SUPPLY, DEMAND AND PRICE
OHIO DEPARTMENT OF EDUCATION CONSUMER ECONOMIC UNIT
A FIELD TEST ECONOMIC PAK K-6
SUPPLY, DEMAND AND PRICE
Supply/demand and price
Why Supply, demand and price?
“Yes, I got no bananas;”
INTRODUCTION AND BACKGROUND
The market system provides a means for organizing production and decision-making about
what, how, how much and for whom of production. The market system relies fundamentally on
the interaction of demand and supply and the price mechanism for the exchange of resources
that have alternative uses and a variety of goods and services that are available in limited
qualities. In the market system, producers compete against each other in the final goods market
for the limited supply of products and services that they want.
Price is the exchange value of products or services expressed in the currency of a particular
nation. In our economic system, prices are theoretically determined by supply and demand
forces at work in the market. Wages, interest, rent and profit are all types of prices.
Demand is different from want. A person can want anything, but a demand indicates the person
is able and willing to buy the product or goods. Many factors determine demand, such as
preference, services, borrowing power. Specifically, demand is defined as the amount of a good
which buyers will actually purchase at any one time at each of the possible prices that might be
charged. Significantly, the character of the demand comes from what is called the law of
diminishing marginal utility - that is to say, that with the consumption of a given product, the
utility or satisfaction form added units of that product will decline. Furthermore, demand
character reflects that more persons have low income than high.
Supply can be defined ad that amount of a good a seller will provide at any one time at each of
the possible prices that might be received.
The so-called equilibrium price (the result of the interaction of supply and demand) is the
price we, as consumers, pay in the marketplace. Other things being equal, prosective buyers
will usually offer to buy more of a commodity at any one time as the price goes down. Other
things being equal, prospective sellers will usually offer to sell more of a commodity at any
one time as the price goes up. In competitive markets, prices will be determined when both
the buyer's and seller's offers are alike.
Three important functions of price can be observed. The first function is that of allocator of
resources. It is apparent that as the value of a given resource is higher in one use that in
another, those resources will be pulled to the higher priced use. The second function of price
is the of rationer. Anyone wishing to buy a product at a price below the equilibrium price is
rationed out of the market due to the level of the equilibrium price. Finally, the third function
of price is that of income distributor. As we determine the value of the product through the
market mechanism, we will likewise determine the price or the wage of the factors of
production necessary to produce the product. This price allocated to the factors of production
results in income distribution. (2;4)
FOR FURTHER REFERENCE USE THIS BRIEF BIBLIOGRAPHY BELOW:
1. CAMPBEL, SALLY R. OUT ECONOMIC SYSTEM, ESSAY AND TEACHERS’
GUIDE, SEARS , ROEBUCK, AND CO., CHICAGO, ILLINOIS, 1976.
2. CONSUMER EDUCATION CURRICULUM GUIDE FOR OHIO, 1976,
VOCATIONAL EDUCATION DIVISION, STATE DEPARTMENT OF EDUCATION,
COLUMBUS, OHIO 1976
3. ECONOMICS IN THE CURRICULUM JOINT COUNCIL ON ECONOMIC
EDUCATION. JOHN WILEY & SONS, INC., NEW YORK, N.Y., 1970
4. GLASSNER, SHERWIN S AND EDWARD N. GROSSMAN. HOW THE
AMERICAN ECONOMIC SYSTEM FUNCTIONS. BENEFIC PRESS,
WESTCHESTER, ILLINOIS, 1963.
5. INTRODUCING ECONOMICS, FEDERAL RESERVE BANK OF BOSTON,
BOSTON, MASS, 1976,. FREE, WRITE: BANK AND PUBLIC INFORMATION
CENTER, FEDERAL RESERVE BANK OF BOSTON, BOSTON, MASS. 02106
6. KOURILSKY, MARILYN, BEYOND SIMULATION, THE MINT-SOCIETY
APPROACH TO INSTRUCTION IN ECONOMICS AND OTHER SOCIAL
SCIENCES EDUCATIONAL RESOURCE ASSOCIATES, INC., SANTA MONICA,
CALIF., 1974
7. MAHER, JOHN E, WHAT IS ECONOMICS JOHN WILEY & SONS, INC. NEW
YORK, NY 1969
8. SAMUELSON, PAUL A, ECONOMICS, MCGRAW-HILL BOOK COMPANY, E,
NEW YORK, NY, 1973
9. THE AMERICAN ECONOMIC SYSTEM…AND YOUR PART IN IT. THE
ADVERTISING COUNCI AND U.S DEPARTMENT OF COMMERCE, 1975.
SINGLE COPY FREE, WRITE; “ECONOMICS,” PUEBLO, COLORADO 81099.
10. THE MOCHANS, A MYTHICAL ECONOMIC SOCIETY, P.O BOX 1400K,
DAYTON, OH, 45411, $1.50
11. WILSON, W, HARMON AND ROMAN F, WARMKE, LIFE ON PARADISE
ISLAND; SCOTT, FORESMAN AND COMPANY, GLENVIEW, ILLINOIS, 1970
supply/demand and price
Teacher Information: This page is teaching information.
Information may be adapted to use as learning activities for students.
THE IMPORTANCE BEHIND TEACHING….
ABOUT SUPPLY DEMAND AND PRICE
 Knowledge about supply, demand and price relationships is important for a basic
economic understanding. The supply, demand and price relationship is used everyday by
students.
 Students should understand how supplies of goods and services affect everyday living.
(example: energy)
 Students should understand how the relationship of supply, demand and price affect
wants and needs of the family and the individual.
Teachers in the primary grades can help students to develop basic concepts that will build a
foundation for a more sophisticated appreciation of economics at a 1ter age.
In the process of learning more about supply, demand and price, students will gain an
understanding of the American economic system.
BASIC PRINCIPLES INCORPORATED
Supply and demand affect the wages we are paid; these wages are really the prices we charge for
performing work.
Supply and demand affect the price of goods and services, and the price of raw materials.
Two factors work together to determine the supply of a product, service or resource are
1) the cost of producing it and
2) the selling price.
supply/demand and price
Prices play a role in the balancing act between the supply of goods and services, and the
demand for them in the marketplace.
More money being made available for spending without a corresponding increase in goods
and services encourages the buyer to pay higher prices.
Increased supply of goods and services without a corresponding increase in the money
supply decreases prices.
SUPPLY/DEMAND AND PRICES
Teacher Information: This page is teaching information.
Information may be adapted to use as learning activities for students.
AFTER COMPLETION OF THIS PACKET STUDENTS WILL RECOGNIZE AND
DESCRIBE:
• HOW SUPPLY NIGHT AFFECT DEMAND
• HOW DEMAND MIGHT AFFECT SUPPLY
• HOW PRICE MIGHT AFFECT DEMAND AND/OR SUPPLY
• HOW DEMAND AND SUPPLY MIGHT AFFECT PRICE
• EXAMPLES OF HOW SUPPLYJDEMAND AND PRICE AFFECT ONE ANOTHER
• EXAMPLES OF HOW SUPPLYJ DEMAND AND PRICE INFLUENCE OUR EVERYDAY
LIVING; THE FAMILY AND THE INDIVIDUAL
supply/demand and prices
Teacher Information This page is teaching information.
Information may be adapted to use as -learning activities for students.
"YES, I GOT No BANANAS
(SUPPLYJDEMAND AND
PRICE)
HOW TO USE:
TEACHER INFORMATION SHEETS WILL PROVIDE THE TEACHER WITH A BASIS
FOR STARTING A UNIT AND LESSON PLANS.
LEARNING ACTIVITY SHEETS WILL PROVIDE CLASSROOM PRESENTATION IDEAS
AND LEARNING STRATEGIES FOR STUDENTS.
OPTIONAL LEARNING ACTIVITY SHEETS CAN BE AN OPTIONAL LEARNING
ACTIVITY TO EMPHASIZE CONCEPTS FOR STUDENTS.
SUPPLY/DEMAND
AND PRICE
All the citizens of Maxville relied heavily on the sun to heat their home in the winter of 2002.
The sun would beat down on their solar units on the tops of the roofs of their homes. The
process worked nicely and all the citizens were warm and cozy on cold winter days and nights.
One day the citizen council of Maxville discovered that the Sunscreen Company had bought ten
acres of land on the west side of town and ten acres on the east side of town. The workers of the
Sunscreen Company had begun to build two huge black arched screens with big round holes in it
that could be opened like a camera's eye. One arched screen was on the west side of town and
the other on the east side of Maxville.
All the citizens of Maxville were ALARMED! How could the citizens still have sun to heat their
homes if the Sunscreen Company to huge black arched screens continued to be built? Why, that
arched screen would definitely block out the sun which helped heat the citizens' homes. IS
THAT WHAT THE SUNSCREEN COMPANY WAS BUILDING THE ARCHED SCREEN
FOR?
The members of the citizens council of Maxville went to see the president of the Sunscreen
Company to talk over the problem of these arched screens. The president of the company said
yes indeed that he was going to charge the citizens of Maxville for the use of the sun holes
which would be opened in the huge arched black screens when each citizen paid him $350.00 a
month. The president went on to say that he had gotten a sun permit from the government and
that his company was completely in their rights.
Discussion questions:
What did the Sunscreen Company owners have control over?
Who were the Suppliers? the citizens of Maxville or the owners of the company?
What was in demand and why?
What do you think the Citizens of Maxville ought to do?
SUPPLY DEMAND
AND PRICE
Games
SUPPLY DEMAND AND PRICE STRATEGIES
BID-OF-FUN
Give each student a quantity of play money. Let the students bid on the following items
which they might need on a school day. Tell the students this is the total amount available of
the item for the day.
Examples:
1 baseball
5 felt pens
1 eraser
1 super game (which the students like to play)
10 pieces of paper
10 recess passes
10 pieces of chalk
Follow with a discussion on why certain items became very costly while others did not? Did
supply have something to do with the cost? Did demand have something to do with the cost?
ZIPPIE ZAP vs. SLIMMIE-GIMME
Divide the class in thirds, have 1/3 of the students be CONSUMERS, 1/3 be PRODUCERS of
"ZIPPIE ZAP" and the remaining 1/3 be PRODUCERS of "SLIMME-GIMME".
'Consumer Directions:
Give each consumer $20 to spend and instructions to spend $5
the 1st round, $10 the 2nd and$15 the 3rd.
• Producer Directions:
the following items:
Give the producers of "ZIPPIE ZAP" and "SLIMMEGIMME"
2 glue bottles
100 toothpicks
40 pieces of colored paper
scissors
20 paper clips
20 rubber bands
Then have each producer group design and make a product(s). Tell students beforehand that
there will be 3 rounds of selling and buying.
supply/demand and price
Objective of the game is to see which producer team can make the most money.
Suggestion time for ROUNDS:
1st
10 minutes
2nd
15 minutes
3rd
15 minutes
Discussion Questions:
Why did a certain product sell over the other ones?
What did demand have to do with the consumer buying products?
What did supply have to do with the consumers buying the products?
What did the price have to do with the consumer buying the product?
How do sellers and buyers influence on another?
Why were the consumers willing to spend more the second and third round?
supply/demand and price
SUPPLY AND DEMAND
WHAT WOULD BE IN SUPPLY?
DIRECTIONS: Place an "X” in the spaces provided if your answer is YES.
Place an "O” in the spaces provided if your answer is NO.
Be sure in fill in every space with an "O" or "X".
IF YOU WERE .....................................
1. On a small unpopulated island in the middle of the Atlantic Ocean?
a.
b.
c.
d.
salt water
sea shells
electricity
paper
2. In a grocery store
a. peanut butter
b. dogs
c. crackers
d. saltwater
3. In a flower shop
a. planting pots
b. flower seeds
c. crackers
d. vases
4. In a desert
a.
b.
c.
d.
an oasis
palm trees
rice
sea shells
supply/demand and price
WHAT WOULD HAPPEN
IF EVERYONE WANTED TO EAT PEANUTBUTTER?
WHAT WOULD FARMERS DO?
GLASS COMPANY WORKERS?
BREAD COMPANY WORKERS?
IF EVERYONE WANTED TO SLEEP ON WATER BEDS?
WHAT WOULD BED COMPANY WORKERS DO?
FURNITURE STORE SALESPERSONS DO?
IF EVERYONE WANTED TO WEAR WOOL HATS?
WHAT WOULD FARMERS DO?
WOOL MILL WORKERS DO?
CLOTHING STORE WORKERS DO?
IF EVERYONE STOPPED EATING CANDY?
WHAT WOULD CANDY COMPANY WORKERS DO?
CHOCOLATE BEAN GROWERS DO?
IF EVERYONE STOPPED DRINKING MILK AT LUCH TIME?
WHAT WOULD THE CAFETERIA MANAGER DO?
MILK COMPANY SALESPERSON DO?
MILK CARTON MAKERS DO?
supply/demand and prices
SUPPLY/DEMAND AND PRICE CLASSROOM STRATEGIES
Have students brainstorm some "demand" items they have that there may not be a supply of in
their family.
Have students list on the chalkboard "demands" of a family. Follow with a discussion of how
these demands are either met with supply or not.
Have students make bulletin boards in the classroom by cutting out pictures of demand items
with yarn strings matching where the supply for the demand might be found.
Student groups could research and report the following items that have a high price or a low
price:
High Price
Diamonds
Oil
Cars
Fur coats
Low Prices
paper
ice cream
cereal
chalk
supply/demand and prices
Optional Learning Activity:
Directions:
Have student partners match the "supply item card to the demand card. Color code the supply
cards(pink) and the demand cards another color. Then have the students check against the
answer key.
Winner is the most correct answers.
SUPPLY CARDS
DEMAND CARDS SET 1
Tires
gasoline
paper
flea collars
leashes
planting pots
plant food
Cloth
Ink
Cars
SUPPLY CARDS SET 2
MILK
TREES
WATER
ELECTRICITY
STEERS
WASHING MACHINES
comic books
dogs
house plants
T-shirts
Ballpoint pens
DEMAND CARDS SET 2
hungry baby
paper
thirstiness
lighting for a house
hamburger
dirty clothes