More Teaching: A Class Exercise on Price Elasticity

Steven Horwitz

Since we're talking about teaching, and I think we should talk about it more, here's a little class exercise on price elasticity that I've used for a few years that works very well if you have a class small enough in which to do it.  I use this after they've supposedly read chapter 3 of Heyne, Boettke, and Prychitko and after we've done demand curves but before we say anything about elasticity.

This "conceptual workshop" idea is taken from one of the best books on teaching I've ever read, Don Finkel's Teaching with Your Mouth Shut (yes,I know it's hard to imagine me with my mouth shut for any length of time...).  Finkel has a similar exercise in there designed for a physics course involving a canary and a glass enclosure and a spring (you have to read it for yourself).  My exercise is patterned closely after that example.

This works best if you, as the instructor, wander the classroom while they work and check in to see what they're doing and prod/coach them through a question if they're stuck.  Asking them the right questions to get them to think it through is one of the most rewarding forms of teaching there is - it really is coaching in a fundamental way.  This exercise lets you do it.  Remember the idea with something like this is to get them thinking and discovering these relationships for themselves, not necessarily to come up with a precise "right" answer.  The learning takes place in their interactions with each other and yours with them.

When they're all done (or most of them anyway), you can go through the questions and have them give their answers and then use that to teach the idea of price elasticity, the relationship between elasticity and total revenue, and the basics of price discrimination.  This is where getting out the right answer is important.  And all of this is built off the HBP book's basic insight that demand is all about "substitutes everywhere."

If you have other questions about it, email me or ask in the comments. 

Comments

[Mario Rizzo]

Excellent.

[Gene Callahan]

Thanks. I plan on using it this week.

[Gene Callahan]

Damn you, Mario! I thought I had the first comment slot locked up.

[Jennifer Dirmeyer]

This is great! Thanks.

[Steve Horwitz]

Now we're even Jenny :)

[Steve]

Hey, I just used the in class questions. It generated some pretty good discussion. I started the class by doing a google news search (google.com, news tab) for "price increases". We looked through the article headlines on the in class screen (loving the smart classroom). There are a great number of headlines for goods that are or are expected to see price changes. It created some real interest.

For the last 20 minutes of class I did the dirty work--formally defined elasticity, and showed an equation (cursed me).

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