It teaches students to draw and understand step-function demand and supply curves, and it gives them useful practice for later, more elaborate experiments. This experiment illustrates the method of comparative statics with a shifting supply curve in a hypothetical fishing village. The experiment also forces students to grapple with the concept of sunk costs. This discussion is intended to teach them to determine in applications which curve shifted, and to distinguish shifts in a demand or supply curve from movements along the curve. Each of the experiments in this section demonstrates applications of the basic theory of supply and demand to issues in public policy.
Students get to explore the implications of putting a tax on the buyers versus the sellers.
Skeptics are finally convinced that a tax collected from demanders is equivalent to a tax collected from suppliers. Prohibition Students seem to really enjoy this experiment, perhaps because of the topic. The experiment imposes a minimum wage in a labor market. From the experiment, students also learn to define and measure voluntary and involuntary unemployment. The discussion and homework offer a general analysis of price floors and ceilings.