# Economics Examples

Examples on this page are grouped by type of course.The approximate time to complete each example is provided in bold face type after each example description. Our time categories are:

- One class period
- One week
- More than one week
Your time may vary, depending on how you structure the use of the simulation in your course curriculum.

## Examples for Economics Principles Courses

The Tax Game: The link between a set of taxes and income distribution is an important, but difficult, concept taught in economics principles courses. The Tax Game simulation attempts to make the concept more accessible to students by letting them design their own tax system and seeing the system's distributive impact. The Tax Game was developed by Mark Maier in the Department of Economics at Glendale Community College.

One class period.

Budget Explorer: Students often come to a principles course with knowledge that is not correct. This example asks students to guess the percent of federal expenditures for different spending categories. They are then shown the actual percentages. The student results can be the source of a class discussion on why many of their initial estimates were wrong (as they generally are). Students can also create their own budget by changing the amounts spent in each category. Budget Explorer uses data from the Public Budget Database of the White House Office of Management and Budget.One class period.

Specialization and Division of Labor: This example engages students in a simple simulation of specialization and division of labor. All that is needed are staplers and some paper.One class period.

Economics and the Tragedy of the Commons: In both macroeconomics and microeconomics principles courses, economists teach the virtue of markets as an allocative mechanism. But markets sometimes fail. This example, implemented over the internet, allows students to simulate the market failure associated with a common property resource, a salmon fishery, and evaluate ways to control fishing. The simulation was developed by Paul Romer at Stanford University and is available on the Aplia web site.One Week.

MarketSim: MarketSim helps students understand the functioning of markets by having them become consumers and producers in a simulated economy. There are two versions, both implemented over the internet. Jeremy's market is a consumer barter market. Adam's market introduces firms and money. MarketSim received funding from the National Science Foundation. The principal developers are Tod Porter and Kriss Schueller at Youngstown State University.More than one week.

## Examples for Upper-Division Economics Courses

Open Outcry Market: This example is an in-class market simulation conducted with paper cards. The cards assign each student a buyer or seller role and a reservation price. The example is appropriate for both upper and lower-division courses. Open Outcry Market was developed by Barry P. Keating at the University of Notre Dame.

One class period.

Basic Monte Carlo Simulation for Beginning Econometrics: Beginning econometrics students often have an uneven preparation in statistics. Simulation can help with both an understanding of the analytically derived means and variances of regression estimators and the intuition of a sampling distribution. The instructional problem, however, is that many simulations are either black boxes to students or written in a programming language that is not easily understood by beginning students. The Stata simulate command opens up the use of very basic programs using the same Stata commands students use at the Stata command line.One class period.

Stata Monte Carlo Simulation for Heteroskedasticity: Econometrics students often struggle with how heteroskedasticity biases an interval estimator. They also have difficulty understanding why the power of a statistical text is important. This compact Stata simulation written by Christopher F. Baum at Boston College demonstrates the effect of varying degrees of heteroskedasticity on the interval estimate of the sample mean. The program is also easily modified to evaluate the power of a test for heteroskedasticity. The simulation includes the case of homoskedasticity for comparison purposes. Varying degrees of heteroskedasticity are user determined.One class period.

Ricardian Explorer: Ricardian Explorer, implemented over the internet, simulates a Ricardian trade model with linear production technology and a CES utility function. While Ricardian Explorer was developed to supplement a course in international trade, it can also be used in intermediate microeconomics courses. The authors of the simulation are Alberto Isgut and Tanya Rosenblat at Wesleyan University.One week.

Sports Franchise Simulation: The Sports Franchise Simulation, modeled after the card game War, lets students run their own sports franchise. While the goal of the simulation is to teach students several microeconomic concepts taught in a sports economics course, the simulation can also be used as an application example in intermediate microeconomics courses. The simulation was developed by David G. Surdam at the University of Northern Iowa.One week.

A General Equilibrium Simulation for Microeconomics: Teaching general equilibrium analysis to students is challenging. General equilibrium models are typically accessible to only a small handful of mathematically well prepared students. Yet the growing significance of general equilibrium models in economics challenges instructors to find ways to make these models accessible to undergraduate students. The simulation gives microeconomics instructors an alternative to the traditional Edgeworth box graphical presentation. The simulation is available as a Java applet over the internet. The developers of the applet are Walter Nicholson and Frank Westhoff at Amherst College.One week.

EconModel: This site contains 21 modular, easy to use economic models, that are appropriate for class assignments or in-class demonstrations. Students or instructors can simulate all the standard models taught in most economics courses. EconModel uses the Windows OS. The simulations were developed by William R. Parke of the University of North Carolina at Chapel Hill.One class period (each).

Zero-Intelligence Trading in Markets: This agent-based simulation model involves zero-intelligence buyers and sellers trading in a simple order-book market by placing randomly determined bids and asks. Specifically, the students look for how the structural parameters of the market affect market efficiency using the Zero-Intelligence Trader Lab. The model is designed to serve as either a follow-up to participating in a classroom experiment or stand-alone application.One week.

Fair Model: The Fair model web site includes a freely available United States macroeconomic econometric model and a multicounty econometric model. After being downloaded, the models run on the Windows OS. Instructors can use the models to teach forecasting, run policy experiments, and evaluate historical episodes of macroeconomic behavior. The web site includes extensive documentation for both models. The simulation is most appropriate for upper-division economics courses in macroeconomics or econometrics. The principal developer is Ray Fair at Yale University.More than one week.

DICE Model: The Dynamic Integrated Climate Change Model (DICE) assumes a single world producer must chose levels for three simultaneously determined variables: current consumption, investment, and greenhouse gases reduction. The model is freely available in both a GAMS and Excel version. DICE allows both science and economics instructors to integrate a sophisticated economic model of climate into their courses. The simulation is for upper-division courses where students have some background in microeconomics. The principal developer is William Nordhaus at Yale University.More than one week.