Appendix

PBL EXEMPLARS FOR A FIRST YEAR ECONOMICS MODULE

The exemplars provided in this section have been used, either wholly or in part, as PBL tasks in the teaching of first-year economics at the University of Ulster.  They are included here as suggestions, or prompts, to help first-time users of PBL to design their own PBL resources to suit their particular learning environment.

Note the following PBL design features:

•	Each exemplar can be used in full, or sub-divided into smaller components if time is limited (i.e. the tasks are flexible)

•	The element of variability in the tasks, in terms of:
o	the required student responses – presentations, written reports, ‘university challenge’ type quiz
o	the learning resources to be accessed – media articles, websites, reports, data, text, online tutor notes  

•	The application of theory to real-world situations (i.e. realism)

•	Each exemplar is supported, in that all supporting information necessary to complete the task is provided:
o	advice for task leaders
o	learning resources stipulated, including all Web links
o	learning outcomes stipulated

The above design elements are crucial if PBL is to meet the needs of both students and teachers.  Realism and variability in PBL tasks help retain student interest and commitment; flexibility and supportiveness allow tutors to control the learning environment, particularly the pace and direction of student learning. 

																																																																																							

EXEMPLAR  1								1 of 2

Core Concepts		Elasticity, Commodity Taxes
Applications		New Cars, Dairy Products, Pesticides	
Response Required	Written Report

1(a)	From the data you have obtained (see below), choose the GDP measure you think appropriate and 
	calculate the income elasticity of demand for new cars for (i) 1989-1991  (ii) 1994-1998
  (b)	Explain briefly your choice of GDP measure in (a)
  (c)	How would you categorise “new cars” from your results in (a) – ‘normal’ or ‘inferior’ products? 
  (d)	Using supply & demand diagrams, illustrate what happened in the UK market for new
cars in each of the periods noted in (a).  What evidence is there in support of your 
conclusions for the earlier period from the article available at 
http://www.iht.com/articles/1991/07/04/ford.php ?    		
   (e)	With the aid of the article available at the address below identify 4 conditions of demand
for new cars:  http://cfit.independent.gov.uk/pubs/2000/ebpt/ebptgerman/04.htm
						                 		 
2	“The elasticity was found to be less than 2.”  Explain why this statement is ambiguous, 
	and make any modification you think necessary to give it economic meaning. 
										
3	Using the publication, Desktop Study into Demand for Dairy Products, Section 2, pp3-12, 
	Provide evidence in support of the view that market forces do not favour farmers.
You should illustrate your answer with supply and demand diagrams.	
http://www.defra.gov.uk/foodfarm/food/industry/sectors/milk/pdf/agraceasreport.pdf

4	Draw ONE  supply and demand diagram that illustrates the general pattern to emerge from
 the PESTICIDE DATA in Table 1 attached.  Explain briefly why you would expect the values 
depicted in the last column 
.

LEARNING OUTCOMES - AFTER THIS TASK STUDENTS WILL BE ABLE TO:

•	Understand the influence of market forces on product prices.
•	Define and calculate different measures of elasticity.
•	Assess how the impact of changing market forces depends upon market elasticities
•	Understand the relevance of elasticity for government policy and firms
•	Assess the relevance of elasticity for farm incomes 
•	Illustrate and assess the impact of a commodity tax on market outcomes
•	Understand how environmental and other public policy objectives can be attained via 
the use of commodity taxes 

EXEMPLAR  1 (contd)							2 of 2

Notes  for Task Leader:

You may need to prompt the group to encourage discussion in the following areas: 

Key concepts:	Elasticity of demand & supply (price elasticity of demand & supply, income 
and cross elasticity of demand); related markets; price elasticity and sales revenue; the relevance of time for price elasticity of supply; the rationale for protecting farm incomes; supply and demand representation of a commodity tax; the incidence of a commodity tax.

Learning Resources								          
	
TEXT	Demand elasticities			TEXT REFERENCE (essential)
Supply elasticities			TEXT REFERENCE (essential)
		Elasticity and farm incomes		TEXT REFERENCE (essential)
		Sales taxes and elasticity			TEXT REFERENCE (essential)

INTRANET	Market Elasticities 		Lecturer’s online presentation (optional)
Elasticity and Farm Incomes	Lecturer’s online presentation (optional)
Commodity Taxes		Lecturer’s online presentation (optional)

INTERNET	

“Ford Lands Price Blow in U.K. Car War”, International Herald Tribune, 4 July 1991, at 
	http://www.iht.com/articles/1991/07/04/ford.php

European best practice in transport - the German example: why is car ownership higher in Germany than in the UK? UK Commission for Integrated Transport (2000), at 	 http://cfit.independent.gov.uk/pubs/2000/ebpt/ebptgerman/04.htm

Desktop Study into Demand for Dairy Products, Section 2, “Factors affecting consumer demand for milk and dairy products”, at  http://www.defra.gov.uk/foodfarm/food/industry/sectors/milk/pdf/agraceasreport.pdf

DATA REQUIRED FOR Q1, EXEMPLAR 1

Using the World Economic Outlook (WEO) database find the GDP for the UK, 1980-2009, at (i) current prices and (ii) constant prices, available at http://www.imf.org/external/pubs/ft/weo/2009/01/weodata/index.aspx .  

Using the source at http://www.autoindustry.co.uk/statistics/sales/index  find the UK new vehicle registrations (in units) for the years 1980-2006

         

PESTICIDE DATA

Table 1 provides information on the impact of a 30% commodity tax on each unit of pesticide produced under different demand elasticity and incidence assumptions.				

TABLE 1       PESTICIDE DATA	
Scenario	Price Elasticity of Demand	Price Increase %	Change in Sales Reveue for UK producers (£m) 	
Base Case (no tax)	n/a	0%	n/a	
Inelastic, 30% tax, 30% of tax absorbed by manufacturers 	-0.2	21%	168	
Inelastic, 30% tax, 15% of tax absorbed by manufacturers 	-0.2	26%	175	
Less inelastic, 30% tax, 30% of tax absorbed by manufacturers 	-0.5	21%	159	
Less inelastic, 30% tax, 15% of tax absorbed by manufacturers	-0.5	26%	164	
Inelastic, 100% tax, 30% of tax absorbed by manufacturers	-0.2	70%	121	
Inelastic, 100% tax,15% of tax absorbed by manufacturers 	-0.2	85%	144	
Less inelastic, 100% tax, 30% of tax absorbed by manufacturers	-0.5	70%	103	
Less inelastic, 100% tax, 15% of tax absorbed by manufacturers 	-0.5	85%	120	
Source: Table derived from Design of a Tax or Charge Scheme for Pesticides, report by ECOTEC for  Department of the Environment, Transport and the Regions, March 1999 	

GENERAL NOTE

Producers of pesticides are legally responsible for paying the tax.  The primary users of pesticides are farmers and local councils.  Although manufacturers of pesticides are responsible for the tax, they can pass on some of the tax burden to buyers.  How much of the tax that can be passed on will depend on the price elasticity of demand.  The incidence of tax refers to how the tax burden is shared between producers and buyers.

EXEMPLAR  2									1 of 2

Core Concepts		Production, Costs and Revenue
Applications		Economics of Wind Power	
Response Required	Group Presentation																														
SUBMIT PRESENTATION FILE ONE WEEK BEFORE PRESENTATION

Formal group presentations (20 MINUTES EACH)

1  (a)	Complete Table 2
    (b)	Are the MC and AC data consistent with the basic theory you met in the TEXT?
    (c)	Do the data in Table 2 depict a short-run or long-run scenario?
    (d)	Using the source, Wind Power Economics (EWEA, 2005), available at:
http://www.ewea.org/fileadmin/ewea_documents/documents/publications/factsheets/factsheet_economy2.pdf    (and/or any other source you have found), identify the likely sources of economies of 
	scale in the production of wind power energy.

2	Identify the economic and environmental arguments FOR and AGAINST the use of 
wind power to generate electricity												

LEARNING OUTCOMES - AFTER THIS TASK STUDENTS WILL BE ABLE TO:

•	know the importance of the distinction between the short and long run in the analysis of production costs
•	understand the determinants of unit costs in both the short-run and long-run 
•	be able to apply their knowledge of production costs to analyse specific industrial situations

																																																																						

	

																									

EXEMPLAR  2				  				2 of 2

Notes  for Task Leader:

You may need to prompt the group to encourage discussion in the following areas: 

Key concepts		Total costs and total sales revenue, marginal and average cost; marginal and 
average revenue; profit maximisation; short run and long run production costs; fixed and variable factors; fixed and variable costs; law of 
			diminishing returns; economies and diseconomies of scale; U-shaped unit 
			and marginal costs in short and long run.

Learning resources

TEXT		The firm’s supply decision		TEXT REFERENCE (essential)
Short run production costs		TEXT REFERENCE (essential)
		Long run production costs		TEXT REFERENCE (essential)

INTRANET	Production Costs			Lecturer’s online presentation (optional)

INTERNET	Wind Power Economics, European Wind Energy Association (2005), 
available at  http://www.ewea.org/fileadmin/ewea_documents/documents/publications/factsheets/factsheet_economy2.pdf	

“The cost of Wind Power”, in Windletter, The American Wind Energy Association, May 2003, at http://www.awea.org/windletter/wl_03may.html

EXEMPLAR  2							WIND POWER DATA

The electricity produced by a wind turbine over one year is measured in kilowatt hours/year (kWh/year).  The maximum yearly output of a wind turbine will depend upon the power producing capacity of the turbine (measured in kilowatts, kW) and the number of hours/year at which the turbine operates at full capacity.   The latter is clearly dependent upon wind conditions, with coastal and upland areas offering the best sites.  The maximum yearly output of a wind turbine is given by:

OUTPUT (kWh/year) = TURBINE POWER  (kW ) *  TIME (hours /year at full-load) 

TABLE 2:	WIND POWER OUTPUT and ESTIMATED COSTS per kWh 

Wind Strength 	TIME

Full-Load
Hours / year
(1)	OUTPUT

[kWh/year]

(2)	Average Cost

[c€/kWh]

(3)
	Total Cost

[c€]

(4)	Marginal Cost

[c€]

(5)	
LOW	1500		7.6			
LOW	1700		7.0			
MEDIUM	1900		6.5			
MEDIUM	2100		6.0			
MEDIUM	2300		5.6			
HIGH	2500		5.2			
HIGH	2700		4.9			
HIGH	2900		4.7			
Source:  Data in Column (3) derived from European Wind Energy Association (2005), Wind Power 
	Economics, Fig. 1, available at 
http://www.ewea.org/fileadmin/ewea_documents/documents/publications/factsheets/factsheet_economy2.pdf      Also available from the module WebCT
 
NOTE:  Turbine capacity = 1,000kW; c€ = Euro cents; Average Cost data in Column 3 assumes that 
	capital costs and O&M costs are discounted at 7.5% discount rate [see discussion in above 
	publication re. Figs. 1 & 2].

EXEMPLAR  3									1 of 2

Core Concepts		Perfect Competition and Monopoly
Applications		Competition Policy, Regulatory Bodies, Consumer Council, 
			Transport and Energy 
Response Required	Team Quiz

‘UNIVERSITY CHALLENGE’ QUIZ

Questions will focus on the following

1   	The perfectly competitive industry in the short and long run
2	The profit maximising monopolist in the short and long run
3	The price discriminating monopolist
4	Natural monopoly
5	The Internet sources listed below

LEARNING OUTCOMES - AFTER THIS TASK STUDENTS WILL BE ABLE TO:

o	Distinguish between normal and supernormal profits

o	derive and illustrate the revenue and cost conditions that generate maximum
profit/minimum losses for PC firms and Monopolists  in the SR and LR

o	assess the outcome of competitive structure (and lack of it ) for consumers, producers and society as a while

o	understand the role of consumer groups and regulating bodies in controlling the market power of monopolists

o	apply their knowledge of market structure to specific industries 

Notes  for Task Leader:

You may need to prompt the group to encourage discussion in the following areas: 

Key concepts		Total, average and marginal revenue concepts; profit maximisation; normal 
and supernormal profits; perfect competition (PC); short and long run equilibrium of firm and industry in PC; profit maximisation under monopoly;  discriminating monopoly and natural monopolies.
.

EXEMPLAR  3								2 of 2

Learning Resources								          
	
TEXT		Revenue, profit, perfect competition,
monopoly 				TEXT REFERENCE (essential)

INTRANET	Perfect competition , Monopoly		Lecturer’s online presentation (optional) 			
	
INTERNET  

Phoenix Gas  [ sole supplier of natural gas in Northern Ireland]
									
http://news.bbc.co.uk/2/hi/uk_news/northern_ireland/2773243.stm    
http://news.bbc.co.uk/2/hi/uk_news/northern_ireland/3561873.stm
http://news.bbc.co.uk/2/hi/uk_news/northern_ireland/3525416.stm
http://news.bbc.co.uk/2/hi/uk_news/northern_ireland/3602786.stm
http://news.bbc.co.uk/2/hi/uk_news/northern_ireland/4626912.stm
http://www.phoenix-natural-gas.com/
http://www.consumercouncil.org.uk/publications/?id=110

Translink Services  [sole supplier of bus and rail services in Northern Ireland]

http://www.translink.co.uk/enterprisefares.asp
http://www.consumercouncil.org.uk/publications/?id=81  This paper relates to ‘transport poverty’

Questions involving OHP facility. 	See “Competition & Monopoly” at the following link:   http://www.economicsnetwork.ac.uk/projects/mini/forsythe_pbl.htm

•	All OHP questions will involve partially completed diagrams (i.e. no labels and missing schedules) relating to the theory of the firm under varying competitive conditions.

•	Diagrams may contain deliberate errors, such as wrongly positioned equilibria, wrongly labelled schedules ……. etc.

•	Teams winning the ‘starter’ question for a particular diagram have an opportunity to earn additional points by completing the diagram and correcting any deliberate errors in the process.  

		 

EXEMPLAR  3

General Questions (intended for rapid Q&A session, not using OHP facility)

1.	What is the profit maximising condition for a PC firm?
2.	List the conditions necessary for PC
3.	What is ‘normal’ profit?
4.	Why is the distinction between firm and industry important in PC?
5.	Define marginal revenue (MR)
6.	Define marginal cost (MC)
7.	Average revenue (AR) always equals ……… 
8.	  In PC, a firm is a price ………..
9.	  What is the significance of AR  > AC?
10.	  Why does MR fall as monopolist raises output?
11.	   In PC, P …… MC, but in monopoly, P …… MC 
12.	   If AC < AR, what happens in PC?     
13.	   If AC < AR, What happens in Monopoly? 
14.	   In Monopoly, the distinction between the LR & SR is ………….
15.	   In the LR a PC firm will earn ………..  ?
16.	   In the LR a monopolist will earn …….?
17.	   Why are normal profits treated as a cost? 
18.	   In PC why will the firm NOT sell BELOW the market price?
19.	   Name the market:      AR > AC;  P = AR;  MC = MR;  MC = P
20.	   What type of firm can exercise price discrimination?
21.	   What conditions are necessary for price discrimination?
22.	   Identify THREE monopoly services within NI
23.	   Can MR & AR schedules ever coincide in monopoly?
24.	   Why does MR normally lie below AR in monopoly?
25.	   Why does MR =AR in PC?
26.	   How does a ‘natural monopoly’ arise? 
27.	  What does OFREG stand for?
28.	  In PC, if AC < AR what profits are being earned?
29.	  In PC, if AR > AC, what will happen to market price?
30.	  Define the short run in a PC industry
31.	  In PC, if AC < AR what will happen to the industry supply curve?
32.	  In PC, if AC > AR what will happen to the industry supply curve?
33.	  From consumer viewpoint, what makes PC attractive?
34.	  From a firm’s viewpoint, what makes PC unattractive?
35.	  From efficiency viewpoint, what makes PC attractive?

Questions based on Internet Sources (Q&A session testing teams’ research effort) 

36.  What evidence is there of price discriminating behaviour in NIR?  
37.  What evidence that Pheonix Gas exercises monopoly power?
38.  Identify THREE ways that have been used to control Pheonix Gas
39.  What stance does the NI Consumer Council take in relation to Pheonix Gas?  
40.  How does Pheonix Gas project itself?
41.  What case does Phoenix Gas present for raising prices?
42.  What stance does the NI Consumer Council take in relation to Translink?
43.  The MC of a journey made by public transport is (more or less) than by car
44.  What is the ‘transport trap’?  	
45.  What are the advantages of a ‘hail & ride’ bus service?
46.  Re. Phoenix Gas, what does ‘revenue recovery period’ mean?
47.  Why should extending the RRP help stabilise gas prices?	
48.  How many increases in gas prices occurred between 1996-2002? 	

EXEMPLAR  4								1 of 2

Core Concepts		Comparative Advantage, Trade Policy &Tariffs, Exchange Rates
Applications		Somalia, UK, Germany, Ethiopia, 
Response Required	Written Report OR Group Presentation (groups are free to choose response format)

1	Explain how the theory of comparative advantage could account for the data in Table 1.  					          
2	Explain why it is necessary to distinguish between : 
(i) differences in factor endowments, and 
(ii) market structure when accounting for the data in Tables 2 and 3.                       				
3 	(a) 	Using Tables 4-6 calculate Israel’s terms of trade for 2004, 2005, and 2006.
(b) 	Which price movements most influenced its terms of trade since 2004?

4     	Identify the arguments for tariff protection implied in, “Ethiopia on the track of joining WTO”, 
	Ethiopian Reporter, Saturday 8/10/2005.
	What are the arguments against Ethiopia using tariffs as a policy instrument?  

5(a)	Outline the protectionist measures associated with the rise of economic nationalism highlighted in 	the 2009 Financial Times article, “Rising protectionism”, Financial Times, Friday 3/2/2009
   (b) 	Explain the main arguments against the use of protective trade measures? 

6(a) 	Using supply and demand diagrams explain (i) how the equilibrium value of the pound in terms of euros is determined in the foreign exchange market, and (ii) why a rise in UK interest rates relative to 
        	eurozone rates could strengthen the pound against the euro.
6(b)	 Evaluate the view that a fall in the value of the pound benefits the UK economy, referring to the Daily Telegraph (2008) and Financial Times (2008) articles below.

LEARNING OUTCOMES - AFTER THIS TASK STUDENTS WILL BE ABLE TO:

o	Apply and appraise the principle of comparative advantage using real data

o	Evaluate the use of restrictive trade policies, including tariffs

o	Determine and discuss the terms of trade using real data 

o	Use basic supply and demand analyses to analyse the foreign exchange market 

o	Evaluate the impact of a depreciating pound on the UK economy 

EXEMPLAR  4								2 of 2

Notes  for Task Leader:

You may need to prompt the group to encourage discussion in the following areas: 

Key concepts		Absolute and comparative advantage; terms of trade; trade policy, including
tariffs; exchange rate determination; impact of a depreciating / appreciating
currency on export and import prices – here you should also consider the 
relevance of  price elasticities of demand for exports and imports. 

Learning resources

TEXT		Relevant sections /pages		TEXT REFERENCE (essential)

INTRANET	Appropriate resources		Lecturer’s online presentation (optional)

INTERNET	The following provided information on the trade-related issues forming this task.
			Use the search facility in each site as appropriate.
 
http://en.ethiopianreporter.com/ 
http://www.telegraph.co.uk/ 
http://www.ft.com/home/uk
http://www.intracen.org/countries/ (International Trade centre) http://unstats.un.org/unsd/trade/imts/analyticaltradetables.htm (UN statistics division)

		The following are relevant for Question 6b
		
		“No help in sight for the falling pound”, Daily Telegraph, 15/12/2008
		“London and tourists enjoy weak pound”, Financial Times, 19/12/2008
		“Ground down by the pound”, Financial Times, 25/11/2008

			

EXEMPLAR 4 IS CONTINUED OVER THE NEXT TWO PAGES

TABLE 1	SOMALIA			TRADED GOODS   2004 

    			      Ranking1				    	 Ranking1		
				
Product			Export    Import 		Product			Export    Import 
Rank       Rank2					Rank2     Rank

Live Sheep & Goats	   1	   n.a.		Sugar Cane or Sugar Beet	  n.a	    1 	
Wood Charcoal	  	   2	   n.a		Vegetable products		  n.a	    2
Animal Products         	   3	   n.a		Cigars & Cigarettes		  n.a	    3
Wood Pulp		   4	   n.a		Rice          	 	  n.a	    4
Live Bovine Animals	   5      	   n.a		Wheat or Meslin Flour 	  n.a	    5												
Source:  International Trade Centre (ITC)			
Notes: 	(1) ranking is based on the value of exports and imports in US $million.
(2) n.a. for export/import rank means product is not exported/imported

TABLE 2	UNITED KINGDOM		TRADED GOODS   2004  (US £billion)

Product			   	 Export   	Export 	         Import    Import	   Net		 		   				 Rank      	Value	          Rank      Value	Exports1 

Cars			      	     1	 18.6   	             1	        30.9	         	 - 12.3     	
Medication Mixtures	   	     2	 16.2  	            4	        11.0	        	 +  5.2
Crude Petroleum Oils             		     3	 15.1   	            5	          9.7	        	 +  5.4
Turbo Jets & Other Gas Turbines    	     4	 12.2	          10	          6.7	        	 +  5.5
Automatic Data Processing machines	     5      	   9.5 	            2	        15.2	        	  -  5.7               
Motor Vehicle Parts		   10	   6.9	            3	        11.5	        	  -  4.6     

Source:  International Trade Centre (ITC) 
Notes:  	(1) net export value is plus when value of exports exceed the value of imports and minus when value 
      of exports is less than the value of imports.  All values in terms of US $billion.

TABLE 3	GERMANY			TRADED GOODS   2004  (US $billion)

Product			   	Export   	Export 	         Import    Import	   Net		 		   				 Rank1     	Value1	          Rank      Value	Exports2 

Cars			      	    1	 91.5  	             1	          32.8 	+ 58.7	     	
Motor Vehicle Parts		    2	 24.9	             5	          15.0	+   9.9
Medication Mixtures	   	    3	 16.2   	             9	            8.5	+   7.7	
Automatic Data Processing machines	    4      	 12.5 	             3	          17.8	 -   5.3     	
Aircraft				    5	 11.5	           10	            8.5	+   3.0
Crude Petroleum Oils             		 n.a	   n.a	             2	          23.3	-  23.3     
Petroleum Gasses			  31	  3.6 	            4	          17.0	-  13.4     

Source:  International Trade Centre (ITC) 
Notes:  (1) n.a. for export rank and export value means product is not exported.
            (2) net export value is plus when value of exports exceed the value of imports and minus when value of 
   exports is less than the value of imports.  All values in terms of US $billion.

 

Table 4  The relative value of Israeli imports, and exports, as a percentage of the total in the year 2000
	
  imports:		 exports:	
fuels	other raw
materials	other 
imports	total 
imports		agriculture	diamonds	other
manufactures*	total exports	
15.1 	51.6	33.3	100		2.4	37.6	60	100	

* other manufactures include low-, medium-, and high-technology manufactures (excluding diamonds)

Table 5  Israeli import price indices (2000 = 100)
	
	fuels	other raw
materials	other 
imports	total 
imports	
2004	128.2	113.4	107.6	111.8	
2005	176.2	125.4	111.0	120.0	
2006	208.0	135.9	126.2	127.1	

Table 6  Israeli export price indices (2000 = 100)
	
	agriculture	diamonds	low technology manufactures	medium technology manufactures	high technology manufactures	total 
exports	
2004	125.2	113.0	106.1	111.9	98.0	107.4	
2005	124.1	134.4	110.0	126.8	95.3	116.2	
2006	124.2	143.6	113.7	139.0	95.1	121.1	
Note: A ‘base year’ price is valued as 100 (the base year here is the year 2000).  Price indices for other years show how a price differs from the base year.  For example the price index for diamonds in 2004 was 113.0, which means that the price of exported diamonds was 13% higher in 2004 than in 2000. In 2006 it was 43.6% higher than in 2000. Comparisons with non-base year prices can also be made, by calculating the relevant percentage. For example, the price rose between 2004 and 2006 by 27%, since (143.6 / 113.0) x 100 = 127.