labor Statistics calls the most dangerous job in the United States. Over four years’ time, a timber cutter would stand only a 1-in-200 chance of being killed. Or compare the crack dealer’s odds to those of a death row inmate in Texas, which executes more prisoners than any other state. In 2003, Texas put to death twenty-four inmates—or just 5 percent of the nearly 500 inmates on its death row during that time. Which means that you stand a greater chance of dying while dealing crack in a Chicago housing project than you do while sitting on death row in Texas. So if crack dealing is the most dangerous job in America, and if the salary is only $3.30 an hour, why on earth would anyone take such a job?

I think Breaking Bad illustrates the principles outlined in Freakonomics perfectly.  If you have Netflix, you can get the entire series on your computer.  I've been told that the next series to watch is The Wire.

Financial Resources for High School Students

If you are a teacher looking for interactive games that teach financial literacy, Teen Dollars, is a good place to begin.  In addition, there are several links on how to pay for college.

Sunday, September 02, 2012


This cartoon doesn't work.  I wanted to show that inflation heats up the economy.