This lesson we will be learning about
Supply and Demand
What do we mean by this?
Tile and today’s date in your books
NO IDEA
I NEED HELP
NEVER HEARD OF IT
OK
I CAN DO THIS WITH SUPPORT
SOME GUIDANCE NEEDED
NEARLY AT MY TARGET
GOT IT!
VERY CONFIDENT
WILL HIT MY TARGET GRADE
EXCEED
TARGET
LEARNING OBJECTIVES
To understand that a market is made up of buyers and sellers
To explore the factors affecting demand and supply
Success Criteria
<C
Define primary, secondary and tertiary sector
To describe the difference between a goods market and a commodity market
Draw a demand curve using the data provided
Identify factors which cause the demand and supply curve to move (fall or increase)
C>
Define primary, secondary and tertiary sector using examples
Describe factors which cause the demand and supply curve to move (fall or increase)
B>
Explain factors which cause the demand and supply curve to move (fall or increase)
A > QOWC and SPAG
Topic Areas in 1.5
1.5 Understanding the economic context
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-market demand and supply
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-impact of change of interest rates
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-impact of changes in exchange rates
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-business cycles
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-effects on stakeholders
Fill in the gaps (essential notes)
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1.5 - Commodities
[Fill in the gaps]
_______________ like copper, iron, coal, oil and wheat
Commodity market – commodities are traded for an agreed price.
The _______ represent the __________ for a commodity and the
________ represent the __________ for a commodity.
___________ are set by a balance of demand and supply
Demand in the commodity market
The amount that buyers are willing and able to purchase at a given price
If demand increases this may cause a ___________ (demand exceeds
supply)
Commodity Market
Commodities – raw materials like copper, iron,
coal, oil and wheat
Commodity market – commodities are traded for
an agreed price. The buyers represent the
demand for a commodity and the sellers
represent the supply for a commodity.
Prices are set by a balance of demand and supply
Demand in commodity markets
The amount that buyers are willing and able to
purchase at a given price
If demand increases this may cause a shortage
(demand exceeds supply)
Question: What will happen to the price if there is a
shortage?
It will rise
Demand in commodity markets
The amount that buyers are willing and able to
purchase at a given price
If demand increases this may cause a shortage
(demand exceeds supply)
Question: What will happen to the price if there is a
shortage?
It will rise
Supply in commodity markets
The amount that sellers are willing/ able to sell at any
given price.
In 2007 , bad weather hit wheat harvests in Australia,
parts of Canada, the US and Europe, as a result the
world supply of wheat fell.
If supply exceeds demand there is a surplus in the
market.
If demand for a commodity is greater than supply,
then there will be a shortage in the market.
Question: What will happen to the price?
It will increase
Supply in commodity markets
The amount that sellers are willing/ able to sell at any
given price.
In 2007 , bad weather hit wheat harvests in Australia,
parts of Canada, the US and Europe, as a result the
world supply of wheat fell.
If supply exceeds demand there is a surplus in the
market.
If demand for a commodity is greater than supply,
then there will be a shortage in the market.
Question: What will happen to the price?
It will increase
Goods Market
Goods Market - The market for everyday goods e.g. crisps,
magazines
The price of products in a goods market changes a lot more
gradually and less frequently than in a commodity market.
Customers would find it confusing if prices changed regularly
and businesses would find it time consuming and expensive to
change price labels regularly.
Samples
Goods
Commodities
Control over the goods market
More control over prices in a goods market –
businesses choose the price (price maker)
they sell products at whereas commodities
tend to go to auction and must take the price
they get (price taker)
Goods Market – Price maker
Commodity Market – Price taker
http://www.youtube.com/watch
?v=7KoJh5mwTG4
Add video on price markers and
takers
Silver – Supply & Demand
• Part 1
• http://www.youtube.com/watch?v=M3uNsEfg
ZXY&list=UUBL1EFppmbaKFAJU1gocB9A&inde
x=3
• Part 2
• http://www.youtube.com/watch?v=2auBA7xa
UCk&list=UUBL1EFppmbaKFAJU1gocB9A&ind
ex=2
Raw Material and Energy Costs
Many small businesses have to buy raw materials
(commodities) and energy.
A café supplies goods in the goods market but uses / purchases
electricity which is part of the commodity market.
If commodity prices change it has a major effect on the costs
of the business. Many businesses absorb the increase in
prices rather than passing the price rise on in the short term
Price increases in the goods market tend to get past on after
an annual review of prices (known as inflation).
If the costs of production increase how does this affect the
businesses finances?
Profit falls
Raw Material and Energy Costs
Many small businesses have to buy raw materials
(commodities) and energy.
A café supplies goods in the goods market but uses / purchases
electricity which is part of the commodity market.
If commodity prices change it has a major effect on the costs
of the business. Many businesses absorb the increase in
prices rather than passing the price rise on in the short term
Price increases in the goods market tend to get past on after
an annual review of prices (known as inflation).
If the costs of production increase how does this affect the
businesses finances?
Profit falls
TEST YOURSELFStudents must stick the handout in
book
1. The price of oil rises on world markets. This is
most likely to be because
A the demand for oil has risen
B the supply of oil has risen
C the supply of oil has risen faster than demand or
oil
D the demand for oil has risen faster than the
supply of oil
Answer:
D
TEST YOURSELFStudents must stick the handout in
book
1. The price of oil rises on world markets. This is
most likely to be because
A the demand for oil has risen
B the supply of oil has risen
C the supply of oil has risen faster than demand or
oil
D the demand for oil has risen faster than the
supply of oil
Answer:
D
TEST YOURSELF
2. Jake Wooley runs a flower shop in London. He buys most of his flowers
from a supplier in the Netherlands. The supplier in the Netherlands
increases its prices. Jakes decision about whether he puts up the price
of flowers to his customers because of this cost increase is most likely
to depend on
A
how much insurance he pays
B
how big is the increase in the price of the flowers he buys
C
the amount of flowers he sells each week
D
which supplier he buys his flowers from
E
how large a proportion of his total costs is made up from
buying flowers
2 answers
Answer: B + E
TEST YOURSELF
2. Jake Wooley runs a flower shop in London. He buys most of his flowers
from a supplier in the Netherlands. The supplier in the Netherlands
increases its prices. Jakes decision about whether he puts up the price
of flowers to his customers because of this cost increase is most likely
to depend on
A
how much insurance he pays
B
how big is the increase in the price of the flowers he buys
C
the amount of flowers he sells each week
D
which supplier he buys his flowers from
E
how large a proportion of his total costs is made up from
buying flowers
2 answers
Answer: B + E
TEST YOURSELF
3. Dylan Parkes has reopened a former tin mine in Cornwall. He
produces a small amount of tin which he sells at auction in London.
He also uses the mine as a tourist attraction, charging visitors to
come and see old workings. Which one of the following is most
likely to be true about his business?
A
He has to accept whatever price is set at auction for his tin
B
He has no control over the price he sets for visitors to see
the mine
C
He cannot charge a higher ticket price to visitors in July and
August than at other times of the year
D
He can decide for what price he sells his tin
Answer:
A
TEST YOURSELF
3. Dylan Parkes has reopened a former tin mine in Cornwall. He
produces a small amount of tin which he sells at auction in London.
He also uses the mine as a tourist attraction, charging visitors to
come and see old workings. Which one of the following is most
likely to be true about his business?
A
He has to accept whatever price is set at auction for his tin
B
He has no control over the price he sets for visitors to see
the mine
C
He cannot charge a higher ticket price to visitors in July and
August than at other times of the year
D
He can decide for what price he sells his tin
Answer:
A
OVER TO YOU
Next – Go through some sample
answers
Over to you – teacher notes
1. Steel is a commodity therefore the price is set by demand and supply.
Demand has exceeded supply – shortage . The bigger the surplus the
bigger the rise in price
3 marks
2. Two effects must be analysed
-make a loss. Need to seek other ways of cutting costs
-close down in the long run
6 marks
3. Unhappy, move to competitors, stay with Gillians due to their excellent
customer service
6 marks
4. No because the increase in price is being used to cover the rise in
commodity prices. Instead staff will be dealing with unhappy customers
(complaining about the price rise)
6 marks
Quick Questions
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What is Steel? Commodity or Good (why?)
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How is the price for Steel set?
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What happens if there is a shortage of steel?.
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What is Steel? Commodity or Good (why?)
is a commodity
How id the price for Steel set?
As a commodity the price is set by demand
What happens if there is a shortage of steel?.
Demand has exceeded supply – shortage . The
bigger the surplus the bigger the rise in price