The canonical neoclassical model is insufficient to understand business cycle fluctuations in emerging market and developing economies. The author reformulates the model proposed by Aguiar and Gopinath (2007) in a simple setting that can be used to teach business cycle macroeconomics for emerging market and developing economies at the…

In this article, the author presents a price-takers' market simulation geared toward principles-level students. This simulation demonstrates that price-taking behavior is a natural result of the conditions that create perfect competition. In trials, there is a significant degree of price convergence in just three or four rounds. Students find this…

Public choice uses the tools of economics to analyze how the political process allocates resources and impacts economic activity. In this study, the authors examine twenty-three principles texts regarding coverage of public choice, market failure, and government failure. Approximately half the texts provide coverage of public choice and recognize…

Economics faculty expect that students have an integrated understanding of economic theory upon graduation and that they grasp and appreciate how all elements of markets naturally move to equilibrium. Through assessment activities, the authors discovered that their students were not developing that knowledge, so they turned to learning theory to…

Using a survey of a large group of first- and final-year students of different disciplines to study their beliefs in the existence of mutual benefits of market transactions, the authors observe significant differences between economics and business students versus students of other disciplines. These differences increase over time, due partly to…

In goods markets, an equilibrium price balances demand and supply. In a financial market, an equilibrium price also aggregates people's information to reveal the true value of a financial security. Although the underlying idea of informationally efficient markets is one of the centerpieces of capital market theory, students often have difficulties…

The lessons learned from the recent financial crisis should significantly reshape the economics profession's thinking, including, importantly, what we teach our students. Five such lessons are that we live in a monetary economy and therefore aggregate demand and policies that affect aggregate demand are determinants of real economic outcomes; that…

The authors describe a Web-based classroom experiment with two assets: cash and a stock that pays a random dividend. The interest rate on cash, coupled with a well-chosen final redemption value for the stock, induces a flat trajectory for the fundamental value of the stock. However, prices typically rise above this value during a session. The…

NutrientNet is an Internet-based environment in which a class can simulate a market-based approach for improving water quality. In NutrientNet, each student receives a role as either a point source or a nonpoint source polluter, and then the participants are allowed to trade water quality credits to cost-effectively reduce pollution in a…

The authors describe a classroom game used to teach students about the impact of reputations in markets with asymmetric information. The game is an extension of Holt and Sherman's lemons market game and simulates a market under three information conditions. In the full information setting, all participants know both the quality and the price of…

Adam Smith used the metaphor of an invisible hand to represent the instincts of human nature that direct behavior. Moderated by self-control and guided by proper institutional incentives, actions grounded in instincts can be shown to generate a beneficial social order even if not intended. Smith's concept, however, has been diluted and distorted…

The author describes a classroom exercise that introduces the Socialist Calculation Debate (SCD) to undergraduate economics students. The SCD concerns an issue that remains one of the most consequential of the 20th century--the belief in the superiority of socialism and central planning over capitalism and the free market. The exercise presents…

Argues that instructors may mislead students when they credit efficient performance as flowing entirely from competition. Distinguishes between competitive behavior and market structure; refines the implications of opportunity cost and profit; and derives useful conclusions about the nature and sources of productive and allocative efficiency. (DB)

Suggests that intermediate microeconomic theory instruction should emphasize individual elements of the topic as part of a general equilibrium model. Summarizes a model that can be used to highlight the unifying thread running through the subject. Discusses the submodels of the market, the consumer, the firm, and the economy as a whole. (SG)

Identifies inconsistencies in treatments of the perfect competition, monopoly welfare comparison in textbooks for economics instruction. Argues for explanation of how experiments are being conducted and explicit identification of all underlying assumptions. Suggests straightforward analysis of the social cost of monopoly based on a comparison…