Light Rail Case
Summary
This activity has students building their own microeconomic model in order to help a city council decide how many stops to build on the city's new light rail. It gives students practice building a social welfare function, and connecting the elasticities in their model to hypothetical data.
CollapseContext for Use
Context for Use:
- This application is appropriate for an intermediate microeconomic theory course that places emphasis on students building their own microeconomic models.
- By the time students do this application, they should have experience building their own models.
- There are no class size limitations.
- This application generally takes one and a half class periods (55 minutes each).
- This is not connected to another TBL activity.
Light Rail Student Handout (Microsoft Word 2007 (.docx) 34kB Aug10 18)
- This application is appropriate for an intermediate microeconomic theory course that places emphasis on students building their own microeconomic models.
- By the time students do this application, they should have experience building their own models.
- There are no class size limitations.
- This application generally takes one and a half class periods (55 minutes each).
- This is not connected to another TBL activity.
Overview
This activity has students building their own microeconomic model in order to help a city council decide how many stops to build on the city's new light rail. It gives students practice building a social welfare function, and connecting the elasticities in their model to hypothetical data.
Expected Student Learning Outcomes
Learning Objectives:
1) Students should be able to identify ways that empirically estimated correlations appear in economic models. They should be able to discuss how those empirical estimates can be used to inform policy decisions.
2) Students should articulate how the elasticity magnitudes and directions are important for deciding which position is optimal for maximizing social welfare.
3) Students should gain practice building an economic model of their own in a real-world context.
Information Given to Students
Light Rail Student Handout (Microsoft Word 2007 (.docx) 34kB Aug10 18)
Teaching Notes and Tips
Prefatory remarks:
- If the students understand economic modelling, this application is fairly self-explanatory.
Facilitating team work:
- The teams should be able to do this on their own. However, it is helpful to remind students of the time left, to make sure that they stay on track.
- Fairly early in the process, teams should figure out that the appropriate choice variable is "number of light rail stops". If any team gets stuck or institutes a choice variable that doesn't serve the scenario, it may be worthwhile for the professor to guide them in the right direction by asking questions like: "Does the city council have control over that variable?" "
Evaluation of models:
- Did any of the models have logical flaws?
o Does the City Council have control over the choice variable they have chosen? (Teams should all choose "number of stops" as the choice variable. If they have not, it might be worth steering them in that direction.)
o Are all of the endogenous variables directly influenced by the choice variable?
o Is every term in your model influenced by the choice variable?
o Does your objective function capture things that belong in social welfare? Or are there components that do not fit in a social welfare function?
o Is the model as simple as possible while still capturing the important points?
- If you were a supporter of Position A (fewer stops), which model would you prefer? Why? What if you were a supporter of Position B (more stops)?
- What were the similarities across the teams' models? Why did the models have these similarities?
- What were the differences across models?
Points to emphasize in discussion:
- Microeconomic modelling helps us to connect our arguments with data.
- Microeconomic modelling helps us to formalize a structure of causality for evaluating a problem.
- Microeconomic modelling can be used to place different positions in the same framework in order to compare them.
- If the students understand economic modelling, this application is fairly self-explanatory.
Facilitating team work:
- The teams should be able to do this on their own. However, it is helpful to remind students of the time left, to make sure that they stay on track.
- Fairly early in the process, teams should figure out that the appropriate choice variable is "number of light rail stops". If any team gets stuck or institutes a choice variable that doesn't serve the scenario, it may be worthwhile for the professor to guide them in the right direction by asking questions like: "Does the city council have control over that variable?" "
Evaluation of models:
- Did any of the models have logical flaws?
o Does the City Council have control over the choice variable they have chosen? (Teams should all choose "number of stops" as the choice variable. If they have not, it might be worth steering them in that direction.)
o Are all of the endogenous variables directly influenced by the choice variable?
o Is every term in your model influenced by the choice variable?
o Does your objective function capture things that belong in social welfare? Or are there components that do not fit in a social welfare function?
o Is the model as simple as possible while still capturing the important points?
- If you were a supporter of Position A (fewer stops), which model would you prefer? Why? What if you were a supporter of Position B (more stops)?
- What were the similarities across the teams' models? Why did the models have these similarities?
- What were the differences across models?
Points to emphasize in discussion:
- Microeconomic modelling helps us to connect our arguments with data.
- Microeconomic modelling helps us to formalize a structure of causality for evaluating a problem.
- Microeconomic modelling can be used to place different positions in the same framework in order to compare them.
Assessment
Assessment of Student Learning:
- If the students are able to produce a model and evaluate one another's model, they are generally learning both the mechanics and the broader significance of economic modelling.
- If you have access to Moodle or another similar online forum, you can have students "vote" in an online quiz between Days 1 and 2 of the application. Asking them to justify their vote ensures that they understand their reasoning (or at least are prepared to talk about it in class). If any of the teams have logical errors in their models, you can add an additional question on the quiz: "Which of the teams have logical errors in their model? Explain."
- It can also be helpful to tell students that you will put one of these models on the exam, and will ask some basic questions about it. This inspires students to read one another's models carefully. You can raise the stakes by saying, "Today (day 2 of the application) is the only chance you will get to ask questions about one another's models for the exam. After today, I will no longer answer questions about these.")
- If the students are able to produce a model and evaluate one another's model, they are generally learning both the mechanics and the broader significance of economic modelling.
- If you have access to Moodle or another similar online forum, you can have students "vote" in an online quiz between Days 1 and 2 of the application. Asking them to justify their vote ensures that they understand their reasoning (or at least are prepared to talk about it in class). If any of the teams have logical errors in their models, you can add an additional question on the quiz: "Which of the teams have logical errors in their model? Explain."
- It can also be helpful to tell students that you will put one of these models on the exam, and will ask some basic questions about it. This inspires students to read one another's models carefully. You can raise the stakes by saying, "Today (day 2 of the application) is the only chance you will get to ask questions about one another's models for the exam. After today, I will no longer answer questions about these.")