#12 Non-price Competition #13 Supply and Demand

Standard 12: Distinguish between price and non-price competition; provide 5 examples of competition for customers.
Standard 13:  Explain the theory of supply and demand by diagramming a recent purchase of both an elastic and non-elastic product.Use the price paid at the time of the purchase as the equilibrium price; show the impact on price due to an increase or decrease in demand or supply.

Introductory Concept

1. Distinguish between price and non-price competition from page 116 in your text book.
2. On your own sheet of paper provide five non-price examples of competition for customers.
3. When you finish your paragraph, read pages 119- 121 in your text book.

What's It Worth To You?

What would you pay for the price of this candy?  .25, .50, .75, $1, $1.25?

Review

• Economies are created as nations provide for the needs and wants of its people through economic resources (factors of production)
• What are the different types of economies?
• Who determines what goods/services are made and sold?
• What economy best describes the U.S.?
• Last lesson we leaned that a market economy is generated by the free enterprise system (competition)
• Monopolies
• Examples of price competition
• Examples of non-price competition

Standard/ Objectives for Today

1. Explain the theory of supply and demand
2. Diagram both elastic and non-elastic products
3. Understand the impact on price due to increase or decrease in demand or supply

What is Tulip Mania?

Have you ever heard the term "tulip mania?" Watch this video and find out about what happened in the 1600's in the Netherlands that generated this title.

Class Discussion

Since we have been learning about our free enterprise system, it might be interesting to see how prices are assigned to the products that you want to purchase.  Remember, in a command economy the government calls all the shots about what, who, and how products are made available.

In a market economy prices are determined by supply and demand. 


Let's look at figure 5.1 on page 120 to see how supply and demand works.

1. What is the theory of supply?  (Where did you find that?)
2. The price of a movie ticket goes from $7.00 to $8.50.  What should happen to the demand for these tickets?
3. Why would an economist say that "Supply and demand are inversely related to one another"?

Surpluses

Businesses try to avoid surpluses and shortages, both of which can lead to problems.

1. What are some synonyms for surplus?
2. What are two common causes of surpluses?

Shortages

1. What is an example of a situation in which a shortage is caused by a change in supply?  A change in demand?
2. How do shortages affect businesses?
3. You manage a home improvement store.  Your area has just been hit by a flood.  Building supplies quickly become in short supply.  Would you raise prices to profit from this shortage?  Why or why not?

Equilibrium

1.  How would you define the equilibrium point?
2. On your paper draw the demand curve on page 120 from the data at the top of the illustration.

Recap

Remember: In a market economy prices are determined by supply and demand.  Let's watch this instructional video explaining how this occurs in our economy.

Questions to Think About

1. What product that you recently purchased could be used as an example of supply and demand in action?
2. What are the four different types of economies that we learned about in chapter 3? 
3. Does the theory of supply and demand affect all types of economies?  Why or why not?
4. Any questions?  Ready to take this concept a little deeper?

Elastic vs. Non-elastic

1. Read the "Supply and Demand" Section on pages 592-593 and be prepared to explain the difference between elastic and non-elastic demand.
2. List on your paper the 5 factors that determine demand elasticity on page 594.
3. Notice how the demand curve looks different for non-elastic (gasoline) vs. elastic (pizza)
4. Categorize the following goods and services to tell whether they have elastic or inelastic demand values (be prepared to attach one of the 5 factors that helped you determine elasticity:)
1. salt, gasoline, restaurant meal, Chevrolet automobiles, physician services, movies, iPhone, milk, bread, eggs, toothpicks

Plotting Supply and Demand Curves

Complete worksheet page 49
Using excel spreadsheet complete worksheet page 52
Tips to create a supply and demand scatter plot 
Elastic vs. Inelastic Demand Curve

Bidding War

1. You will either be a buyer or a seller depending on which color card you get.  The goal is to buy or sell one unit of the product being traded (widget).  The price at which you can buy or sell is dictated by your economic situation (maximum or minimum on your card.)
2. You must trade one unit during each round of the game to see who wins the prize.
3. KEEP THE INFORMATION ON YOUR CARD A SECRET!
4. Buyers will make bids on the trading floor anywhere from $0 up to the maximum price on your card.  You cannot bid over your maximum price.  Your profit will be calculated by taking the difference between your max price and the actual price you paid for the product.  To make the most profit, you will want to buy as low as possible.  
5. Remember, each student can only make one transaction per round.  After you have settled on a price with a seller, both students will record the sale on the transaction sheets.  Bring to me to verify and record each sale, then move off the floor until the next round.
6. Sellers will be making offers to sell on the trading floor but cannot ask for a price below their minimum price on their card.  Each seller's profit is calculated by taking the difference between the minimum selling price on their card and the actual price they sold the product.  To make the most profit, sellers want to sell as high as possible.
7. Remember there can only be one transaction per round.  After you have settled on a price with a buyer, both students will record the sale on their transaction sheets, then bring to me to verify and record each sale.  Students should then move off the trading floor until the next round.
8. At the end of each round, students will calculate their total profit.

The student with the most profit at the end of the game receives the winner's prize.

Exit Ticket

  (Using the same paper that you used for your bell work on Tulip Mania),  draw two different demand curves:

1. illustrate the inelastic demand curve
2. illustrate the elastic demand curve