Understanding Supply and Demand Concepts

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• Understanding Supply and Demand Concepts

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TeacherInterest 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

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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.

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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)

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Agriculture, Food and Natural Resource Standards
Addressed!

• ABS.01. Apply management planning principles in
  AFNR businesses.
• ABS.01.01. Apply micro- and macroeconomic
  principles to plan and manage inputs and outputs
  in an AFNR business.
• Sample Measurement The following sample
  measurement strands are provided to guide the
  development of measurable activities (at
  different levels of proficiency) to assess
  students attainment of knowledge and skills
  related to the above performance indicator. The
  topics represented by each strand are not
  all-encompassing.
• 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.).

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Bell Work
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Terms

• Commodity
• Demand
• Elastic
• Elasticity of demand
• Elasticity of supply

• Fixed cost
• Law of demand
• Law of supply
• Supply
• Total Costs
• Variable Costs

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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

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• Elasticity of supply-variability 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

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• 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.

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• Cost can be broken down into three types
• Fixed costs-operating costs that are not directly
  related to production usually pre-determined and
  usually cannot be changed
• Ex. taxes and insurance
• Variable costs-directly related to production,
  these will change over time
• Ex. labor, raw materials
• Total costs- sum of fixed and variable costs

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Types of Cost Fixed Costs Variable Costs
Insurance X
Taxes X
Interest on Investments X
Land or Large Machinery X
Labor X
Feed X
Medicines X
Fuel X
Seed, Fertilizer X
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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.
• Peoples preference may change, substitutes may
  become available, or number of people in
  marketplace may fluctuate.

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• 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

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• 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.

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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.

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• 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.

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• 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

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Review

• What is Supply?
• What is demand?
• What happens when there is a change in supply or
  demand?

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The End!