Download Market Price I - Okemos Public Schools

Play Dough
Economics
Cornell Cougar Company
Lesson 11
2010-2011
Tuchek
Market Price I:
Changes in Supply
•Production must take place to supply
goods & services.
• The Law of Supply states that
suppliers will supply more
at high prices than at low prices.
• In other words, there is a direct relationship between
price & the quantity of goods producers will supply.
Market Price I:
Changes in Supply
• The market price of a good or service is
determined by the interaction of
supply & demand.
• If other things do not change, the market price
of a good or service will decrease if
supply increases.
• The market pricewill increase if
supply decreases.
Market Price I:
Changes in Supply
• In a competitive market of many buyers and sellers,
producers must “take” the market price of the good
or servicethey produce.
They have little or no
power to control prices.
• If producers cannot make
profits at the market price,
they must increase efficiency
by reducing their costs, or
they must produce a different
good or service.
Market Price I:
Changes in Supply
• Remember in any market, it is the interaction
of supply and demand which determines a
market price.
• In this lesson, the demand
is assumed to be constant,
and it is only the supply
that changes.
Play Dough Time…
• You are going to participate in an economics production contest
to see who can make the most money.
• Your table is your “factory.”
• Groups should consists of equal numbers of students.
• About 5 or 6 students to a group.
• In groups where there is an extra student, there should be a
non-producing “quality control job.” Rotate this job to a new student each
production round.
• Each group will also have a “production manager” and an
“accountant.”
Play Dough Time…
• In this activity, there are three separate production rounds of about 5
minutes each. The timer will be set.
• Each group produces the following:
* baskets of apples
* cups & saucers
* hammers
* shirts
• Groups do not have to make some of each good; they can produce
any combination.
• Each good produced must be the same size.
• Each good must contain at least two colors of play dough.
Play Dough Time…
• After each round, I will pay from $2.00 to $10.00 for each good
the group produces.
• The exact market price will depend on the supply of goods that
all the groups produce.
• Remember, we are assuming today that the demand for each
good is the same and does not change.
• Only the supply changes.
• The group that earns the most money wins.
Play Dough Time…
• Each factory will receive the same amount of play dough in which to
work with for this activity.
• You may only use your hands for this activity – no capital allowed.
• Remember that you should produce a high quality good.
• Sloppily made goods will not be accepted.
• You may specialize and/or divide your labor (assembly line) if your
group chooses.
• Each group accountant will receive a Revenues Worksheet to be
completed after each round.
• Each production manager will announce how many of each good
his/her group produced.
Play Dough Time…
Market Supply & Market Price Chart
(Assume that DEMAND is Constant)
Goods Supplied
to the Market
by the Class
0–8
9 - 12
13 - 16
17 - 20
Over 20
Resulting
Market Price
$10.00
$ 7.00
$ 5.00
$ 3.00
$ 2.00
Changes in Supply Rounds
Round 1
Basket of apples:
Cups & saucers
Hammers:
Shirts:
Round 2
Round 3
Supply & Demand
• If the market price for a good is high what are suppliers
likely to do?
• Produce more
• If the market price is low, what are suppliers likely to
do?
• Produce less
• What economic law does this illustrate?
• Law of Supply
• If supply increases while demand remains constant,
what happens to the market price?
• It goes down.
• If supply decreases while demand remains constant,
what happens to market price?
• It goes up.