to my office hours
a couple of students came today I was happy
to help them out with it we went over the
question so if you lack any understanding
with a question don't just like get the
answer and move on come see me and I can help
you understand why you're having some
trouble with it so in terms of the actual grade
itself you're pretty set otherwise come
see me and I'll probably change that
check thing for the next one you have to have
the textbook I know a lot of people still
don't so yeah okay we're gonna start with
the Kahoot today I know a few people just
came in, so I'll give you a couple more
minutes, and then we actually have an activity
we're doing today. There's more
than 29 people in this room
at the moment. Before we just
start, anyone have any questions
about the homework or
anything else? What am I doing? We're obviously playing
for prizes as well. Whoever finishes first
gets a choice between the kangaroo and
koala or a candy bar. Face is going on. Thumbs up. Okay, great.
I'm going to start it up in 30 seconds.
So if you just came in, get going, get
up on the kahoot. Yeah, it's rare
I'll do this at the very beginning of
class, it's just that we're doing
something else today that is a bit time
intensive, so I apologise for those
that came in late. Usually, even if
we finish the topic of the class before,
I'll probably wait 10-20 minutes by
doing other material before jumping
into the computer. Anyone still logging in? Okay, great, let's get cracking, we've
got 42 minutes. Okay, six questions. which of the following
would not result in a shift of the
entire demand curve informative advertising
of a good, the price of the good increases,
the price of a substitute increases or
the population decreases so remember you
get half a point for a wrong answer
so better to guess than not guess
if you don't know great most people
got that right a change in the price
of the good changes the quantity demanded
but through a movement along the
demand curve Not through a shift of
the demand curve. Great. Too tight up the top
to pick on anyone yet, although I do like
how there's a couple of koalas up top.
That's quite fitting. One of the questions,
not the next one, I believe the one
after. You'll have 30 seconds. I'll let you
know when it's coming. If a good is an
inferior good, and if income increases,
demand for the good will increase.
True or false? If a good is an inferior good, income increases, demand for that good will increase. True or false? Okay, great, it's
false. I gave it kind of away with the
potatoes there, remember. An inferiority good
means if your income increases, demand
for that good decreases. You're going
to substitute it with something else. We
talked about a lot of people in developing
countries. As GDP increase, they
substitute away from things like potato
and rice to meat. Okay, great. This
next one, I believe, is 30 seconds.
It's a little wordy, a lot you
have to look at, but I've given you an
extra time for it. for the following
linear demand function P, Y and
M are what and what respectively a
complement, normal good substitute, normal
good complement, inferior good substitute, inferior good
P, Y and M this is the hardest question
by far on any we've done so far so take
a guess three seconds left here we go yeah
good get the guesses in fantastic so this
question was really hard and the same in
the other class we pretty much had an
even dispersion of all the answers which
showed a lot of people didn't really know
100% of what was going on, we had a positive
sign in front of PY. So what that means
is as PY increases, our quantity demanded
for X increases. And the only way that
makes sense is if PY is a substitute.
As the price of the substitute is more
expensive, people will shift away from the
substitute towards X and demand more of X. So
a positive sign in front of PY denotes
that it's a substitute not a compliment and
the sign in front of m income was negative
so if income increases that means the quantity
demanded because the minus sign over
front is going to decrease and we know
just from before that's the definition of
an inferior good so this is a substitute
inferior good okay um we have a clear leader
who's um pacified koala what's your
name again sorry Eric, have you been in the
lead at all for any of them? Is this your
first time in the lead? Yeah. Okay, nice, nice. I'll
come back to you in a couple if you're
still in the lead. I won't ask you
to tell me how confident you are
of winning just yet. Next one. Consumer surplus
can be described as a person's
willingness to pay minus the price they pay for a good.
True or false? Last answer for this one, a little bit simpler. Fantastic, most
people got that right. Yep, it's how much
you value something. That's what you're
willing to pay at most minus the
price you pay. that difference is your
consumer surplus. All right, Eric's still in the lead. Two left. An excise tax is
a percentage tax. True or false? Okay, so an excise tax,
remember, is a specific number. So no matter
what, it's going to be, let's say, a
dollar tax, whether the value of the good is $5
or $30 is $1. It's not a percentage of the
value of the price. Whereas an ad valorem
tax, which literally means to include the value
or incorporate the value. That's the
percentage tax. So an ad valorum tax could be
10%. If the price is $10 then the tax will be
10% of $10 which is $1. If it's $50 it's going to be 10% of $50
which is $5. So that's the percentage tax. So the
answer is false. Hey. Similarly with one
less. How confident are you that you're
going to hold on? You don't know?
You don't want to give me a number?
Between 0 and 100? 1. 1%. Okay, that
means 99% chance that you don't win
based on that. Okay, we'll see what
happens. Last one. If the market
equilibrium is at $10 and a price ceiling of
$8 is introduced, then we would
expect a shortage of goods, an excess
of goods, no effect on the market,
unable to determine. What do you reckon? No? Okay, fair
enough. Sorry, bud. Oh, we've got
another Koala in first though?
Who's cool koala? Cool koala? Actually, you? What's
your name, sorry? Moses. Moses, you
guys friends? Yeah. That's brutal. Anyway,
come on up Moses. You can choose
between the kangaroo koala and you can
share one with Eric if you so desire or one
of the candy bars. And after you,
if you want to share one, I'm not
going to judge. You are the
winner after all. Okay, great. So with
that last question, remember the
little heuristic we had. If the
market price is between the floor
and the ceiling, it's not going to be a
binding price control. But in this case,
the market price was above the ceiling, so
it is binding, which means there's going to
be more people demanding the good than supplying
it, because it's artificially lower
than what it should be. As a result, we have
this shortage of goods, more people demanding
than supplying. So congratulations on
winning, and there's going to be ten more
opportunities to get these little prizes and yeah
let's get cracking on to the next thing so
we have a couple of guests today so if you
guys want to come up the front we have JJ
Andre and Wendelin they're from my experimental
economics class and they're going to help
me out today so the idea of markets is
so important I really wanted to drive the
point home by getting you to do one more interactive
activity with me so we're going to do
the following I'm going to get you when I'm
I'm reading this out. so let me make this
bigger so everyone can see so there's there's
there's like a summarized set of instructions
on the back but it's important to pay
attention there are a few little quirks to this
so we're going to set up a market in which
the people on my right so this side of the
room here are going to be buyers and the other
side of the room the people on my left so
this side of the room here you are going to
be sellers so buyers and sellers and andrea
Do any of the buyers here go to the seller's
side or vice versa? If you can move a
couple of people so it's even to
the other side or just tell them
that they're here. Okay, so people
on my right are buyers, people on
my left are sellers, a couple of people
there will be told to go over
there to be buyers. And each person will now get a numbered
playing card. Some cards have been
removed from the deck and all the remaining
cards have a number. So please, once you
get given your card, hold it so others do
not see the number. The buyer's cards
are going to be red, so hearts or
diamonds. You'll get a red card here.
And the seller's cards, that side
of the room, will get a black card,
clubs or spades. Each card represents
one unit of an unspecified
commodity that can be bought by buyers
or sold by sellers. So how does trading work? Buyers and sellers
will meet in the centre of the room
or another designated area. Literally,
this entire classroom is a designated
area. and negotiate during a five-minute
trading period. Prices must
be in multiple of 50 cents, so $3.75, anywhere between a full number and a half number. When a buyer and a
seller agree on a price, they'll come
together to the front of the room to report
the price, which will be announced to
all. So we have our three volunteers up
the front. Once you agree on the trade,
come up the front, and they'll make sure
it's a valid trade. There's going to
be several market periods. I think
we're going to do five. We'll
have time for five. Sellers. So this side of the room, pay attention. You can each sell
one unit of the commodity during
a trading period. The number on your
card is the dollar cost that you incur if you
make a sale. This is your marginal cost. So
if you have a card that says five, you can't
sell below five. It costs you five dollars
to make this product. So you'll be
required to sell at a price that
is no lower than the cost number
on the card. Your earnings on the
sale are calculated as the difference
between the price that you negotiate
in the transaction and the cost on the
number on your card. If you don't manage
to make a sale, you won't earn
anything, nor will you incur any cost
in that period. You just end
up with zero. So suppose you get
a two of clubs. That means that's
your marginal cost of producing the
product. And you negotiate a sale of
a price of $350. 50, you earn the price
minus the cost on your card, which is a producer
surplus of $1.50. You won't be allowed
to sell at a price below $2 with this
card, and if you make a mistake and
agree, our lovely volunteers will
invalidate it and you'll get sent back to
the trading floor. Buyers. You can each buy a
single unit of the commodity as well. The
number on your card is the dollar value
that you receive if you make a purchase. So
this is your willingness to pay how much
you value the good. you'll be required to
buy at a price that is no higher than the
number on your card. Your earnings on
the purchase are calculated as the
difference between the value number on
the card and the price that you
negotiate. So how much you're willing to
pay minus what you actually pay is your
consumer surplus. If you do not make
a purchase, you'll get a zero for
that period. So let's say you have
a nine of diamonds and you negotiate
a price of $4. Then you would earn
your willingness to pay the number
on the card, nine, minus the price,
four, which equals $5. And once again, you
won't be allowed to buy at a price above
$9. So our idea of willingness to
pay is enacted here. So some sellers
with high costs, so if you have a
high black card, and some buyers with low
values, a low red card may not be able to
negotiate a trade. But don't be discouraged,
since new cards will be passed out
at the beginning of the next period. And
if you can't make a trade before you
go back and sit down, just bring your card
back up the front. Remember, earnings
are zero for any unit not bought or sold, and
sellers incur no cost. When the period ends,
we'll collect the cards for the units
not traded, and you can calculate your earnings
for that period while we shuffle and
redistribute the cards. Your total earnings
equal the sum of earnings for units
traded in all periods, and you
can use the earnings record form on
the back of this sheet to keep track
of your earnings. Sellers use the
left side of the earnings record form,
and buyers use the right side. At
this time, actually before you do this,
have we moved any of the sellers across
from your buyers? Okay, great. Okay, great. So if
you're a seller, cross out the buyer's
side. If you're a buyer, cross out
the seller's side. Just to make it
easier on yourself so you don't get
confused what you are. Okay. Payments. After all periods
have ended, I'm going to randomly
draw a number. Everyone's going to
have a number in this room. and I'm going
to pay that person 50 % of their total
earnings from this game. So, your total earnings.
So, in the previous class, for example,
someone earned $14. They got randomly
selected, so I paid them $7.
So, there is, you know, money on the
line here. So, it's important to take
it seriously. Are we using Jack's
Queen's Kings? Okay, so don't
worry about that. There's no Jack's
Queen's Kings. When a buyer and a
seller agree on a price, they both should
immediately come to the front table to
turn in their cards together so that we can
verify that the price is neither lower than
the seller's cost nor higher than the
buyer's value if there is a line, wait together
with your trading partner, after the
price is verified, the assistant of the
board me, I'll write the price down here
in each period and I will announce it
loudly because I have a loud voice then those
two traders can return to their seats
calculate their earnings now we're going to,
does everyone have a worksheet we're now
going to hand out the buyer and seller
card, so buyers this side red card sellers
outside black cards okay brilliant okay
so they're gonna hand out the cards
now we're gonna have five minutes on the
trading floor so once they hand out
the cards you can start negotiating so
buyers this side so red this side sellers
this side does anyone have any
questions before we start I know
it's a lot of information you have
stuff on the back as well if you
want to read please you're a seller read
is you're a buyer yeah yeah what do
you have the rain so this side of the
room should all be buyers most on that side
should be sellers is everyone got a card
everyone know what's going on any final
questions okay the trading floor is open get up
in and get trading so they can come to all three of you if
they want to. Thanks. Also, good chance to
learn each other's names as well.
Introduce yourself. Not a good round for
you, buddy, not a good round. I would
sell a lot of mine. Yeah, yeah. How do we have a trade? Yeah, we'll do five. Okay, you come up
to the trading floor and lock it in.
What do you have? I have nine. Can you agree
on five? I agree on five. Okay,
five dollars! Five dollars! You can sit down,
you can sit down and put it in, so there's
no opportunity. No, no, give
your cards back. Yeah, you don't have to say
what you personally have. You can hide
it from the other person if you want to
keep it sacred. So, don't show people the
cards if they don't want to show you.
What was that sale? $5. Make a sale? Oh, yeah. JJ? $4.50. $4.50. You can come up to
the front of the classroom as
well. Like, I know it's pretty crowded
here. We've got a little bit of a
traffic situation. You know if some of
you won't be able to buy some of you
won't be able to sell Two and a half
minutes left Oh, yeah, I'm sorry.
Do whatever you want. No judgment. . Is it valid? Yeah. Six dollars
and 50 cents. The rest is stellar.
Two minutes left. Five-fifty. Oh, we'll see
if it's valid $7 $5 $5 $5 $5 $5 $5 $5 $5 $5
$5 $5 $5 $5 $5 $5 20 squared out a little bit, just a nice one. $7.50. $7.50. $5.00. $5.00. I mean, I was the buyer. Okay, one minute
left. One minute left. Get those trades in. $6.50. $6.50. Get a trade in? Yeah. Yeah, what did he have? You had a pie. Okay, you had
a ten. You got a trade in. You
got a trade? Okay, yeah. Okay, 20 seconds left.
Any negotiations? Come up now. If you can't sell your card,
just bring, or buy, just bring your
card back up to the front, hand it in
and sit back down. How much? 550. 550. Okay, that's the end of the first period. 750. One final trade,
750. Everyone bring your cards back and
go and sit down. We'll reshuffle,
hand out new cards to everyone to sit where
you were before, and we'll get going with
the second period. Do you have trades? No. No, what
did you have? I don't know. It's a middling. It's hard. Were
you a buyer? Yeah. I was a buyer.
Yeah, it's hard. Yeah, only a
couple. Only one would have got
you a profit. So take note what's
going on as well. This is a little
bit of fun, but obviously there's
learning to it as well. We'll talk about
it on Friday. Okay, so just keep in mind
what's going on. Those are the
buyers, sorry. Yeah, hand those out
to the buyers, yeah. No wait, wait, wait,
wait, wait, wait, wait, wait. Those
are buyers, yeah? They're red cards. The first six. Oh,
the first six-year-old buyers, okay, great,
great. Thanks, Sandra. Yeah, you're the same for
each period. You should always be a buyer or
always be a seller. No, it's the
black cards or the red cards. Red
cards or the cards. Good, good, good. Yeah, and I think
you, what was it, a 2 for you?
The black one? I got it, so hopefully you got to get a card. Yeah, yeah, yeah. Hey, has everyone
got a card? At the back there
you all have? Fantastic, okay. Wait for Wendell
to get back. Okay, round two, trading
floor is open. So that side of
the room should be selling some
of the people in there. You have
to branch out. $5.50! $5.50! I guess this might
get people right now. Just one of you. Yeah. Seven. Wait. More than seven. Oh. Seven dollars. Seven dollars.
Seven dollars. Seven dollars.
Seven dollars. Six. Six. Six. Six dollars. Six. Six dollars. Six dollars. All right. How
are we going? Let's negotiate
out there. Let's go. $2. How much? $2. There's a lot of
prices for this. $7. $7. $7. $7. $7. $7. $7. I'm just writing
down the price of the transaction
you write down your own surplus
yeah six dollars five dollars
two and a half minutes left
four dollars $4? $6? $6? Jeez, a lot
of prices for you. Yeah, I had a 10 last
time. Yeah, that's brutal. Brutal. Got to get a
cheap factory. Alright, two
minutes left. Surely there's a
couple more trades we can do. If you
don't think you can make a trade,
just put your card up to the front
and then sit down. Some of you might
already know you can't make a trade based on
the values you got. Not giving up? I think
that's fair enough. Yeah, fair enough. Yeah, rough out there
for the sellers. I want to know
what you have. You don't have to show. $6.50! 450 one minute
left one minute left lower your
prices increase your bids get
those transactions $5.50, $5.50. Did someone
else make a deal before you? No, he
put his card in. 30 seconds. 30 seconds. This is
the time to acquiesce. 6 seconds if you
made a trade better run to the table
because it's closing 3 2 1 we're closed
period 2 is done I'm going to lower the
time to 4 minutes 30 now just because
we're running out of time and I want to
do three more periods So some people are
getting the hang of the idea,
you might get a certain card and
you're like, oh nah, it's not a good
thing. So just keep in mind what's going
on. Take a look at the numbers I'm
announcing. These are the prices of the
agreed transaction. These aren't surplus.
These are the announced prices. if
you don't sell you get a zero if you
don't buy you get a zero so if you
don't transact you just get nothing
there's no extra cost if you don't sell
you just get zero don't worry about the
most crazy shuffle let's hand them
back out and let's do the
next round has anyone not made
a trade yet? believe in the heart
of the cards hopefully you get a good one
this time around sorry? Maybe you'll ask for
too much or a low price and you want
to get a try done. $2! Okay. Are we ready, everyone? Okay. Okay, the trading
floor is open, round three. This is part of the game, there's going to
be rounds where, but at least it means the information's coming
before we know $6.00. $6.00. $4.50. $5.00. five
dollars finally got a trade-in first
time not trading should be more not
everyone gets the two eric did you get a trade
-in or did you give up If you want to give
up, come up the front and have a
party. Fair enough. Yeah, yeah. $6.50. $6.00. $5.50 $6.50 $6.50 $6.50 $6.50 $6.50 $6.50 Two
minutes left. Two minutes left on
the trading floor. come on surely we can get a few more trades in two in this left Michael we got a trade $6.00 $6 .50 $6.00, come on,
surely we can get a couple more
trades in, we have less in the previous
two periods, okay, are we all giving up over here,
yeah, great, okay, looks like
all our trades are exhausting, no one else
making a trade here, oh, you're making a
trade, amazing, getting one more in how much
hundred 6.50 okay great let's reshuffle
it now okay this is the second last
period now the second last trading period
remember someone's gonna get 50% of their
earnings so we can get that extra 50 cents
that could potentially be 25 cents so it's
worth trading get another trading this
period hopefully it's nice nah does
anyone sold for less than five yeah
great question does anyone sold for
less than five yeah there's been a there's
been a few 450s okay everyone
got okay second last round we're
starting up Who's asking
for a dollar? I'm asking for
a dollar. Yeah. No, you know the
guy. That's right. Yeah, that's right. Yeah, that's right. Yeah, that's right. Yeah, that's right. Yeah, that's right. Oh, man. Absolute bummer. Two again. Two again? Two again? What do you have?
What do you have? Five fifty! How
about? Five fifty! Five fifty! Can you use your dollar? Six fifty. What
price is your dollar? Five fifty. I'll come back to you. that's even
better, perfect. 650. 650. 550. Is that a give
up over there? What did you have? Let's go, let's
get these trades in. How much do
we have left? Three minutes left. $2.00. $3.00. Who's trying
to sell for $9? $2.50. $2.50. $2.50. $6.00. $6.50 Okay, two minutes
left. Let's get those final trades in 350 350 Is that five five
dollars six fifty is reasonable
whoever's offering that Reasonable you a
buyer or seller where are the
buyers 650 come on There's a 4-2 in
this round for fire. Got it. Everyone else give it up? I can go to what? Are you finding a selfie? It's not like a
photo. I'm going to go to the 5. Are you
going to go to the 5? I'm pushing it. I'm pushing it. But
could you do it? No. How do you do 5-5? No, I can't do it. Okay, that's it. Okay. Okay. Okay. Okay. Okay. Okay. Okay. I thought $6.50 was
reasonable but yeah another $5.50 great
and that's it for this round so we can end it
up so if you want to shuffle and hand out
the cards for the last round but um before
before we start the last round so obviously
this is taking place in Australia and oh
what's this I just got a call from Anthony
Albanese the Prime Minister of Australia
what's that Mr. Albanese? okay I'll let them
all know so the Prime Minister of
Australia Anthony Albanese has just introduced
a new policy, a sales tax of $1 on all
sellers. So if you're a seller and you get a
card with any number, add one on top of that.
So if you get a five, your sales cost is
now six. If you get a three, your sales
cost is now four. So there's a $1 tax on
sellers thanks to Mr. Albanese. So we can
hand out the cards and start our last round
with our $1 sales tax. Yeah, this is
an excise tax. This is an
excise tax of $1 you're a seller you
have to add one to your card number all
right ready let's get going last round Five
bucks fifty. Six. Five bucks fifty. You guys are nice,
sorry about that. Six. How many do we
have in the class? Just add up your surplus. Yeah, just add
up your surplus. Add up your surplus
once you're done. Six. Six dollars. Five. Five. $4.50 $6 $6 $6 $6 $6 $6 $6 $6.00. The whole game. That's brutal. Did he get any
done at least? Okay, let's go. Hey, just under three
minutes left, Michael. You traded. Yes. Right. We have an offer of seven somewhere I heard seven I'm Six-fifty Six dollars $6.50. Is this the give
up time now? Yeah. Man, the taxes
make it hard, eh? Alright, great. Okay. So the last thing to
do, if everyone can sit down, I don't think
anyone else is making a... When everyone sits
down, you want to just count
everyone quickly. I want to make
sure we've got 750. Oh, we've got
another trade. 750. I've been on this side
and how many overall. Okay, so what
we're going to do, everyone add up your
surplus in every period and get your
total earnings. I'm going to use
a random number generator now to
determine who's going to get 50% of their
earnings from me. So over there, this is
number one, and then we're going to go
from that direction, each row and that's
essentially your number 36 46 46 okay let's
hope you're right 46 hey okay one two three
four five six seven what's your name over
there okay you are the one selected do
you have your earnings sheet there what
did you tell us what your total earnings
was well you get three bucks then congratulations
come up here after class again we're
going to break this There's actually a
lot of moving parts here. We all really
need to clap for $3. Well done, DK. So we'll go
over this. This really ties
together with things we talked about
for last week. And we'll lead into
understanding distortions in markets as well.
So have a great day. Ask me questions if
you have any about the homework. And I'll
see you all on Friday. And DK, come
up here, mate. Let's see if I'm going. Thank you so much. I
really appreciate it. I've got another
class in here now, so you can
see no worries. And, yeah, the class in there is pretty amazing. Everyone has said,
I'm really anything else here. No,
no, no, that's only the next year.
Leave us here. I know it wasn't
all out for us, but no, I
appreciated it. Yeah, I know it was. A lot of work,
actually. Yeah, yeah. Um, alright, yeah. And, thank you
for your question. Okay. You can get
half a coffee. No worries on Joe. No worries on one. See you Joe Joe. Hey, how's it going? Good, how can I help? Yes, yes, I'll send
it to you. Just email me, because
I will forget. Email me and I'll
send it to you. For a new topic,
yeah. When you say new redacted,
email me and I'll send you the
whole thing. Yeah, no worries. Hey, how's it going? Yes, yes, we did. I
came like 3.30 to me. Yeah. Oh, really? Oh,
OK. So I started the quiz at... Oh, I'm
sorry about that. Yeah. So don't worry about
that. I'll tell you why. Your lowest three
scores are dropped anyway. And in the
future, if I do a quiz at the start of a new
lecture, I'll usually do it halfway through.
It's just because we were doing this
today, this activity. I just wanted to get
it out earlier. So I apologise for that.
But in the future, I'll probably start
it at the earliest 10 minutes into class.
Yeah, yeah no worries. See you Michael,
thank you so much Wendell, I really
appreciate it. Yeah, I had it
on Jaya last minute, yeah,
because this class is bigger than
the final class. And yeah, we had
50 said I. Usually there's another
table in here which would make
things easier. Yeah, this is a bit
crowded and everything. You don't want to
give me those points. I think I did. You did. What are
you talking about? You guys helped so
much. So definitely give me the extra
credit point. And I really appreciate
you helping out. You made my life
so much easier. You remember like
when we did it in our class, I was
running around everywhere. And I
just had to say, yeah. What do you mean? You helped so much. Yeah, like a lot of
experimentation is logistics. Just sorting
out all the cards, handing things out, taking
the transactions, just making sure everything's
running smoothly. I could have
got sick halfway through class and
had to run out, then you would have
all taken over. Having people there
and having more people than probably what
you need is perfect. So, yeah, no, you did
me... I felt like I did it too much. Well,
it definitely didn't feel like that way
for me. You all really helped me out
a lot. Having that hands on deck made
a huge difference. A huge difference. So,
don't feel pleased.