Market efficiency is perhaps one of the most important topics in any principles course.  Yet the very related concepts of consumer and producer surplus are two of the most difficult topics for students to grasp.  They are difficult because of the high level of abstraction required from students in order to master them; in particular consumer surplus. Yet, it is critical for students to understand these concepts well if they are to understand market efficiency and deadweight loss.  So I usually have one overriding goal when teaching market efficiency to principles students: how can I make the deadweight loss concrete enough for them? The case study of the market for organs (for instance the market for human kidneys), is a great way to achieve this goal.  I usually like to begin the discussion referring to a famous article in the NYTimes describing the now famous (or infamous), auction of a human kidney on ebay. After describing the auction for students, I present the following clicker question to them: Take a guess of how much was the bidding for this auction when e-bay took it down three days after it started: a) 25K b) 100K c) 200K d) 1 million e) More than 1 million Students are always shocked to learn the auction for a kidney had reached almost 6 million in two days! From this point the discussion could go in many different and very interesting directions: Why did ebay took down the auction? Answer: as you know, it is illegal in the U.S. to sell your organs. Why does the U.S. ban the sale of organs? Answer: many possible answers. But, probably the reason has to do more with ethics than with economics.  It is interesting, though, that the sale of blood is not prohibited. Is the market for organs in this country efficient? Clearly not.  Usually the number of donors is way below the number of people waiting for an organ.  In the market for kidneys, the waiting time is about 3.5 years, which is many times longer than what the patient could wait.  The best place to get data on this market is the Organ Procurement and Transplantation Network.  They offer real time data on the demand and supply data for human organs. What is consumer and producer surplus in the market for kidneys?  What happens to producer surplus when there is no way to legally profit from selling an organ? What can we do to increase the efficiency in this market? What is the deadweight loss in this market?  How does advances in medicine change the deadweight loss in this market? The answer to this last question is what makes this case study fundamentally useful to teach this concept. In this market, deadweight loss is not an abstract idea, but it is actually human lives! ... View more

Unemployment compensation (experiment) Students particilate in a double-oral auction in markets for skilled and unskilled workers, with and without government intervention. ... View more

Traditional vs. Shadow Banking Modern economies rely heavily on financial intermediaries to channel funds between borrowers and lenders. In this issue, the role of traditional banking is outlined and a parallel system— shadow banking —is explored. Article and follow-up questions are included. ... View more

Hamilton's National Bank In this lesson from the Federal Reserve Bank of St. Louis, students participate in two rounds of a role play to help them understand the role of banks in facilitating economic growth through loans. Round 1 is conducted without a bank. After the first round, students read excerpts from Secretary of the Treasury Alexander Hamilton’s 1790 report to Congress in which he proposes a national bank because the United States had few banks at the time. Students then conduct Round 2 of the role play with a bank. After the round, students read excerpts from and summaries of the statute creating a national bank, Thomas Jefferson’s opposition, and Hamilton’s rebuttal. Lesson Plan and PowerPoints Included. ... View more

This is a very simple experiment I designed to demonstrate the diminishing marginal returns problem for my students.  I welcome any feedback. https://www.economicsnetwork.ac.uk/iree/v7n1/vazquez-cognet.pdf Vazquez-Cognet, Jose (2008) The Production of Mathematical Problems: A Diminishing Marginal Returns Experiment  International Review of Economics Education 12/2008; 7(1):103-116. ... View more

As we all know, the theory of production can be applied to any production process, regardless of whether the output is sold in the market.  For instance, many of us use the production function for course performance to study economics education.  Using a noncommercial example to present the theory of production for the first time to students have many benefits: 1) students see how economics apply to their daily lives, and 2) students see how rules of production are independent of input costs. By far the most popular example I use in my class of noncommercial production is the production function for romantic partners. Since many of my students are usually engage in that production as they take my course, they can immediately identify with the case study.  So, here is a question I use to spark the discussion. Which of the following is the most Fixed input of in your production of romantic partners? a)    your chiseled abs b)    your cool haircut c)    your nice dancing skills d)    your pick-up line The idea here is for students to see that these inputs move from more fixed (abs) to more variable (pick-up line).  But, the point is not necessarily for students to identify the “best” answer, but more to see how production works and applies to their daily life.  I usually present this as a clicker question at the beginning of the class; let students vote once, and then allow them to think-pair-share and the vote again.  If I had assigned the question before class (as one could do using a system like FlipItecon.com), I could show some sample answers from students.  This allow the instructor to get the most of out of the classroom activity. Here are some of the best I have received from students over the years. For (a): “You can change the other things pretty quickly but you have to build abs over time.” For (c): “dancing skills take long to develop”. For (d): “my abs may fade, my hair may fall out, my body may become crippled, but i can always use my wit!” This student is clearly mixing the definition of a fixed input, so this wrong answer presents an excellent teaching moment for me. And, perhaps the best one of all: “You've got the curves to supply my demand.” I encourage you to use this, or any example that allow students to see how relevant economics is to their daily lives.   ... View more

The Great Inflation: A Historical Overview and Lessons Learned This history and data lesson from the Fed includes questions for students. ... View more

Tennis ball production (demonstration) Students 'produce' tennis balls by moving them between buckets. Resulting production data is used to calculate total, marginal and average production and costs. This is a good demonstration for large classes because the physical nature of the activity is easily observed by others.   ... View more

Teaching Bank Runs with Classroom Experiments Journal of Economic Education 42(3) 2011 (experiment) Students act as depositers who must decide when to withdraw their funds. Article provides information for both a computerized and noncomputerized version. ... View more

Tax Man Max (song and video) Schoolhouse Rock introduces taxes, including different tax bases and deductions. ... View more

Tax game (simulation) Students determine tax rates and analyze resulting income distribution. Requires internet access. [inequality, tax structure] With larger classes, can be used as an interactive lecture demonstration, or have students complete the simulation before class.   ... View more

Sugar tariff (context-rich problem) Students analyze the impact of phasing out a tax on sugar imports. Can have students complete individually, with think-pair-share or small groups. In larger classes, student responses can be collected using clickers. ... View more

Statistical discrimination (experiment) Web-based game with students acting as employers and workers. Can also be done manually without internet access   ... View more

Spent is a free online game   about surviving   poverty   and   homelessness   created by ad agency   McKinney   for pro bono client   Urban Ministries of Durham   (UMD), whose mission "is to provide food, clothing, shelter and supportive services to neighbors in need". [1]   Players   must make the difficult decisions necessary to live for one month on $1,000, often having to choose between equally disagreeable options. The dilemmas they face represent those that bring people to places like UMD: Do you make a healthy meal or keep the lights on? Cover the minimum on your credit cards or pay the rent? Hope your sick daughter gets better on her own or risk your job by leaving early to take her to the doctor? Let your son play in the after-school sports league or save the money needed for his uniform? The game ends when players either run out of money before the end of the month or make it through with money left over. Since its launch in February 2011, the   interactive game   SPENT has been played more than 4 million times in over 218 countries. [2] SPENT  ... View more

Spending Strings (demonstration) Using spending and output cards, instructor can show students how various policies affect equilibrium, unemployment and inflation. Can have students predict outcomes first; predictions could be collected using clickers.   ... View more