Sunday, October 10, 2004

Ideas for Teaching Market Structure

Hands-on Project for Studying Market Structure

- Money Changers at Change Alley (Perfect Competition)
- Hairdressing Salons (Monopolistic Competition)
- Telecommunication Companies / Petrol Companies (Oligopoly)
- OPEC (Monopoly)

Difficult Economic Concepts

Below is a list of economic concepts which students have difficulties understanding:

- automatic stabilisers / fiscal drag
- marginalist concept
- MEC curve
- crowding-out effect
- effects of budget deficit financing on money supply
- Monetary vs Keynesian transmission mechanism
- real and nominal concepts (e.g. GDP, interest rates)
- CPI calculations and application

Thursday, October 07, 2004

Increase in eq i/r arising from an increase in Y

Explanation for an increase in equilibirum interest rate arising from an increase in national income using the Liquidity Preference Theory.

Just thinking if it is any better to spin the following story....

In the case of an increase in national income without a corresponding increase in money supply (that is money supply remains constant), firms will find that they "run out" of money to compensate households....

Given that firms hold bonds as a store of wealth (bonds is the instrument of choice for storing wealth in the LPT), they will compensate the households in the form of bonds. When households receive the additional income in the form of bonds, they would want to sell off part of the bonds to meet their increase in demand for money.

This leads to a decrease in bond prices and an increase in interst rates. Hence, the movement along the new money demand curve to a higher equlibirum interest rates.

I know the story sounds unnatural, but I suppose this is what happens when we "over-extend" an economic model.... :-) to try to use it to fully account for real life....

In the beginning....

And so begins my life as a blogger.... a virtual existence born of boredom....

Seriously, this blog was created to keep track of thoughts which run through my mind, especially ideas related to my profession as an economics educator. My thoughts come as quickly as they go.... it might not be a bad idea that I pen my thoughts down before they vapourize into nothingness....

This blog is created for my own purpose.... but if there is anything which interests anyone.... by all means, take a read and hopefully, have a laugh....:-)