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Understanding Supply and Demand Concepts

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Lesson1 Understanding Supply and Demand Concepts Teacher:Interest Approach Hold up a bag of candy. Ask the students what they would do to get this candy. – PowerPoint PPT presentation

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Title: Understanding Supply and Demand Concepts


1
Lesson1
  • Understanding Supply and Demand Concepts

2
TeacherInterest Approach
  • Hold up a bag of candy. Ask the students what
    they would do to get this candy. Would they pay
    for it? Stay after school and do extra work for
    it? How much is it worth to them Briefly discuss
    the concept of demand. Now give each student a
    piece of candy

3
Teacher - Cont
  • Then hold up a whole bag of candy. Once again,
    ask the students what they would do for the bag
    of candy. Are as many people still willing to
    give or do something extra for the bag of candy?
    Why or why not? Briefly discuss the concept of
    supply with the students.

4
Common Core/Next Generation Standards Addressed!
  • WHST.9-12.7 Conduct short as well as more
    sustained research projects to answer a question
    (including a self-generated question) or solve a
    problem narrow or broaden the inquiry when
    appropriate synthesize multiple sources on the
    subject, demonstrating understanding of the
    subject under investigation. (HS-LS2-7),(HS-LS4-6)
  • RST.11-12.1 Cite specific textual evidence to
    support analysis of science and technical texts,
    attending to important distinctions the author
    makes and to any gaps or inconsistencies in the
    account. (HS-LS2-1),(HS-LS2-2),(HS-LS2-6),(HS-LS2-
    8)

5
Bell Work
6
Terms
  • Commodity
  • Demand
  • Elastic
  • Elasticity of demand
  • Elasticity of supply
  • Fixed cost
  • Law of demand
  • Law of supply
  • Supply
  • Total Costs
  • Variable Costs

7
What is Supply?
  • Supply is the amount of goods or services offered
    for sale at a given time
  • Law of supply- states that a producer will supply
    fewer goods or services as prices decrease and
    will supply more goods or services as prices
    increase

8
  • Elasticity of supply-variability of supply based
    on cost of production
  • Agricultural commodities such as livestock and
    crops have less elasticity than other commodities
  • Commodity is any good or product that is sold

9
  • Lack of elasticity is due to high cost involved
    in producing agricultural commodities
  • i.e. cost of raising cattle
  • Costs may include land, feed, medicines, milking
    machinery, milk storage tanks, etc.

10
  • Cost can be broken down into three types
  • Fixed costs-operating costs that are not directly
    related to production usually pre-determined and
    usually cannot be changed
  • Ex. taxes and insurance
  • Variable costs-directly related to production,
    these will change over time
  • Ex. labor, raw materials
  • Total costs- sum of fixed and variable costs

11
Types of Cost Fixed Costs Variable Costs
Insurance X
Taxes X
Interest on Investments X
Land or Large Machinery X
Labor X
Feed X
Medicines X
Fuel X
Seed, Fertilizer X
12
What is demand?
  • Demand is the desire for a commodity or
    willingness to buy a commodity.
  • Based on assumption that prices may differ but
    everything else will remain constant, however,
    not always true.
  • Peoples preference may change, substitutes may
    become available, or number of people in
    marketplace may fluctuate.

13
  • Law of demand states that people will buy more of
    a product at lower prices and less at higher
    prices
  • Ex. Corn dogs vs. pork chops at a fair. The pork
    chop may be have a more desirable taste but cost
    more. Therefore, more corn dogs will be sold due
    to the price

14
  • Elasticity of demand is the variability of the
    amount of goods or services that will be
    purchased at various prices
  • Ex. Beef tends to be higher in price than pork
    and is often more desirable flavor. Consumers
    will buy the pork because it will still meet
    their dietary needs and cost less. This make
    beef elastic.
  • Elastic means that a product is sensitive to
    changes in price.

15
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16
What happens when there is a change in supply or
demand?
  • Changes in supply or demand refer to overall
    changes in the products and services provided and
    the demand for them
  • Change in supply may be a decrease in milk supply
    due to widespread mastitis infections.

17
  • Change in supply may also be caused by an
    increase in wheat production due to extremely
    fair weather conditions.
  • Both situations caused a change in supply but did
    not effect the change in demand.
  • Excess supply will result in lower prices.

18
  • Change in demand is anything that causes
    consumers to buy more or less of a product
    despite its price
  • Changes can result from availability and prices
    of comparable commodities and changes in public
    perception.
  • Public perception is a direct result of
    advertising

19
Review
  • What is Supply?
  • What is demand?
  • What happens when there is a change in supply or
    demand?
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