Teachers' Guide - Using the Virtual Economy for AS and A2 Economics

The Virtual Economy is likely to be of most value in the teaching of macroeconomics, but there are also many areas of microeconomics where it is relevant. The model can also be used very effectively as a prompt for discussion. Different groups could be set different (and perhaps differentiated) experiments to carry out, and asked to report back on the results. They could be encouraged to try to explain the reasons for the changes they found, supporting their presentation with relevant economic theory.

At AS level the Virtual Economy will be most use for the National Economy module (module 2 AQA, module 3 OCR, module 3 Edexcel). Students can use the Virtual Economy to experiment and learn the different tools that the government has available to manage the economy. They may also find the glossary and the library on the third floor useful for research. The Virtual Economy may also be useful for the markets and markets failure modules. The Virtual Economy can be used to test the impact of indirect taxes and to assess the extent to which they may offer a good solution to different types of market failure. The notion of government failure could also be introduced in this way.

At A2 level the Virtual Economy will be most useful for the UK Economy module (module 6 AQA (Government Policy - National and International), unit 7 OCR (The UK Economy) and Module 6 Edexcel (The UK in the Global Economy)). Students can use the model and related materials to look in depth at application of aggregate supply and aggregate demand theory and use the model to try various policies and assess their success. The worksheets in the Economic Policy section on the second floor may be very helpful as a basis for doing this.

The Virtual Economy could also be used as a basis for coursework projects. Trying policies out progressively could yield a useful dataset to analyse the extent to which a theory works in the real world. For example students could perhaps look at the Phillips Curve, the Laffer Curve or the effectiveness of indirect tax as a tool to correct market failure.

The table below considers the areas of the Virtual Economy that are relevant for different topics on the syllabus. The topics considered are:

• Market theory
• Firms
• Wages
• Market failure
• National income determination
• Money
• Unemployment and inflation
• Government and fiscal policy

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