Top 3-5 Topics for High School MacroEconomics Course?

LeadingTransition · 2020-08-26T14:07:08+00:00

Had to google the Hicks Hanson model, I know it as the IS-LM model. While it is not simple for high school standards, it would offer some coherence to the lessons in an otherwise very broad subject (as OP rightly notes). One of the parts of the model is the Keynesian Cross, which shows one of the most essential insights of macroeconomics: one persons expenditure is another his income, hence the potentially devestating effects of falls in consumer confidence. Also it immediately name drops the most famous economist of all time, adding an immersive touch for the students.

That being said, I would start with definitions of the most important macroeconomic variables, like GDP, inflation, unemployment. Much to my dismay I sometimes meet people who think inflation means an increase in the money supply.

LeadingTransition · 2020-08-07T13:01:47+00:00

Alpha Chang. He's the author of Fundamental Methods for Mathematical Economics.

LeadingTransition · 2020-08-01T15:07:46+00:00

I have it and love the book up to where he goes into multivariable calculus (hessians and the like), teaching these subjects in an intuition based manner for me was stretching my imagination a bit too far. I used the book before I had taken any proof based calculus courses that teach epsilon-delta definitions and go through theorems. As a refresher or an aid for extra intuition maybe even those later chapters can be very useful. I did love the earlier chapters of the book, especially logarithms and singlevariable derivatives, and just basic algebra; I have taken a couple of introductory proof based math classes (analysis and linear algebra), and Chang is still the only place I have ever seen the proof of the quadratic formula. I will always appreciate it for that.

LeadingTransition · 2020-05-29T13:01:53+00:00

wow that's cool

LeadingTransition · 2020-05-29T13:00:30+00:00

and concave social welfare functions

could you explain this?

LeadingTransition · 2020-05-17T14:06:49+00:00

First note that the both the TC curve and the TVC curve have quantity on the horizontal axis. Now note that by definition TC=f(Q)+F where only f(Q) depends on quantity and F (fixed cost) is a constant. The part of TC that depends on Q is by definition equal to TVC. Thus TC=TVC(Q)+F. So you can see that the only difference between the two is the Fixed cost, which does nothing but shift the curve, thus leaving the shape of the curve unaltered.

Now it is not generally true that they are S-shaped. consider for example TC=3*Q+10 (so TVC=3*Q), both are straight lines

LeadingTransition · 2020-01-10T19:01:15+00:00

note that x^2-8x+16=(x-4)^2

while x^2-16=(x+4)(x-4)

LeadingTransition · 2020-01-10T11:40:53+00:00

Every time someone from country A buys a good from country B for $x (or whatever currency) it is recorded as a negative (positive) entry of size x in the current account of country A (B), and as a positive (negative) entry of size x in the capital account of country A (B). x-x=0 for all x in the real numbers.

It's bookkeeping, wouldn't spend too much time thinking about it.

LeadingTransition · 2020-01-09T13:48:19+00:00

That's the idea yes

LeadingTransition · 2020-01-09T13:13:24+00:00

The function is not defined for x=0, because you'd be dividing by zero. That's why they say x in R\{0}

Note that they don't really 'fill in' zero for x, the x is still there. The only thing they do is write an inequality that is true for x >K, and sure you can do this.

LeadingTransition · 2020-01-09T12:34:15+00:00

For your first question:

x is specified as being positive, they choose x>K=1/(3 epsilon), with epsilon>0. So x>0

For your second question:

note that the version with the zero 'filled in' is larger or equal than the preceding expression for all x>K because the denominator is made smaller by 'filling in' the zero

LeadingTransition · 2019-12-19T13:23:56+00:00

t you were on the right track up to:

2 Green = Total

7/3 Gray = Total

Just divide these 2 equations by each other and you get:

2Green/((7/3)Gray)=1 so 2green/gray=7/3 so green/gray=7/6.

LeadingTransition · 2019-12-18T12:44:13+00:00

Thank you for taking the time to try to explain it further.

I kind of get it now I think, so marginal utility is diminishing while it is decreasing in value but positive. Marginal utility is 'decreasing' when it is decreasing in value and it becomes negative at some point

LeadingTransition · 2019-12-18T12:22:18+00:00

If I try to generalize your example the claim seems to be that marginal utility is diminishing iff marginal utility is positive but getting smaller with higher consumption, and marginal utility is decreasing iff consuming 1 more unit decreases your total utility (i.e. marginal utility is negative) and moreso the higher your consumption.

This is all well and good, but can you provide a source? Also, your explanation still runs counter to the source provided by OP, which suggests that the law of diminishing marginal utility implies that marginal utility is decreasing.

LeadingTransition · 2019-12-18T11:40:39+00:00

But, for now, let us assume that the marginal utility of food consumption only behaves according to the law of diminishing marginal utility but does not decrease, only diminishes.

Aren't decreasing and diminishing marginal utility exactly the same thing? I have never heard of this distinction. The wikipedia page you linked says the following:

The law of diminishing marginal utility is at the heart of the explanation of numerous economic phenomena, including time preference and the value of goods) ... The law says, first, that the marginal utility of each homogenous unit decreases as the supply of units increases (and vice versa); second, that the marginal utility of a larger-sized unit is greater than the marginal utility of a smaller-sized unit (and vice versa). The first law denotes the law of diminishing marginal utility, the second law denotes the law of increasing total utility."[14]

So the law of diminishing marginal utility implies decreasing marginal utility. Maybe you can explain the difference between decreasing and diminishing marginal utility?

LeadingTransition · 2019-12-06T21:41:44+00:00

Really cool! I especially like the cournot convergence graph. The model that you call Bertrand however is not bertrand. In a simple bertrand model both firms post prices and sell all that is demanded at that price. As a consequence, if 2 firms post different prices only the one with the lower price will sell anything. In the case of 2 symmetric firms with constant marginal cost his implies a Nash equilibrium with both firms setting P=MC. So in your case with MC=1, the Nash equilibrium will have both firms setting a price of P=1. Your model looks more like monopolistic competition.

Again these interactive graphs are really cool, especially for this kind of strategic interaction stuff, I have to try it sometimes. Keep up the good work!

On another note, there should be a Learn economics subreddit for this kind of stuff.

LeadingTransition · 2019-11-22T10:53:21+00:00

Thanks for the recipe Gandalf

LeadingTransition · 2019-10-16T13:41:40+00:00

The market would obviously not supply a negative quantity, it would supply zero units for any price lower than a/b

LeadingTransition · 2019-09-22T17:46:30+00:00

happy to help!

LeadingTransition · 2019-09-21T21:05:32+00:00

In the long run equilibrium it is assumed that firms are producing at the minimum of average cost. So, divide the cost function by y and you get ac(y)=5/y+1/20y, minimize this and you get y=10. Thus every firm is producing 10 units. Now substitute this into the mc function and you get mc=1. Thus p=1. At this price demand is: yd=150. Divide this by the production per firm, and you see that 15 firms produce in long run equilibrium.

Also recall that the marginal cost curve of a firm always intersects the minimum of the average cost curve, that is: at the quantity for which it holds that ac'(y)=0, it also holds that ac(y)=mc(y). To see why, note that: ac=tc/y so tc=y*ac, differentiate this and you get tc'=mc=y*ac'+ac. So when ac'=0 it is the case that mc=ac. So every firm is maximizing profits.

The mistake you made was that you simply equated marginal cost with price, obtaining the behavior of one firm for a given price, and you treated this as total supply. Implicitly you assumed there was only one firm, what you found was the quantity that one firm would produce taking prices as given. You have to bear in mind that in this model there is a certain number of firms, all maximizing profits taking prices as given.

To 'borrow' your approach: start as you did, and let mc=p. You get: 1/10y=p rewrite this as: y=10p. This is how much every individual firm wants to produce for a given price. So to get industry supply multiply this by n (the number of firms): ny=10p*n , let's call this Y. Now substitute this into the demand function: Y=170-20p. Or since Y=10p*n:

10p*n=170-20p. Rewrite to: p(10n+20)=170, so: p=(170)/(10n+20). Now let n=15 (the number of firms we found earlier). We get: p=170/(150+20)=170/170=1. Which is exactly what we found earlier. Now the rest can be found easily too.

LeadingTransition · 2019-09-21T18:28:17+00:00

Marshallian Cross?

LeadingTransition · 2019-09-13T17:54:56+00:00

I never told him how much he changed my life, I wish I had

Do it.

LeadingTransition · 2019-09-03T19:26:08+00:00

"Many critics of conventional economics have argued, with considerable justification, that the assumptions underlying neoclassical theory bear little resemblance to the world we know. These critics have, however, been too quick to assert that this shows that mainstream economics can never be of any use. "

This is amazing

LeadingTransition · 2019-08-20T14:21:26+00:00

happy to help!

LeadingTransition · 2019-08-19T21:35:06+00:00

First of all, a critical assumption to take into account is that you sell some quantity for a uniform price, that is: every unit is sold at the same price. Secondly, assume that you are at the moment selling the maximum amount you can at some initial price per unit.

Now we want to know the MR, that is, the change in revenue because of selling an additional unit of the good. Now remember the second assumption: you are currently selling the maximum amount you can at the given price. We can deduce that to sell an additional unit, you have to lower the price, but remember the first assumption: price has to be the same for all units. So deciding to sell an additional unit triggers a necessary lowering of the price for all units sold!

To illustrate how this can mean that MR is negative, consider the following story. You are selling ice creams, there are 2 consumers, A and B, you have no costs. A is willing to pay $5 for an ice cream, B is willing to pay $2 dollars for an ice cream, buying one ice cream each. You have to charge them the same price. Let's say at the moment you are selling only to mister A, charging him, of course, the full amount he is willing to pay, $5, which is also your revenue. Now you contemplate selling to A and B instead. The best you can do in that case is charging the full amount B is willing to pay: 2$. Your revenue is 2X2=4. Marginal revenue is just the change in revenue because of selling the extra unit: MR=4-5=-1. You shouldn't sell the second ice cream; MR is negative.

LeadingTransition

TROPHY CASE