Exploring Economic Models Using Excel

This paper applies spreadsheet software to intermediate-level consumer theory concepts. Spreadsheets help make the concepts more accessible while allowing students to explore the ideas in more depth. Areas of application are utility functions, income and substitution effects, price indices, measures of welfare change, and the optimal saving rate. We chose the examples to stimulate awareness and discussion of the many classroom uses for four important Excel spreadsheet tools: three-dimensional (3-D) graphs, iteration, Goal Seek, and Solver. This paper uses spreadsheet software to explore a series of consumer theory examples appropriate to intermediate-level economics classes. The paper also illustrates how spreadsheets can make some advanced topics more accessible to students, thereby helping to bridge the gap between undergraduate and graduate education in economics.' The examples pertain to important topic areas in consumer theory: utility functions, substitution and income effects, price indices, measures of welfare change, and the optimal aggregate saving rate. A web-based supplement accompanies this paper and includes additional examples pertaining to cost minimization, oligopoly models, IS-LM and aggregate supply-aggregate demand models, and the Solow growth model. This supplement is available on the Internet at http:// sterling.holycross.edu/ departments/economics/mcahill/sejpaper.html. The examples in the supplement draw on the same Excel tools that the paper presents.2 The web supplement also contains student instruction