AGED 570: Teaching H.S. Agricultural Economics Day 4: Teaching Producer Economics Part 2

Todays agenda Terms Share Pair Motivational Activity Graphing Exercise Muddiest Concept General Terminology Discussion Terms for Tomorrow

Terms Share Pair Isoquant Iso-Cost Marginal Rate of Technical Substitution Production Possibility Frontier Iso-Revenue Line Returns to Scale

Motivational Activity for Production Possibility Frontier Objective: To develop a production possibility frontier when an input is limited and be able to graph the data in a meaningful way that helps decision making Today we will be building airplanes (one standard and one fancy) Each individual will be given a ratio for building 1 plane for another This ratio will dictate how you will tradeoff the production of one plane for another, e.g., if you are given the ratio 3:8, you will first build 3 of the first plane and 8 of the other, you will then repeat For a plane to be acceptable it must fly five-feet within three tries or you will need to start over

Motivational Activity for Production Possibility Frontier Take the next fifteen minutes to build as many planes as you can Make sure each one is tested before you make the next one You should start with making the plane that has the highest number in the ratio, e.g., if your ratio is 3:8, you want to make the 8 fancy planes first before you make the 3 standard planes Once time is up come to the board and write up the number of each plane you produced

Thought questions for the activity What were the key assumptions of this production activity? How could you set-up the production information that it could be used in a graphical relationship between the two planes? What do you think is important about the relationship between the two planes? How would you go about figuring out how many planes you should produce? Do you always go with the one that you are most efficient in making? Do you always go with the one that you provides you with the most income per unit?

Thought questions for the activity Given that both planes are worth 20 each, how many planes should we produce to maximize revenue? At this optimal decision, what is the maximum amount of each plane that could be made? How does your decision change if the standard plane is 10 and the fancy plane is still 20? How do graphs help us understand this production decision?

Graphical Exercise for the Isoquant Objective: To understand the idea of tradeoff in terms of production when there are two inputs and use graphical analysis to understand the tradeoff Suppose you have two exams that are at the end of the week Your goal is to get a 2.0 average on the exams so that you can be eligible next week for the section finals Math and history are the two exams Suppose that both classes are weighted equally so all you need to do is take the average of the two grades

Graphical Exercise for the Isoquant Study Minutes Necessary Grade Grade Value History Math A 4 377 521 A- 3.7 233 322 B+ 3.3 144 199 B 3 89 123 B- 2.7 55 76 C+ 2.3 34 47 C 2 21 29 C- 1.7 13 18 D+ 1.3 8 11 D 1 5 7 D- 0.7 F

Graphical Exercise for the Isoquant Split up into groups of four to do the following: List the grade combinations that will give a 2.0. Given these grade combinations and the previous chart, list the number of hours of studying required in each subject to get the 2.0. Graph these combinations either on the board or using your computer.

Thought questions for the Isoquant exercise What criterion could we use to make our decision regarding time allocation for studying? What combination of study times would give a 2.0 GPA, while minimizing study time? What would happen to your answer if you change the relative cost of studying so that an hours worth of history studying is equivalent to two hours of math studying?

Thought questions for the Isoquant exercise Is there a way we could examine the table or chart to help us make the decision without having to calculate the costs of each set of grades? How does this example relate to agricultural producers? What are other items that you can make in class that would capture the students attention?

Muddiest Point and Terms Discussion

What kind of examples could you use in your classroom to help students with these concepts?

Terms to know for tomorrow Utility Marginal Rate of Substitution Inverse Price Ratio Utility Maximization Demand Schedule Substitute Goods Effective Demand Demand Curve Complementary Goods Goods Ceteris Paribus Income Effect Bads Substitution Effect Marginal Utility Budget Law of Diminishing Marginal Utility Budget Constraint Indifference Curve Budget Line