Microeconomics Facilitator’s Guide


  1. Review difference between micro- and macroeconomics. Provide examples for each. Answers will vary. Just keep in mind that “micro” means small and individual units and “macro” mean large and aggregated units.
  2. Ask participants to explain in their own words the link between scarcity and choice. Answers should indicate the understanding that a choice in necessitated by the reality of scarcity.
  3. Discuss examples of non-financial choices that maximize well-being. Facilitators should ensure that a variety of examples are given, including but not limited to issues of time management, psychic benefits, the work/leisure trade-off, or health-related issues.
  4. We assume voluntary transactions make us better off. Discuss and find examples of the difference between voluntary and involuntary situations. The coercion evident in the transaction will determine the voluntary nature of the trade. Be open to considering both the degree of inequality and the extent to which it is used. Examples are: parent/child, teacher/student, employer/employee, government/ individual, etc.
  5. Discuss examples of consumer profit and producer profit. Examples will vary. Any illustration of a consumer getting a better deal than expected equals consumer profit, whereas a producer getting a better deal than expected is called a producer profit.
  6. Practice taking some normative statements and making them into positive statements. Evaluate all answers in terms of whether they generate quantifiable data. Remember that normative statements generally deal with “ought” or “should” whereas positive statements can be verified objectively.


  1. Think of your school as an economy. What are you producing?  Answers should include producing an educated student or producing a body of knowledge. How are you producing it?  Varies from school to school. For whom are you producing it?  In an immediate sense for the students and their families. Ultimately, they are beholden to whoever provides the funding – government, private donors, etc. (Remember these responses. At the end of the first year of implementation, you will begin to think about establishing an actual student economy in your school. The responses to this question will be useful when you organize this alternative economy.)
  2. Describe something at your school that has an allocation mechanism. Examples include grades, older student benefits, federal lunch programs; need based and achievement based scholarships, etc.
  3. Discuss how your school’s value system influences the allocation systems within it. Your school may value high academic achievement, special assistance to students with disabilities or underachieving student, student who are gifted or talented in particular areas, and so on.  Is there a direct link between these school values and the allocation systems you have put in place?


  1. Think about ways to grow each of the following determinants of production in both quality and quantity: (Fill in table below)
    1. Natural Resources
    2. Human Resources
    3. Capital Resources (plant and equipment)
    4. Entrepreneurship
  2. How could you use an understanding of opportunity cost to motivate your students to improve? As students become accustomed to identifying what they give up, they will be more careful about what they choose.
  3. In order to grow an economy, sometimes people need to forego current consumption to allow for future gain. How does this idea apply to your life and the lives of your students? Answers may vary. Look for specific examples.  The important thing is to recognize a causal relationship between the two.
Determination of Production How to Grow Quality How to Grow Quantity
Natural Resources Reduce water and air pollution

Improve farming techniques

Plant more trees

Develop renewable resources

Human Resources Education

Better nutrition

Better health care

Capital Resources
(plant and equipment)
Employ new technology

Increase investment

Increase trade

Employ new technology

Increase investment

Increase trade

Entrepreneurship Education


Business friendly tax laws

Improve infrastructure

Recognition of private property rights

Accessible and trustworthy banking system

Enforcing copyright and patent laws


(Before moving on make sure everybody feels comfortable with the concepts presented.)


  1. Explain the Law of Demand in your own words. Definition should include “willing and able” and point to the inverse relationship between price and quantity demanded.
  2. Complete your own demand schedule showing how many bags of chocolate candies you would purchase at the following price points: $0.25, $0.50, $0.75, $1.00.
  3. Draw the demand curve for the schedule.


For each of the following examples, indicate which direction the demand curve shifts and why.

  1. Draw the aggregate (national) demand curve for Christmas cards. If the government announces a 50% increase in the cost of stamps, which way will the demand curve shift, and why?Left, because stamps are a complementary good.
  2. Draw the demand curve for MP3 players. This year real incomes are expected to grow at a whopping 10%. Which way will the demand curve shift, and why? Right, because of an increase in wealth.
  3. Draw the demand curve for vitamin enhanced water. A new study has come out showing that drinking vitamin enhanced water causes weight gain. Which way will the demand curve shift, and why? Left, change in tastes.
  4. Draw the demand curve for Medicare. When the first baby boomers turn 65, which way will the demand curve shift, and why? Right, higher number of consumers.


  1. Restate the Law of Supply in your own words. Answers should include “Willing and able” and demonstrate the directly proportional relationship between price and the quantity supplied.
  2. An application of the Law of Supply is, “We tax what we want less of and we subsidize what we want more of.” An example:  taxing alcohol and tobacco to discourage socially unacceptable behavior;  subsidizing agricultural products to increase food supply. How does government implement this rule? How do you implement it in your classroom or school? Answers will vary.


If you consider your school as an economy and your product as educated students, which Determinants of Supply will most affect your willingness and ability to supply your “product”? How will they affect it? Answers will vary. Example: Price of inputs – if teacher salaries, price of books and materials increase, the supply curve of educated students will shift to the left. Advances in technology will cause the supply curve to shift to the right.


  1. Describe what a shortage is and what causes it. A shortage exists when quantity demanded is greater than the quantity supplied. It is cause by shifts in the demand curve to the right and/or the supply curve to the left.
  2. When a price is too low, explain who initiates movement toward price equilibrium and how. Consumers initiate the move by entering the market to take advantage of the consumer profit.
  3. Instruct teachers to partner up, and choose a market. Knowing that a graph is a picture, have them draw an equilibrium graph for the market they chose. Have them explain to each other what this graph is a picture of. Answers will vary but should include an understanding that at the equilibrium point there is no pressure to change on the part of either producers or consumers.


You have practiced graphing the changes in supply and demand that affect market equilibrium. We know that markets always tend toward equilibrium, but are not static. Considering the frequent shifts in the market for gasoline, discuss some of the different countervailing determinants (opposing forces) that create these shifts.

  • Things that shift demand to the right: new entrants into the market (India, China)
  • Things that shift demand to the left: Fuel-efficient cars
  • Things that shift supply to the right: new technology for extracting oil cheaply
  • Things that shift supply to the left: disruption of pipelines


  1. Elasticity is the percentage change in the quantity demanded divided by the change in price. Ask teachers to put this in terms their students will understand. Answers will vary, but will center around the degree of responsiveness of consumer demand to changes in price.
  2. Without using a rubber band or underwear, come up with a way to explain and illustrate to your students the difference between elasticity of demand and inelasticity of demand. Answers will vary. An easily understood example would be the demand for addictive drugs. Generally, things perceived as luxury goods are relatively elastic, things perceived as necessities are relatively inelastic.
  3. How does the concept of elasticity translate to things that motivate or fail to motivate students?  Again, it is dependent on the student’s perception of “necessity vs. luxury.” If the student places a high value on something, withholding or granting it will be more motivational, whereas if they do not value something, they will not be motivated by receiving it or not. How can use this idea to evaluate the things your school uses to motivate students? For example, grades, detention, extra credit, etc. Answers will vary.