ECONOMICS
UNDERSTANDING
SUPPLY AND DEMAND
ESSENTIAL QUESTIONS


How do competition, markets,
and prices influence people’s
behavior in consuming?
How does production and
opportunity impact our
purchases?
VOCABULARY
Here is a list of a few businesses in your community. Can you think of more?
What Is a Business?

A business tries
to make money
by selling goods
or providing a
service

Here is a list of a
few businesses in
your community. Can
you think of more?
- grocery stores
- clothing store
- jewelry store
- discount store
- drugstore
- car repair shop
- doctor's office
- dry cleaners
- bank
- movie theater
The Marketplace





In our country, we have a market
economy.
Buying and selling creates the
marketplace.
Businesses are sellers. They sell goods
and services to make money.
People who pay for goods and services
are called buyers.
Buyers and sellers come together in the
marketplace.
Competition in the Marketplace


Can you think of two stores that sell
candy? Those two stores are
competitors. They are competing for
your money. Both stores want you to
buy their candy.
When two or more businesses sell the
same goods or service, they are
competing for the same market.
When Businesses compete…
 they
try to find ways to get you
to choose them.
 Buyers get to choose where to
spend their money.
 This is competition in the
marketplace.
Competition in the Community






Burger, Burger!
Burger King and McDonalds are two
hamburger restaurants.
Both sell soda, french fries, and
hamburgers.
Both want you to eat at their restaurants.
Both want you to spend your money at
their restaurants.
ARE THESE TWO RESTAURANTS
COMPETITORS?
YES.
BECAUSE THEY SELL
SIMILAR ITEMS, THEY ARE
CALLED COMPETITORS.
ANOTHER EXAMPLE

Target, K-Mart, and Wal-Mart
All three businesses sell clothing, food,
and toys.
All three offer low prices.

ARE THESE STORES COMPETITORS?


Because they sell
similar items, they are
called
competitors.
Burgers and Shoes!



Burger King© sells soda, french fries,
and hamburgers.
ShoeTown sells shoes, boots, and
sneakers.
Both businesses want your money.

ARE THESE BUSINESSES
COMPETITORS?
ANSWER



Burger King only competes in the
burger market with other burger sellers
trying to attract burger buyers.
ShoeTown competes in the shoe
market with other shoe stores, wanting
shoe buyers to come to shop.
So Burger King© and ShoeTown are
not competitors: They and do not
compete in the market for the same
customers.
COMPLETE THE
FOLLOWING EXAMPLES
FROM THE FOLLOWING
LINK:
SUPPLY
AND
DEMAND

Yesterday, when Stan
was walking through
town, he decided to go
to “Bubba’s Ice Cream”.
His friend Diana works
there. Diana provides a
service to Stan
because she serves
him ice cream. A
service is any kind of
work performed for
others. The ice cream
is a good. A good is
something you can feel,
or any kind of
merchandise.
Bubba’s Ice Cream
 Look
at the
pictures on
the right.
Which of
these pictures
show goods
and which
ones show
services?
1)
2)
3)
4)

I’m sorry
Stan!
Stan asked Diana
for a double scoop
of his favorite kind
of ice cream: mint
chocolate chip. “I
am sorry Stan, we
are all out of that
flavor”, she said.
Disappointed, he
settled for vanilla.
What is supply and demand?
Gallons

100
90
80
70
60
50
40
30
20
10
0
vanilla choc. straw.
Flavors
mint
choc.
The supply of mint
chocolate chip ice
cream at “Bubba’s”
was gone because it
was in high demand
(wanted) by many
customers. Look at
the chart on the left
to see what flavors
are in supply at
“Bubba’s Ice
Cream”.

Diana asked Stan if he
would like his vanilla ice
cream in a cup or a cone.
He asked for a cone.
Diana said he was lucky
because there was only
one more cone available.
The little boy behind him
in line cried, “I wanted my
ice cream in a cone!”
Stan told Diana that the
little boy could have the
last cone, and that he
would have his in a dish
with chocolate syrup.

There was a
scarcity of cones
at Bubba’s.
Scarcity means
that there are
limited resources,
and therefore,
people must
make choices.
Look at the
pictures on the
right. Which
pictures show a
scarcity?
1)
2)
3)
PRODUCERS AND CONSUMERS

A boy, named Andy,
answered: “We’ve
saved up all our money
and today we are
going to the toy store!
My sister Sara wants
to buy either a rabbit or
a bike and I want to
buy either a basketball
net or a skateboard”.
Toy Store
What are producers and
consumers?


The two children in this example are
consumers. A consumer is anyone
who buys a good or a service.
The toy store owner in this example is a
producer. A producer is anyone who
makes or grows a good or performs a
service.
What is opportunity cost?

Andy had $65.00
to spend at the
toy store. The
basketball net
cost $50.00, so
he had to buy that
instead of the
skateboard, which
cost $75.00.

Sara had enough
money for either
the rabbit or the
bike. She decided
to buy the bike
because then she
could ride bikes
with her friends
after school.
Opportunity
Costs
Purchases

Opportunity cost is
the process of
choosing one good
or service over
another. The item
that you don’t pick is
the opportunity
cost. The rabbit is
Sara’s opportunity
cost and the
skateboard is
Andy’s opportunity
cost.
Goodbye!

This completes my
lesson on
economics! I hope
you enjoyed the
tour. Economics is
an important part of
our lives. Think of
all of the ways you
use economics
everyday!
References

Text Information:

Think Quest Junior: “Econopolis” [Online] Available
http://tqjunior.advanced.org/3901/ Copyright 1997. Advanced
Network and Services, Inc.
Pocket Dictionary for Economics. Available through Virginia
Commonwealth Center for Economic Education (no
copyright).
The Economic Songbook: Old Tunes with an Economic
Twist. “We Are Consumers!” Copyright 1997, Martha C.
Hopkins. James Madison University Center for Economic
Education.
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Graphics Information:

Microsoft Clip Gallery 3.0 (no sitations)
#1 Free Clip Art. [Online Graphics]. Available
www.1cli[part.com/ Copyright 1999 #1Free Clip Art
