Visualizing Long-Run Average Cost with an Interactive Excel Module
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The purpose of this document is to introduce an interactive Excel module that illustrates the graphical relationship between short-run average cost and long-run average cost in a unique and dynamic way. The module takes advantage of the following characteristics of Microsoft Excel:
The image above is a [static] screen shot of the module interface showing all of the controls.
This paper assumes that the reader has received at least a minimal introduction to the ideas of "average cost," its graphical representation, and the distinction between the short-run and the long-run. The module incorporates these ideas and graphically reveals or illustrates the relationship between the long-run average cost curve and the underlying short-run average cost curves.
The intended users are both classroom instructors and their students. We hope that the module design is sufficiently inviting and intuitive for students to begin exploring long-run average cost with little, if any, demonstration of its use by the instructor. The hope is that the interactive module will support an instructor's classroom (or online) introduction of "the long-run" in the economic analysis of cost. The contribution of the Excel module is making visible — and "visually dynamic" — the graphical relationship between the short-run average cost curves and the long-run average cost curve, while giving complete control of the visual dynamics to the user. The Excel environment is more "user-friendly" than some other software environments. Animation in other environments occurs at one speed only, and the user cannot slow it down or speed it up. Excel, on the other hand, gives speed of motion control entirely to the user through the use of simple "spin buttons."
Reminders are at the top of the relevant pages.
If you do not need the underlying analysis of short-run average cost and long-run average cost and want to proceed directly to the link and begin exploring the module right away, go to the download page!
With the first link under the table of contents, "U-shaped average cost in the short run: k = 1," you may begin a mostly-linear path through the site's documents. The current page, through the table of contents below, can also serve as a site map. Every page at this site has a link back to this home page.
If you are ready, you may begin the more leisurely tour. Alternatively, you may proceed directly to the module page!