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Been doing some A2 revision courses this holidays and this question came up. In the last two November A2 exams there have been multiple choice questions concerning the point on the Total Cost curve when MC, AVC, and ATC are at their lowest point. In the graph note the corresponding points on the Total Cost. They usually ask you where on the Total Cost line is the lowest point on the MC curve/AVC curve etc.
MC cuts ATC and AVC at their lowest points. The firm will supply where the price is greater than or equal to MC. Thus the individual firm’s supply curve consists of the firm’s MC curve, but only the portion above AVC . The reason for this is that where P=AVC the firm will shut down operations because they are barely covering avoidable costs.
Firms, according to the analysis we use predict their behaviour, are very interested in their marginal cost. Since the term marginal means additional or incremental, marginal costs refer to those costs that result from a one-unit change in the production rate. We find marginal cost by subtracting the total cost of producing all but the last unit from the total cost of producing all units, including the last one. Marginal costs can be measured, therefore, by using the formula:
Marginal Cost = Change in Total Cost ÷ Change in Total Output
Average Fixed Costs (AFC) : they continue to fall throughout the output range. The gap between ATC and AVC = AFC
Average Variable Costs (AVC) : the form it takes is U-shaped: first it falls; then it starts to rise. It is certainly possible to have other shapes of the AVC.
Average Total Costs or Average Costs (ATC or AC) : similar shape to the average variable cost. However, it falls even more dramatically in the beginning and rises more slowly after it has reached a minimum point. It falls and then rises because average total costs is the summation of the AFC and the AVC curve. Thus, when AFC plus AVC are both falling, it is only logical that ATC would fall, too. At some point, however, AVC starts to increase while AFC continues to fall. Once the increase in the AVC outweighs the decrease in the AFC curve, the ATC curve will start to increase and will develop its familiar U-shape. Where MC = ATC this is the lowest point on the ATC curve and is therefore the cheapest production for the firm. This is called the technical optimum.
Marginal Cost (MC) : it cuts ATC and AVC at their lowest points. The firm will supply where the price is greater than or equal to MC. Thus the individual firm’s supply curve consists of the firm’s MC curve, but only the portion above AVC. The reason for this is that where P=AVC the firm will shut down operations because they are barely covering avoidable costs.
This is a fun game to help students who hate writing or revising essays/short answers for IGCSE, AS Paper 2 and A2 Paper 4 .
I see this as both a formative tool that can be used in normal teaching as well as a revision exercise in Term 4.
I am sure you will have your own ideas and I would be interested as to how you adapt and modify to meet the nature of your individual teaching style and syllabus.
1. Brainstorming key ideas related to the essay (Team 4)
• Divide class into 2,4 or 6 groups of approx 4 students. You may try to mix abilities or academically stream depending on your cohort.
• Each team to elect an ‘Examiner’. This person will rotate and change with each game.
• Choose an essay (Most Eco essays have two parts A & B). Half the teams will start with essay A, while half start with essay B.
• Prior to the essay game you may wish to revise the topic and / or give students time as a team to do so.
• The teams get 2 mins to try to name as many mark points as they can. The Examiner cannot help the teams but can simply tick and confirm when they get a mark point.
• The Bonus round!
At the end of 2 minutes the Examiner A swaps with Examiner B. Hence all teams have seen both essays. The new team is read the question as well as the mark points already gained by the previous team. Any extra mark points that they brainstorm are bonus points. (You may wish to give these double value!)
• Marks are collated both as a team of 4 students as well as a Super Team of 8 students ie the 2 teams that work together on the same essays A & B.
• Team Points can me collated over a lesson or a term. You may wish to offer a prize to the best team and/ or the best Super Team.
2. Essay Plan (Team 2)
• In pairs, they have 2 mins to plan a logical chain of thought that links the mark points they individually understand.
• Do not encourage them to use point that they do not understand. Remember than aiming for B/C grades do not need full marks.
3. Writing a draft essay (Team 1)
• Students have 1 min in silence to revise the essay.
• Students have 4 min in silence to revise the essay.
• Student pairs then mark each others essays.
Here are ten strategies for improving your evaluation skills in data response and essay questions written by Geoff Riley of Tutor2u.
1. Make good use of your final paragraph – avoid repetition of points already made
2. Look for key stem words in the question – build your evaluation around this
3. Put an economic event, a trend, a policy into a wider context
4. Be familiar with different schools of thought e.g. free market versus government intervention
5. Be aware that a singular economic event never happens in isolation especially in a world where economies are so closely inter-connected.
6. Question the reliability of the data you have been given
7. Draw on your wider knowledge to provide supporting evidence and examples
8. Consider both short term and longer term consequences (they are not always the same)
9. Consider both positive and negative consequences
10. Think about what might happen to your arguments if you drop the “ceteris paribus” assumption
Very worthwhile with the essay paper on Wednesday.
Currently at AGS doing a 3 day AS revision course. Used this graphic to explain indirect taxes. An indirect tax will have the following effects on the market:
• The supply curve shifts vertically upwards(effectively a shift to the left) by the amount of the tax(gf) per unit. The price increases but not by the full amount of the tax. This is because of the slopes of the demand and supply curves.
• The consumer surplus is reduced from acp to agb. The portion gbhp of the old consumer surplus is transferred to government in the form of tax.
• The producer surplus is reduced from pce to fde. The portion phdf of the old producer surplus is transferred to the government in the form of tax.
• The market is no longer able to reach equilibrium, and there is a loss of allocative efficiency resulting in the deadweight lost shown by the area bcd. This represents a loss of both consumer surplus bhc and the producer surplus hcd that is removed from the market. The deadweight loss also represents a loss of welfare to an individual or group where that loss is not offset by a welfare gain to some other individual or group.
With the Cambridge AS Level exams nearly upon us here is some revision material that explains the values for each of the above.
Price Elasticity of Demand
Income Elasticity of Demand
Cross Price Elasticity of Demand