ECONOMICS TEACHERS’ GUIDE

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COMPONENT: MICRO<strong>ECONOMICS</strong> EXAM LEVEL: A LEVEL AREA OF STUDY Oligopoly Key Points: • Learners need to understand the pricing decisions of oligopolies • Introduce learners to game theory as a way of analysing oligopoly Provides an opportunity to develop the following skills: Speaking, listening and understanding; Reading; Writing; Understanding numerical data; Carrying out calculations; Interpreting results; Presenting findings; Using ICT systems; Finding, selecting and exchanging information; Improving own learning and performance; Developing and presenting information using ICT; Working with others – plan do and review. INSPIRATION FOR TEACHING Example Activity Name : The Pricing Decisions of Oligopolies • Select the image (left) for an example of a game theory matrix. • Split the class into groups of three, each learner in the group represents one firm in a three-firm oligopoly. • Talk the learners through the game theory matrix provided (the associated figures are fictional). They have a choice to make, to 'keep their price high' (H) or 'lower their price' (L). However, the impact on their profit will depend on the choices of the other two firms in the group. The pay-offs from the various possible combinations are shown in the matrix. • Learners should be asked to play the game a number of times, with the aim of maximising their total profit at the end of the last game. • Stretch activity: learners should be encouraged to work out the rational pricing decisions in this market and then consider how it may work in reallife situations. USEFUL INTERACTIVE RESOURCES WJEC Resources > Economics WJEC > A level Economics > Specification from 2015 WJEC > A level Economics > Specimen Assessment Materials
SECTION: MICRO<strong>ECONOMICS</strong> EXAM LEVEL: A LEVEL EXAMPLE GAME THEORY MATRIX You have a choice to make, to 'keep your price high' (H) or 'lower your price' (L). However, the impact on your profit will depend on the choices of the other two firms in the group. The pay-offs from the various possible combinations are shown in the matrix below: PRICE COMBINATION PRICE DECISIONS FIRM'S SALES FIRM'S PROFIT (S) HHH H 3,000 800 HHL H 2,000 200 L 6,000 1,400 HLL H 1,000 – 400 L 5,000 1,000 LLL L 4,000 600 USEFUL INTERACTIVE RESOURCES WJEC Resources > Economics WJEC > A level Economics > Specification from 2015 WJEC > A level Economics > Specimen Assessment Materials
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ECONOMICS TEACHERS’ GUIDE

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