With just a few weeks remaining before the AP and IB Economics exams take place, you may be looking for some good resources for exam review. In the last months, I have released two newly updated revision guides for students studying in these courses.
This resources includes chapters on all the topics from both Advanced Placement and IB Economics, including the new quantitative components of the IB Higher Level syllabus. Also included are the two AP-only topics, Resource Markets and Theory of Consumer Behavior
Every chapter includes a link to the corresponding section from my economic video lectures site, The Economics Classroom.
At the end of a book is a glossary including definitions to over 150 Microeconomics terms
Includes chapters covering every topic from the AP Macroeconomics course, as well as sections 2 and 3 from the IB Economics syllabus.
Like the Micro Revision Guide, the Macro guide includes links at the top of every page to the corresponding section of The Economics Classroom, so the student can easily find video lessons to accompany their review process.
The Macro and International Glossary at the end of this book includes over 200 key terms.
Over the last year, I have been working on two new resources for IB, AP, A level and Econ 101 students. The Microeconomics and Macroeconomics Revision Guides for the Introductory Economics student represent the ultimate resource for exam preparation and subject mastery.
The Macro Revision Guide is in its final stage of development and should be for sale by the middle of March. The Micro Revision Guide is now available now on Amazon in the US, the UK and the EU:
Description: The Microeconomics Revision Guide for Introductory Economics students provides a comprehensive overview of the major units covered in an introductory Micro course. The book follows the Advanced Placement and International Baccalaureate syllabuses, and includes over 200 detailed diagrams, clear explanations of concepts, definitions, examples, and a glossary with over 150 key Microeconomic terms.
The revision guide is linked to several online resources which can be accessed for free by students reviewing for exams. Each chapter of the book is accompanied by a section on the website, www.EconClassroom.com, at which students can view video lectures published by the author covering nearly every topic from the course. The website also provides interactive flashcards for reviewing key terms and downloadable practice activities on most units.
For more information on the Microeconomics Revision Guide for the Introductory Economics Student, have a look at the author's website, www.welkerswikinomics.com. There you can also find links to other resources, including teacher lecture notes, a blog, and an Economics news page.
Some say that Global Warming may be the greatest market failure of all. This podcast was originally broadcast in January of 2007 while George Bush was still in office. The commentator claims that global warming is “nothing but one giant market failure”, arguing that the United States therefore must get serious about tackling the problem.
The allocation of resources towards carbon emitting industries has almost undoubtedly contributed to the warming of the planet over the last half century. Only recently have governments begun taking active measures to reduce the impact of industry on the environment through greater regulation of polluting industries, employing corrective taxes in some instances and market-based approaches to pollution reduction in others.
US President Barack Obama, unlike his predecessor, appears to be serious about correcting the “market failure” represented by global warming:
Obama's budget, announced Thursday, looks to fund a host of new energy programs, from carbon sequestration to electric transmission upgrades. It would also provide the EPA with a $10.5 billion budget for 2010, a 34% increase over the likely 2009 budget. Nineteen million dollars of that would be used to upgrade greenhouse gas reporting measures.
The Interior Department would get $12 billion for 2010. The agency would use part of the money to asses the availability of alternative energy resources throughout the country.
Funding comes from elaborate carbon “cap and trade” program, which puts a price on emitting pollution and is the core of Obama's plans. Starting in 2012, the government would sell permits giving businesses the right to emit pollution, generating $646 billion in revenue through 2019.
During those years, the number of available permits would gradually decline, forcing businesses to buy the increasingly scarce, and costly, rights to pollute on an open market. Obama hopes that the rising cost of permits will encourage businesses to invest in clean technologies as a cheaper alternative to meeting pollution mandates, helping to cut greenhouse gas production to 14% below 2005 levels by 2020.
Below is a diagram that illustrates precisely how the Obama cap and trade plan is meant to work. Notice that between 2012 and 2020 the cost to firms of emitting pollution will increase dramatically, while at the same time the total amount of carbon emissions in the US economy will fall due to regular reductions in the number of permits issued to industry.
The Obama cap and trade scheme is not the first experiment with such a market based approach to externality reduction:
Europe established such a market in 2005. But some E.U. governments allocated too many credits at the outset, causing the value of some permits to fall by half and making it relatively easy for large polluters to simply buy credits rather than cut emissions. Overall emissions grew in 2005 and 2006. In 2008, E.U. emissions dropped 3%; 40% of that drop was attributed to the carbon trading scheme.
Europe's cap and trade program took a few years before it began having any noticeable impact on the emission of carbon by European industry. While unpopular among the firms who are forced to pay to pollute, the fall in emissions in Europe shows that a market for carbon may be effective in forcing firms “internalize” the costs of carbon emissions, which until now have been born by society and the environment in the form of the negative effects of global warming.
Why do you think tradeable pollution permits are more politically viable than a direct tax on firms' carbon emissions?
Why did Europe's carbon emission permit market fail to reduce emissions over its first couple of years of implementation?
Is making firms pay to pollute a good idea in the middle of a recession? Do you think that we should even be worrying about the environment when millions of people are losing their jobs and entire industries are struggling to survive?
The activity below is to introduce Economics students to the three primary Macroeconomic objectives of any government or policy making body. These are :
Full employment of the nations work force: This means that nearly everyone who wants to work in the country is able to find a job. It does not mean that there is no unemployment, rather that the unemployment that does prevail in the economy is voluntary, i.e. it exists because workers are simply not willing to work at the prevailing wage rate. If there is involuntary unemployment in the economy, then the country is not meeting its macroeconomic objective, and there is likely a recession caused by a lack of overall demand (aggregate demand) for the nation's goods and services.
Resources for learning about Full Employment:
Textbook (Welker's IB Economics for the IB Diploma) pages 286 – 288, 295-299.
Price level stability: Changes in the average price level of goods and services in the nation are measured by calculating inflation, commonly using a consumer price index to do so. Low and stable inflation is one of the macroeconomic objectives since price level volatility (high inflation or deflation) has several harmful effects on a nation's households and business firms. Keeping inflation low and stable promotes a healthy environment for achieving business investment, full employment and economic growth
Resources for learning about Price level stability:
Economic growth: The third macroeconomic objective is to increase the output of the nation's goods and services year after year. Economic growth refers to the increase in real Gross Domestic Product (GDP) and can be measured by finding the total value of a nation's output one year, comparing it to the previous year, and adjusting it for any changes in the price level between the years. Economic growth is a desirable goal because it generally means that incomes are rising and people's lives are getting better. Of course, GDP only measures the physical output of goods and services, and does not include many non-economic variables that also should be considered when measuring people's well-being. But rising incomes and output are deemed worthy goals since they are associated with rising living standards.
The following lesson is a great way to start an IB or AP Economics class for the year. I just tried it this morning for the first time and it went great!
Before your Econ students arrive for their first full class meeting, remove chairs until there are only half as many as you will have students. I stuck mine in the library, well out of view of the students coming to my class.
Tell students that the custodian removed the chairs for repairs, or they were taken to another room for a presentation or something. Anyway, you don't know when they'll come back and it may be a couple of weeks.
For now, we are stuck with this many chairs, and we have to figure out a way to resolve this problem!
Tell the students it's up to them to decide how our limited number of chairs will be allocated. Have them brainstorm solutions out loud while you write their suggestions on the board.
Try to come up with 6-10 possible solutions, then have the students vote on the one they would like to see enacted. They can only vote once! Write the tallies next to each option on the board.
If there is a tie for #1, have the whole class vote between the two or three options you've narrowed it down to until there is one clear winner.
The Economist's Solution:
Once the students have voted on their favorite solution, share with them the economist's favorite solution. It is known as a sealed-bid auction.
Give each student a slip of scrap paper and have him write two things: 1) His name, and 2) the maximum price he would be willing and able to pay each class period to have a chair to sit on.
Collect the results, and in front of the students, organize their bids from highest to lowest. If there is a tie on the margin, have the students whose bids were identical bid again, writing their highest price on the back of the same slip of paper, then re-rank.
The students with the highest bids will get a chair! For example, I had 17 students, and only 8 chairs. The highest bid was $10, while three students were not willing to pay anything. Four kids were willing to pay $1, but there were only two chair left at that point. When they re-bid, one was willing to pay $2, one $1.75, $1.25 and $1.20. Therefore, the two remaining chairs went to the students willing to pay $2 and $1.75.
Finally, tell the winners that they can take a seat, and that everyone else must stand! At this point, of course, you can send the lowest bidders out to fetch the missing chairs and begin your debrief.
Economic concepts illustrated by the Scarce Chairs exercise:
Equity means fairness, while efficiency requires that resources go towards their most socially optimal use, so that those who value something most end up getting that which they value.
The tradeoff between equity and efficiency is a major theme of the IB Economics course.
What is most efficient (an auction to determine who is willing to pay the most for the chairs) may not be equitable (or fair).
When the richest students end up in the chairs, those with lesser ability to pay feel that they’ve been treated unfairly.
A lottery in which names would be drawn from a hat to determine who gets a chair is certainly more equitable, but is actually less efficient, since those who get the chairs may not be those who place the greatest value on having a chair.
Auctioning the chairs assures that those who value them the most will end up getting them, therefore resources are allocated most efficiently.
Another summer has come to an end and I'm in my classroom preparing for another year of Advanced Placement and International Baccalaureate Economics. There's a lot to be excited about this year, including the fact that the co-author of my textbook, Pearson Baccalaureate’s Economics for the IB Diploma,Sean Maley, has joined me at Zurich International School as a teaching partner. He will be taking two sections of IB Year 1, two of IB Year 2 and one AP Microeconomics this year. I will have the same IB load and one AP Micro/Macro combined course.
I'm also excited because this year I will be using my brand new PowerPoints and Lecture Notes created over the summer, which are a huge improvement on their popular predecessors.
In addition to adding to the already large library of video lectures on The Economics Classroomcreated last year, I plan to produce even more 8-15 minute YouTube lessons covering the remaining topics from AP and IB Economics. For each new lesson I produce, I plan to create a practice activity to go with it (all of last year's activities are already available for free here). I've received several requests from teachers and students for answer keys to go with each activity, which is also something I plan to create this year. By this time next year, I hope to have a workbook for AP and IB Economics available for purchase through my website.
Other exciting developments in Welker's Wikinomics include:
Flashcards on key terms from every section of the AP and IB course, developed late last school year to help my students study for their exams,
Floating definitions on the Economics Classroom, so that no matter what post you're looking at, the definition of any key term can be read without having to leave the page,
My free mobile app for the Android and iPhone, which provides convenient access to the mobile versions of both Economics in Plain English and The Economics Classroom, along with full access to the flashcards and glossary on your mobile device.
If you're not already subscribed to the weekly update from Economics in Plain English and the Economics Classroom, go ahead and enter your email address into the field in the upper right hand corner of this blog, or on my home page. You'll receive one email newsletter per week (Monday morning) containing the latest posts or video lessons put up in the last week. You can also follow me through your favorite social media, indluding:
As always, I love hearing from students and teachers using my resources. Please feel free to post your comments to this blog or send me emails directly at firstname.lastname@example.org. I love hearing suggestions and talking to teachers and students about Economics about any topic whatsoever!
Here's to a new school year and another exciting year of Economic teaching and studies!
Over the last four years nearly 400 teachers and students have purchased and used my popular PowerPoints and Lecture Notes covering the AP and IB Economics syllabus. I would like to thank everyone who has bought these, and I sincerely hope they served a valuable function in your teaching and learning Economics. Believe it or not, selling these resources it the only revenue I earn from the ever-expanding selection of resources I provide through Welker's Wikinimcs.
Now, five years since I first started making my PowerPoints and Lecture Notes available to students and teachers, I have completely remade them from the ground up. The new versions of the Microeconomics Lecture Notes are, as of today, available to buy online. I have been working hard in the last several months to completely redesign the PowerPoints and Lecture Notes, which now include interactive and multi-media features that will enhance your Economics teaching and your students' studies. Here are some of the features included the new Welker’s Wikinomics Lecture Notes:
Quantitative Methods included:The new IB Economics syllabus includes several newly added sections requiring quantitative analysis. Every new topic is covered in detail, with worked solutions to IB-style problems included
Video Lectures Embedded: The new Lecture Notes include embedded video lessons that I have been producing over the last year covering nearly every topic. Each lesson ranges from 7 to 15 minutes in length and includes illustrations and clear, spoken explanations of every concept from the syllabus. If you buy the PowerPoint versions of the Lecture Notes, the videos can be viewed right from within the presentation. If you buy the pdf versions, there are direct links to each of the videos, which can then be viewed from my website,The Economics Classroom.
AP-only units included: AP teachers should not feel left out; I also completely remade the AP-only units on Consumer Behavior and Resource Markets!
Links to Online Resources:The new Lecture Notes also include updated links to blog posts from Economics in Plain English and dozens of downloadable worksheets and practice activities to guide you to success on the Microeconomics exam.
PowerPoint or PDF: Just as with the old versions, you have the option of buying the PowerPoints (these can be edited and adapted for individual teacher use) or the PDF (primarily for students) versions of the lecture notes. You now also have the option to buy class sets of the PDFs to distribute to your students to follow along during your lectures.
Satisfaction guaranteed: If you buy a set of the lecture notes, and within one week decide they are not suited for your needs in the classroom, I guarantee a 100% refund of your purchase. Just shoot me an email and let me know of your concerns, and you'll have your money back asap.
The new information and order page is now online. A free sample can be viewed there, along with a full description of what's included and all the features the Lecture Notes offer. Please email me if you have any questions or need more information about how to order. Thanks for your time! ~Jason
Here's just a tiny sample of what the new lecture notes have to offer!
I've been hard at work the last two weeks creating new tools for the Introductory Economics students preparing for their AP, IB, or other exams this month. My latest addition to my website, Econclassroom.com, is Flashcards for all the key terms in the AP and IB Econ syllabuses. The flashcards also work very well on mobile devices (Android, iPhone, iPad), and can be easily accessed from my new Mobile App, available for various devices here: EconClassroom.com – the Mobile App.
You can study flashcards from the entire syllabus or from one unit at a time. You're presented with ten flashcards at a time, which you should try and master before clicking the “shuffle” button to get ten new flashcards from the unit you're studying. The cards always appear in random order. If you wish to review key terms in alphabetical order, you are best served by another recent addition to Econclassroom.com, the dictionary.
If there are any key terms or concepts you think could be added to the dictionary or the flashcards, please log in and leave a comment on the page for the unit you think a term should be added to, I will respond to all comments quickly with the addition of the terms requested!
In my original “Golden Balls” blog post (see below), written almost three years ago after I saw a clip of the finale in an episode of the British game show, Golden Balls, I analyzed the actions of Sarah and Steve, who had to decide whether they would split or steal a jackpot of 100,000 British pounds. The contestants had one minute to try to convince one another that they would split the money; but when it came down to it Sarah stole and Steve split, meaning Sarah got to keep the whole jackpot and Steve went home with nothing.
In that original post, I proposed that Steve's best chances for going home with any money would have been “for him to use the one minute of discussion time to convince Sarah that he would choose SPLIT, yet be willing to go home with something LESS THAN $50,000 and accept that Sarah was going to choose STEAL. He could have threatened to chose steal if she did not agree to share her winnings with him to some extent.”
In a recent episode of the same game show, a contestant followed a similar strategy to that I suggested Steve should have taken. Watch the clip below, from a February 2012 episode of Golden Balls.
In this episode, Nick immediately takes control of the negotiations by insisting that he is going to steal, which is a very unorthodox approach to this game, in which the traditional strategy is to try and convince your opponent that you are going to split. By establishing a credible threat to steal, Nick puts all the pressure on Ibraham to decide only one of two things:
Does Ibraham trust that Nick will split the money with him after he has stolen the full jackpot, and
Would Ibraham rather both of them go home without any money at all than Nick win the jackpot and possibly not split it with him later on?
Nick's strategy is brilliant. By the end of the negotiation, Nick has convinced Ibraham 100% that he is going to steal the money. Ibraham may only have had a confidence level of 50% that Nick was honest about splitting the money with him after the show, but with a 50% confidence level, Ibrahim's possible payoffs are:
Choose steal and go home with nothing.
Choose split and have a 50/50 chance of going home with half the jackpot (based on his level of confidence in Nick's promise to split the money after the show).
In other words, with a jackpot of 14,000 pounds, the payoffs for Ibrahim became:
If he splits: 0 pounds or 0.5(14,000) = 7,000 pounds
If he steals: 0 pounds or 0 pounds (assuming his confidence level in Nick's intention to steal is 100%).
Clearly Ibraham now has a dominant strategy: to split. In the typical version of this game, a player's dominant strategy is always to steal (as explained below), since the possible payoffs are:
If you split: 0 pounds or half the jackpot
If you steal: 0 pounds or the whole jackpot.
But because Nick has convinced his opponent that he will steal, and then split the winnings, Ibraham's dominant strategy shifted to split, since the possible payoffs have changed. Ultimately, Ibraham does what is most rational given his confidence in Nick's threat to steal, and that is to split. Ibraham then chooses split (as he should), but then to everyone's surprise, Nick chooses split, not steal as he had threatened to do throughout the negotiation. This a surprising twist, since from Nick's perspective stealing is clearly now a dominant strategy! Nick had convinved Ibraham to split, which means Nick faced a greater payoff by stealing. But by splitting, Nick shows that he had intended to split all along, but first needed to convince Ibraham otherwise to establish splitting as Ibraham's dominant strategy.
What a thrilling game! I won't even bother getting into how this relates to economics today, I'm still shaking with excitement over the outcome!
Rarely does such a perfect illustration of the Prisoner's Dilemma come along for Econ teachers to use in their classroom:
The payoffs are clear:
Each player has a weakly dominant strategy, which is to choose to steal.By choosing to steal, the player has a chance at maximizing his own payoff, but will do no worse than he would if his opponent also chooses to steal and at least will have the satisfaction of thwarting his opponent's attempt to steal the money.
There are three Nash equilibria in the game, which are outcomes at which a player can not do better on his or her own by changing his or her strategy. The outcome Steve was hoping for by chosing “split” (50/50) was not a Nash equilibrium because Sarah knows she can do better if she chooses steal when Steve chooses split. Steve doomed himself by choosing split because he should know that Sarah's dominant strategy is to choose steal. However, Sarah would also have doomed herself by choosing split because she should assume that Steve would also chose steal since steal is a dominant strategy for him too.
John Nash, who pioneered the field of Game Theory, assumed that humans were coldly rational, self-interested, deceptive creatures that would not hesitate to stab one another in the back to get what was best for themselves. His theory of human behavior is only partially proven correct in this game, in which Steve is shown to be the sucker and Sarah the coldly rational self-interested player. The best chance for Steve to go home with any money would have been for him to use the one minute of discussion time to convince Sarah that he would choose SPLIT, yet be willing to go home with something LESS THAN $50,000 and accept that Sarah was going to choose STEAL. He could have threatened to chose steal if she did not agree to share her winnings with him to some extent. Then again, any promise Sarah makes she could later break, thus further empowering the players to choose steal.
What in the world is going on here? Why did Sarah choose steal rather than collaborate with Steve and share the $100,000?
Was Steve totally wrong to choose split? What would you have done in his situation?
How do the choices faced by Steve and Sarah relate to the choices faced by firms in oligopolitic markets? Now that you've seen this video, can you explain why collusive agreements between oligopolists often fall apart? Why do cartels such as OPEC often fail to achieve the high price targets agreed upon in meetings of their leaders?