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Aggregate Demand and Supply - Lesson Plan: 3 x 1 hour lessons

A series of 'off the shelf' lesson plans and resources for use in the classroom. These lessons deal with Aggregate Demand and Supply and are relevant to the following specifications:

  • AQA: AS Module 2, 11.2
  • Edexcel: AS Unit 3
  • OCR: AS Unit 2883, 5.3.2

Aim:

These lessons aim to encourage students to analyse major events in terms of aggregate demand and supply models. The opening section of the Activity gives a brief background about the purpose and use of models in economics. Many students fail to see models as a starting point for analysis in that they provide the opportunity for explaining why things in reality may be different to the outcome suggested by a model, and that the latter is really where critical understanding plays a major role.

The Activity provides students with a range of 'newspaper headline' events. The student is asked to analyse the event using the aggregate demand and aggregate supply model. They should be warned that some of the events could have more than one explanation. There is no 'right answer' as such but emphasis should be placed on the quality of the justification they offer as to whether they believe AD or AS is affected first. Some students may wish to develop their analysis skills by looking at the effects on both AS and AD where appropriate. This should be encouraged but the evaluation skills in terms of the size of the respective changes will be important in drawing final conclusions.

A sample of the type of answer students will be expected to give is provided along with a diagram to illustrate the answer. Students are advised to think carefully about the size of the impact that they are considering; this will help them to develop greater confidence with evaluation. It is worthwhile reminding students that the impact on the likes of growth, unemployment and inflation, for example, will DEPEND on the size of the changes in the exogenous factor. For example, the statement regarding average wages states that the increases have been 'way above inflation'. This might suggest that consumption has the potential to increase by a relatively large amount and since this component of AD is the most significant, the effect on growth and inflationary pressure could be significant. If the statement had noted that the rate of growth of wage increases had been consistent with inflation, the effect would be different. This is the point the Activity is trying to get across and to encourage students to think about.

Learning Objectives:

At the end of the lessons, students should be able to:

  • Understand the meaning of the term 'exogenous shocks'
  • Demonstrate facility in the use of AS and AD diagrams
  • Apply different scenarios to the AS/AD model
  • Demonstrate analysis skills in relation to the scenario and the model
  • Demonstrate evaluation skills in relation to the scenario and the model
  • Show an understanding of the limitations of the model in applying scenarios

Resources:

Lesson Structure:

Lesson 1

  1. Review the main economic objectives of the government. (10 minutes)
  2. In pairs, get students to come up with two factors that could cause problems for the government in meeting its targets. These should be written out onto a decent size sheet of paper for display. (5 minutes)
  3. Get students to pin up their factors and to offer a brief explanation of how they think it might affect economic targets. (15 minutes)
  4. Explain the idea of 'exogenous shocks' - factors that influence AD and AS but are determined by factors outside the model. (5 minutes)
  5. Begin to discuss the AS/AD model using the Presentation. There are 28 slides, so it is advisable to deal with this in two chunks - cover AD first. (20 minutes)
  6. Review the learning outcomes of the lesson - exogenous shocks, nature of AD. (5 minutes)

Lesson 2

  1. Review the learning outcomes of the last lesson. (5 minutes)
  2. Continue the Presentation, looking at and discussing AS. As with AD, use a question and answer technique to keep students engaged and to encourage them to think about the model. (20 minutes)
  3. Ask students to take one factor they identified in the previous lesson and to discuss in pairs how their factor could be represented using the AS/AD model. Get students to feedback their interpretations using the whiteboard. Note at this stage areas of misunderstanding. (15 minutes)
  4. Take students through the Presentation section entitled 'Putting AS and AD together' - use one or more of the student examples to highlight areas of misunderstanding that may have arisen from the last section. (15 minutes)
  5. Review the main learning outcomes of the lesson - the basis of the model and how to use the model to explain the impact of exogenous shocks. (5 minutes)

Lesson 3

  1. Review the learning outcomes from the last lesson. (5 minutes)
  2. Give out the Activity and go through the background information about the model. Explain the example given in the Activity and highlight the learning outcomes from the Activity. (15 minutes)
  3. Set students the task of analysing and evaluating the outcomes of the scenarios given. Circulate around the room checking on areas of misunderstanding that may arise and guide students in their learning through asking questions to stretch their understanding. (35 minutes)
  4. Review the learning outcomes of the lesson - the use of the model, applying scenarios to analyse and evaluate and the limitations of the model. (5 minutes)