Dismal Science Software®

SimEcon®

Economic Issues and Principles

Goals of SimEcon®

• Develop an interactive instructional tool

• Add value to economic education• Improve student learning• Attract students to economics• Increase instructional access

SimEcon® ModulesBasic Micro Models Basic Macro Models

•Markets•Competition•Monopoly•Labor

•Macro1•DrugWars•Banking•E-Growth

Advanced Micro Models Advanced Macro Models

•UtilityMax•CostMin•GasStations•Externalities

•Macro2•Macro3•Exchange$•$Distribution

• Operates with a graphical interface

• Runs on Microsoft Windows

• Uses object-based programming features

• Contains initial conditions for each module

• Provides tabular and/or graphical results

SimEcon® Design and Operation

SimEcon® Uses

• Individual student

assignments

• Group lab or activity sessions

• Distance-learning modules

• On-line course assignments

Markets Module

Shows how markets work. You change supply or demand factors and observe the effects on market equilibrium. You may also regulate the market with price or quantity controls and review the results.

Initial ConditionsDemand• Income• Butter Price• Corn Price

Supply• Rainfall• # of Farms• Seed Cost

Initial Equilibrium

• Price• Quantity

Regulate Market Control Price

• Price Ceiling• Price Floor

Control Production

Markets Module

Disturb Market• Demand • Supply

Results• New Equilibrium Price and Quantity

Results• With Regulation• Without Regulation

Competition Module

Shows how a competitive firm determines

its price and output. You select the quantity

of output that maximizes short run profits as

price and costs change and see the results.

Short Run Costs

• Marginal Cost• Average Cost

Set Firm Output

• Current Market Price Provided• Set Output Level

Firm Results

• Price• Costs• Profit Margin• Total Profit• Equity

Competition Module

Expert Analysis

• Evaluation of Output Decision

Monopoly ModuleShows how a monopolist maximizes long run

profits as its costs and output change. You

may also regulate it by breaking up the

monopoly and/or applying marginal or

average cost pricing policies.

Initial Conditions• Total Output• Total Fixed Cost• Total Revenue• Total Cost• Total Profit• Total Equity• Price• Marginal Revenue• Marginal Cost• Average Total Cost

Choice Variables

• Total Fixed Cost• Output

Monopoly Module

Regulate Monopoly

• Number of Firms• Price

Results of Regulation for

Pure Monopoly PricingAverage Cost PricingMarginal Cost Pricing

• Total Cost• Average Cost• Price• Industry Output• Profit

Output Results• New Equilibrium • Price and Quantity

Labor Module

Shows the impacts of labor market disturbances

on labor market equilibrium. You can see how

discrimination affects the employment and

wages of workers who were discriminated

against and those who were not. You can also

try to reduce the burden of discrimination on its

victims.

Initial Conditions

Demand• Price of Bread• Oven Cost• Price of Flour

Supply• Population• Participation Rate• Cook’s Wage Rate

Initial Equilibrium

• Price• Quantity

Discriminate

Control discrimination among Pildians

• Big Pildians• Little Pildians

Labor Module

Disturb Market

• Demand • Supply

Results

• New Equilibrium Price and Quantity

Results

• With Discrimination• Without Discrimination

UtilityMax Module

Shows how a consumer maximizes utility

with a limited income. You choose quantities

of two goods depending on the consumer’s

preferences, prices, and income, and see the

results. Income and substitution effects are

reported for price and income changes.

Initial Conditions

• Price of Beer• Price of CDs• Consumer’s Income

Set Preferences

• Preference A• Preference B

Select Quantities

• Beer• CDs

UtilityMax Module

Change Budget

• Price of Beer• Price of CDs• Consumer’s Income

Consumer Results

• Total Utility• Marginal Rate of Substitution

• Maximum Possible Utility

New Consumer Results

• New Maximum Utility• Income and Substitution

Effects

CostMin Module

Shows how a firm arranges its production

process so as to minimize the total costs of

its product. You choose the number of

variable inputs and the technology the firm

adopts and view the results of the firm’s

output and production costs.

CostMin Module Select Inputs

•Select Number of Variable Inputs

•Select Technology

Graphs

•Isocost / Isoquant

•Long Run Average Cost / Marginal Cost

Production Results

•Output•Total Cost•Average Cost•Marginal Costs•Marginal Products•MRS

GasStations Module

Shows how a monopolistically-competitive

firm operates. You manage the firm so as

to maximize short-run profits by selecting a

location and price of gasoline and see the

results over several months of service.

Initial Conditions

• Rent at Location 1• Rent at Location 2• Current Price of Gas

Set Preferences

• Location 1 or 2

Select Gas PriceGasStations Module

Change LocationOperation Results

• Gallons Sold• Total Revenue• Total Cost• Station Rent Increase

Executive Summary

• Months in Operation• Total Profits• Total Gallons Sold• Average $/Gallon

Externalities ModuleShows the economic results of two different types of externalities

and appropriate policies to internalize these externalities.

In Positive Externalities, you subsidize vaccine production and

development costs in order to maximize total net benefits to society from

providing flu shots. You may view the results for a competitive or

monopolistic vaccine market.

In Negative Externalities, you use pollution permits or taxes to control

pollution in the steel industry in order to maximize total net benefits to

society.

Initial Conditions• Government Spending• Social Net Benefits Lost• # of Flu Shots• Price of a Flu Shot• MSB of a Flu Shot• MPC of a Flu Shot

Positive Externalities ModuleChoices

• Development Cost• Market Structure• Subsidy Type

Results of Market Choices

• Vaccine Price• Marginal Private Cost• # Vaccinated• MSB• MSC• Total Profit• Total Social Net Benefits

Initial Conditions•Production•Pollutants•Price of Steel•Employment•Average Wage•Current Regulation•MPC•MSC•MEC•Total External Cost

Pollution Control Choices

• Issue Permits• Set a Tax

Negative Externalities ModuleResults of

Pollution Control

• Steel Output• Pollutants• Price of Steel• Employment• Average Wage• MPC• MSC• MEC

Macro1 Module

Shows annual and long run simple multiplier

effects of a fiscal or monetary policy. You

get to cure depressions or inflations by

manipulating taxes, government spending,

and the interest rate, and see the results.

Initial Conditions • Consumption• Investment• Government• Real GDP• Unemployment Rate• Inflation Rate• Nominal Interest Rate• Taxes

Macro1 ModuleState of the

Macroeconomy• Inflation• Recession

Annual and Long Run Results• Consumption• Investment• Real GDP• Unemployment Rate• Inflation Rate

Policy Decisions• Government Spending• Taxes• Interest Rate

Drug Wars Module

Shows the benefits and costs associated with

allocating a limited budget. You have $100 billion

to minimize the damage done by drug use. You can

spend the budget on: therapy, law enforcement,

and/or education and see the results.

Drug Wars ModuleInitial Conditions• Property Damage• Lives Lost

Allocate Drug Wars Budget

• Law Enforcement• Education• Therapy

Total Results • Damages• Damage Prevented• (Approval Rating)Set Value of Life

• Drug Users• Non-Users

Marginal Results • Damage prevented by budget category

Banking ModuleShows how the FED uses the required reserve

ratio, the discount rate, and open market

operations to control the money supply. You

can then view the effects of your policy

choices on the balance sheets and profit and

loss statements of “high risk” and “low risk”

banks.

InitialConditions

• Discount Rate• Required

Reserve Rate• Money Supply• Interest Rate• Demand

Deposits

Monetary Policy Tools

• Required Reserve Ratio

• Discount Rate• Open Market

Operations

Policy Results

• Money Supply• Bank Deposits• Interest Rate

Financial Impact to High and Low Risk Bank

• Balance Sheet• Profit and Loss

Banking Module

E-Growth Module

Shows how one or more factors affect a

nation’s economic growth. You set social

and/or economic variables, and review

the results generation-by generation for

six generations.

InitialConditions

• Population• Real GDP• Consumption• Investment• Public Goods

Choice Variables

Social• Age of Marriage• # of Children• R&D

Economic• Investment• Public Goods

Results by Generation

• Population• Population Growth• Real GDP• Real per Capita GDP • Consumption• Real per Capita Consumption• Real Value of Capital Stock

E-Growth Module

Macro2 Module

Shows yearly, simple multiplier results from

fiscal and/or monetary policies. You get to

cure recessions and inflations by manipulating

taxes, government spending and the money

supply, and see the yearly results.

Initial Conditions • Consumption• Investment• Government• Net Exports• Real GDP• Unemployment Rate• Inflation Rate• New Price• Nominal Interest Rate• Real Interest Rate

Macro2 ModuleState of the

Macroeconomy• Inflation• Recession

Yearly Results • Consumption• Investment• Net Exports• Real GDP• Unemployment Rate• Inflation Rate• New Price• Nominal Interest Rate• Real Interest Rate• Performance over Time• Aggregate Supply• Aggregate Demand

Policy Decisions• Government Spending• Taxes• Money Supply

Macro3 Module

Shows how an open-macroeconomy works. You

set fiscal and monetary policies to cure

recessions or inflations and see the yearly

results. Long run adjustments in prices and

wages, and supply and demand shocks are also

included.

Initial Conditions • Government Spending• Taxes• Money Supply• Real GDP• Consumption• Investment• Net Exports• Inflation Rate• Price Level• Wage Level• Unemployment Rate• Exchange Rate• Real Interest Rate

Macro3 ModuleState of the

Macroeconomy• Inflation• Recession

Short and Long Run Results • Real GDP• Consumption• Investment• Net Exports• Unemployment Rate• Inflation Rate• Price Level• Wage Level• Real Interest Rate• Exchange Rate

Policy Decisions• Government Spending• Taxes• Money Supply

Exchange$ Module

Shows how the foreign exchange market

works. You change domestic or foreign

supply or demand factors and observe the

effects on market equilibrium. You may also

regulate the market by changing a fixed

exchange rate and see the results.

Initial ConditionsDomestic• GDP• Price Index• Interest Rate• Political Stability Index

Foreign• GDP• Price Index• Interest Rate• Political Stability Index

Initial Equilibrium

• Price• Quantity

Regulate Market Control Price

• Above Equilibrium• Below Equilibrium

Exchange$ Module

Disturb MarketForeign or Domestic• Real GDP• Price Index• Interest Rate• Political Stability Index

Results• New Equilibrium Price and Quantity

Results• With Regulation• Without Regulation

$Distribution ModuleShows the distribution of income in a society

and how that distribution can be affected by

a number of variables. You can also alter

the distribution of income by changing

government policies and by introducing non-

governmental disturbances.

$Distribution Module

Initial Conditions

•Distribution of Income by Family

•Quintile Distribution

Change the Distribution

•Economic Disturbance

•Policy Disturbance

Output Results

•Distribution of Income by Family

•Quintile Distribution

SimEcon® Usage Recommendations

• Small classes - open format, essay

• Medium classes - mixed format, essay

• Large classes - templates, short

answer

SimEcon® Assessment Methods

• Student Surveys

• Instructor Reviews and Surveys

• Paired Class Comparisons

• Paired Topic Comparisons