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Understanding Supply and
Demand Concepts
Teacher:Interest Approach
• Hold up a bag of candy. Ask the students
what they would do to get this candy.
Would they pay for it? Stay after school
and do extra work for it? How much is it
worth to them Briefly discuss the concept
of demand. Now give each student a
piece of candy
Teacher - Cont’
• Then hold up a whole bag of candy. Once
again, ask the students what they would
do for the bag of candy. Are as many
people still willing to give or do something
extra for the bag of candy? Why or why
not? Briefly discuss the concept of supply
with the students.
Common Core/Next Generation Standards Addressed!
• WHST.9‐12.7 Conduct short as well as more sustained research
projects to answer a question (including a self‐generated question)
or solve a problem; narrow or broaden the inquiry when appropriate;
synthesize multiple sources on the subject, demonstrating
understanding of the subject under investigation.
(HS‐LS2‐7),(HS‐LS4‐6)
• RST.11‐12.1 Cite specific textual evidence to support analysis of
science and technical texts, attending to important distinctions the
author makes and to any gaps or inconsistencies in the account.
(HS‐LS2‐1),(HS‐LS2‐2),(HS‐LS2‐6),(HS‐LS2‐8)
Agriculture, Food and Natural Resource
Standards Addressed!
• ABS.01.01. Apply micro- and macroeconomic principles to plan and
manage inputs and outputs in an AFNR business.
– ABS.01.01.01.a. Examine and provide examples of microeconomic
principles related to decisions about AFNR business inputs and outputs
(e.g., supply, demand and equilibrium, elasticity, diminishing returns,
opportunity cost, etc.).
Bell Work
Terms
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Commodity
Demand
Elastic
Elasticity of demand
Elasticity of supply
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Fixed cost
Law of demand
Law of supply
Supply
Total Costs
Variable Costs
What is Supply?
• Supply is the amount of goods or services
offered for sale at a given time
• Law of supply- states that a producer will
supply fewer goods or services as prices
decrease and will supply more goods or
services as prices increase
– Elasticity of supplyvariability of supply
based on cost of
production
• Agricultural
commodities such as
livestock and crops
have less elasticity than
other commodities
– Commodity is any
good or product that
is sold
– Lack of elasticity is due to high
cost involved in producing
agricultural commodities.
• i.e. cost of raising cattle
• Costs may include land, feed,
medicines, milking machinery, milk
storage tanks, etc.
•
Cost can be broken down into three
types:
1. Fixed costs-operating costs that are not
directly related to production; usually predetermined and usually cannot be changed.
 Ex. taxes and insurance
2. Variable costs-directly related to production,
these will change over time.
 Ex. labor, raw materials
3. Total costs- sum of fixed and variable costs.
Types of Cost
Fixed Costs
Insurance
X
Taxes
X
Interest on
Investments
Land or Large
Machinery
Labor
X
Variable Costs
X
X
Feed
X
Medicines
X
Fuel
X
Seed, Fertilizer
X
What is demand?
• Demand is the desire for a commodity or
willingness to buy a commodity.
– Based on assumption that prices may differ
but everything else will remain constant,
however, not always true.
– People’s preference may change, substitutes
may become available, or number of people
in marketplace may fluctuate.
• Law of demand states
that people will buy
more of a product at
lower prices and less at
higher prices
– Ex. Corn dogs vs. pork
chops at a fair. The pork
chop may be have a
more desirable taste but
cost more. Therefore,
more corn dogs will be
sold due to the price
• Elasticity of demand is the variability of the
amount of goods or services that will be
purchased at various prices
– Ex. Beef tends to be higher in price than pork
and is often more desirable flavor.
Consumers will buy the pork because it will
still meet their dietary needs and cost less.
This make beef elastic.
– Elastic means that a product is sensitive to
changes in price.
What happens when there is a change
in supply or demand?
• Changes in supply or
demand refer to overall
changes in the products and
services provided and the
demand for them
– Change in supply may be a
decrease in milk supply due to
widespread mastitis infections.
– Change in supply may also be caused by an
increase in wheat production due to extremely
fair weather conditions.
– Both situations caused a change in supply but
did not effect the change in demand.
– Excess supply will result in lower prices.
• Change in demand is anything that causes
consumers to buy more or less of a
product despite its price
– Changes can result from availability and
prices of comparable commodities and
changes in public perception.
• Public perception is a direct result of advertising
Review
• What is Supply?
• What is demand?
• What happens when there is a change in supply
or demand?
The End!