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Transcript
Supply and
Demand
A MARKET IN WHEAT
Today’s Objective

After today’s lesson, students will be able to…
 Explain

how supply and demand work together
Essential Skill:
 Demonstrate
understanding of concepts
A Market in Wheat
 Read
over the instructions for this activity
BUY AND SELL!
ROUND 1
ROUND 2
ROUND 3
Hints!

More transactions = More chances at profit. You must
buy and sell each round

You should not let other students see your card

You can only have one card at a time

You do not have to make a profit with every transaction.
Win the war, not all the battles.

Check in on the class transactions tally to see what
wheat is going for these days!
What your graph should look like:
Questions
At
what price was wheat most
frequently sold in each round?
Why did the prices become more
clustered together in the later rounds?
Did buyers or sellers determine the price
for wheat?
How did competition among the sellers
and the buyers influence the price?
Market
wheat
redwood lumber
cigars
butter
paper
Hula hoops
yachts
gasoline
umbrellas
tofu
gasoline
hamburger
oranges
apples
grapes
Event
A drought destroys much of the crop.
Environmentalists urge consumers to boycott redwood products.
A new study shows that smoking cigars results in lots of wrinkles.
The price of margarine goes up.
The price of wood pulp rises.
Brad Pitt confides to People magazine that "he gets a big kick out
of his hula hoop."
The average price of stocks falls by over 20% between now and
the end of the year.
Large sports-utility vehicles (like Suburbans and Expeditions)
become more popular.
Heavy rain is forecast.
E. Coli bacteria is found in another meat plant.
Two oil supertankers collide.
The price of hamburger rises.
There's an early frost which destroys much of the crop.
A new pesticide is developed which controls tent caterpillars.
The government bans the use of pesticides.
wine
The average wage of grape harvesters rises by 10%.
U.S. cars
The U.S. imposes a tariff on Japanese car imports.
hospital beds
Scientists discover a pill that cures cancer.
cement
Video rentals
windshields
A 7.9 earthquake hits San Francisco.
The price of getting cable TV goes up.
A new law is passed requiring gravel trucks to cover their loads with tarps.
Taxi service
Bike helmets
melons
Lucerne milk
jellybeans
Oreo cookies
Local subway workers go on strike
The price of bicycles goes down
The cost of water goes up.
The price of Safeway milk goes down.
The price of jellybeans goes up.
The price of milk increases.
Burger King
whoppers
Hot dogs
McDonald's lowers the price of Big Macs.
Hot dog buns
The price of flour rises
butter
Mad Cow Disease wipes out a lot of dairy cows.
candles
An electric company official announces that a computer bug will likely
result in power outages.
60 Minutes does an expose called "The Truth about Hot Dogs."
Situation
A coffee producer notices an increase in coffee
prices and responds by increasing coffee
production
A local bakery is able to obtain ingredients for
making baked goods at a lower cost
Supply or quantity
supplied?
QS
S
The government collects a new tax from firms on
each unit of output produced
S
A new technology is discovered that enables
firms to produce more output from the same
quantity of an input
The government gives firms a subsidy for each
unit of a good that is produced
S
Book publishers have an expectation that e-book
sales will surge in the next year and prices rise
The price of oil decreases
Favorable market conditions bring more sellers
into the market
S
S
QS
S
Pencil producers expect an
increase in the price of pencils in the
near future.
Decrease
The number of pencil producers
decrease.
The government subsidizes the
production of pencils.
Decrease
The price of pencils increases
No Effect
A technological innovation lowers
the cost of producing pencils
The government taxes producers of
pencils
Wage rates for workers who make
pencils increase.
Increase
Increase
Decrease
Decrease
 Along
a supply curve, if the price of oil falls,
what will happen to the quantity of oil
supplied?
 It
will decrease
 It will increase
 It will not change
 If
the price of cars falls, carmakers are likely
to make ___________.
 More
cars
 Fewer cars
 The same amount of cars

All other things held constant, which of the following would not
cause a change in the supply of beef?





A decrease in the price of beef
A decrease in the price of cattle feed
An increase in the price of cattle feed
An increase in the cost of transporting cattle to market
“Falling oil prices have caused a sharp decrease in the supply of
oil” Speaking precisely, and using terms as they are defined by
economists, choose the statement that best describes this
quotation.




The quotation is correct: a decrease in price causes a decrease in supply.
The quotation is incorrect: a decrease in price causes an increase in supply, not a
decrease in supply.
The quotation is incorrect: a decrease in price causes an increase in the quantity
supplied, not a decrease in supply.
The quotation is incorrect: a decrease in price causes a decrease in the quantity
supplied, not a decrease in supply.
Bottom Line
 The
price of nearly everything that
you buy is determined by the
interaction of supply and demand.
Supply and demand also determine
the quantity of goods and services
that are bought and sold in a market.
Putting it Together

To determine price, we put both the
supply and demand curve together
on the same graph

Next we establish an equilibrium
price: point at which the quantity
supplied equals the quantity
demanded

Equilibrium is found at the point
where the two lines intersect
Shortage
Surplus
Each curve can shift: Single Curve
Shifts
Four Single Shifts
Memorize
1.Demand
, then P
2.Demand
, then P
3.Supply
, then P
4.Supply
, then P
, and Q
, and Q
, and Q
, and Q
Increase in Demand
S0
B
60
A
50
D1
D0
0
80
90
100
Quantity of Video Games (thousands)
Decrease in Demand
S0
E1
Pe1
E
Pe
D0
0
D1
Qe1 Qe
Quantity of Video Games (thousands)
Increase in Supply
S0
S1
E
$50
30
E1
D0
0
80 95
Quantity of Video Games (thousands)
Decrease in Supply
S1
S0
E1
$60
40
E
D0
0
90 100
Quantity of Video Games (thousands)
https://www.youtube.com/watch?v=
V0tIOqU7m-c
Practice Single
Shifts Worksheet
Dual Shifts-When both curves
move
D
S
P? Q
D
P
S
Q?
D
S
P? Q
D
P
S
Q?
CHANGES IN BOTH SUPPLY
AND DEMAND
If supply and
demand decrease
by the same
amount, price will
be unchanged and
the quantity will
decrease.
CHANGES IN BOTH SUPPLY AND
DEMAND
If supply
decreases less
than demand,
price will
decrease and
quantity will
decrease.
CHANGES IN BOTH SUPPLY
AND DEMAND
If supply
decreases more
than demand,
price will increase
and quantity will
decrease.
CHANGES IN BOTH SUPPLY
AND DEMAND
If supply increases
and demand
decreases, the price
will decrease and the
quantity will not
change.
Practice
 Take
a worksheet from the front to
practice double shifts. There will also be
examples of single shifts