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Put simply, I walked into that AP test room with a 110% assurance that I knew the material.  And by “knew” I don’t mean memorized or something paltry like that.  I mean “knew” as in I understood it, could apply it and could absolutely, positively ace the exam. 

The Business Game

AP Macro-Economics, Dr. Howard Richman

2/25/2013

As part of our macroeconomics class, we play economic simulation games which help my students grasp how economic laws work in the real world.

Our first game of the year is the "Business Game" which helps students gain an appreciation of  supply and demand.

Most of the students play retailers, selling meatie- and veggie-burgers to a simulated public. A few  play wholesalers who sell burgers to their classmates. I often join in the game as well, and family members are also welcome to play.

The graph on the right shows the demand curve faced by  retailers at the beginning of the game. If they price their burgers high, say at $6 per burger, they will gradually lose market share. As a result, in the long-run their  sales will decline.

Sometimes my students write essays about what they have learned from the game. One of the best of those essays was written by Jesse, one of my students during the 2012-2013 school year. In my response to that essay, I wrote:

Wow! What a fabulous essay on the Business Game! I love how you tied everything in with the economic concepts that we have been learning. Your mastery of economics vocabulary and concepts was awesome! You made one excellent point after another.

Your discussion of the decision that wholesalers make about whether to build a new veggie or a new meatie factory was indeed one of decision making "at the margin" as you pointed out. And they each did have a different "opportunity costs" depend upon each wholesaler´s level of technology for each type of burger. Again, I can just say "Wow!"

And you made a very good point in response to the "for whom" question. You were kind enough not to mention that I was one of the ones able to get burgers during the shortage because I was willing to offer as high as $4, a price that was significantly higher than the one that other retailers were offering....

I loved the way you pointed out that this method of distribution would not be the method that would be employed in a socialist country, which would tend to ration the burgers so every retailer would get about the same amount of burgers. You also pointed out that rationing results in a system in which the reward is not proportionate to the work put in.

I see two other problems with the socialist rationing system. By keeping the price low, the wholesalers within a socialist economy  would have less incentive to build more factories. As a result, the shortage would continue, turn after turn, the whole game. Indeed, in socialist economies, the shortages continue forever. In contrast, in the business game the shortages disappeared once wholesalers figured out that they could make lots of money by building lots of factories....

The Business Game is just the first game of the course. The Guns or Butter game is a trading alliance and war game. The Investment Game gives each student the experience of trying to manage unemployment, inflation and long-term growth in his or her own economy. The Economic Warfare Game pairs students on teams in a world where economic warfare, using currency manipulation and industrial spies, is the norm. My students learn economics while playing games! 

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