# A2 Revision: Multiple-Choice question on shape of Total Cost curve

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.

Remember:
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.

# A2 Revision – Imperfect Competition AR, MR and TR curves

You should note the following from the graphs:
• to sell an additional unit of a commodity, the monopolist must reduce the price of all units sold. This therefore means the AR curves falls.
• as the price on all units must be lowered to sell the higher output, MR is lower than the price of the marginal unit(AR)
• TR at first increases with output but as price is reduced to sell more goods and services, eventually falls.
• where MR = 0 TR is at a maximum.

# A2 Economics: Two ways of calculating the equilibrium level of income

Went through an A2 multiple-choice question on calculating the equilibrium level of income with my A2 class. There are two ways that it can be worked out. Here is the question:

In a closed economy with no government C = 30 + 0.8 Y and I = 50, where C is consumption, Y is income and I is investment.

What is the equilibrium level of income?

A 64                B 80              C 250               D 400

Below is the most common way of working the question out:

Y = C + I

Y = 30 + 0.8Y + 50

0.2Y = 80

Y = 400

Here is the other way that you should be able to work out the equilibrium

Remember: Savings = Income – Consumption

S = Y – C

S = Y – (a + cY)

S = Y – a – cY

S = -a + (1-c) Y

So if we put the figures into the equation you get:

50 = -30 + (1-0.8) Y

50 = -30 + 0.2Y

80 = 0.2Y

Y = 400

# A2 Revision – Perfect Competition and Shut-down, Breakeven Points

I went through this graph with my A2 class. Note that the firm’s short-run supply curve starts at P4. Useful for multiple-choice questions.

# Economics Study Skills: Essay Writing

With increasing numbers of students struggling to write well structured essays in economics I decided that they needed some guidance and therefore produced a booklet on how to plan and structure your essay – link to download at the bottom of the post. It looks at how you integrate the following into your essays  whether at CIE or NCEA Scholarship level and shows examples.

Knowledge and understanding – Demonstrate knowledge and understanding.

Application – Interpret and apply knowledge and understanding to information presented in written, numerical or graphical form.

Analysis – Analyse economic issues and arguments, using relevant economic concepts, theories and information, and communicate conclusions in a clear, reasoned manner.

Evaluation – Critically evaluate economic information, arguments, proposals and policies, taking into consideration relevant information and economic principles and distinguishing facts from hypothetical statements and value judgements.

It also contains – the box plan – 12 different sentence types (see below) – command words – PREC Point Reason Example Concluding sentence.

I have taken some material from Dr Ian Hunter’s publications and would recommend the books he has for sale on the Write That Essay website.

Essay Writing for Economics

# Economics website for IGCSE AS A2 and IB courses

Want to learn or need assistance with Economics? Are you studying or teaching A Level Economics, Advanced Placement, or International Baccalaureate (IB)?

Help is at hand, elearnEconomics assists individuals studying Economics. This site covers a wide range of courses and individuals have the ability to customise their course or do extension work. It’s simple, easy to use and very cost effective.

eLearnEconomics is a comprehensive online economics learning resource. It is for both students AND teachers. Students study the concepts of each topic with the key notes, then review those concepts with the audio/video and flash card sections and finally test themselves in the written answer and multi-choice sections. The multi-choice section records student scores enabling them to track their progress and build their confidence leading into exams.

Teachers have the ability to monitor students progess within the teachers’ administration section. Students can be arranged into class groups and full reports generated to quickly identify problem areas. These high quality PDF reports can also be presented at parent/teacher evenings. Click the link below to access the site.

elearneconomics

# A2 Revision – Cost Curves

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.

# Economics Speed Essay Game

Here is an idea I picked up off the Biology Department to make revision a bit more entertaining.

Rationale

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.

# A2 Economics – Evaluation Skills for essay writing

Here are ten strategies for improving your evaluation skills in data response and essay questions written by Geoff Riley of Tutor2u.

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.

# AS Revision – Indirect Taxes

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.