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! RST.11 ‐ 12.7 Integrate and evaluate multiple sources of information presented in diverse formats and media (e.g., quantitative data, video, multimedia) in order to address a question or solve a problem. (HS ‐ LS2 ‐ 6),(HSLS2 ‐ 7),(HS ‐ LS2 ‐ 8) WHST.11 ‐ 12.8 Gather relevant information from multiple authoritative print and digital sources, using advanced searches effectively; assess the strengths and limitations of each source in terms of the specific task, purpose, and audience; integrate information into the text selectively to to maintain the flow of ideas, avoiding plagiarism and overreliance on any one source and following a standard format for citation. (HSLS1 ‐ 3)

Agriculture, Food and Natural Resource Standards Addressed! ABS Apply micro- and macroeconomic principles to plan and manage inputs and outputs in an AFNR business. –ABS 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 Commodity Demand Elastic Elasticity of demand Elasticity of supply 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 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

–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 pre- determined 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 Variable Costs InsuranceX TaxesX Interest on Investments X Land or Large Machinery X LaborX FeedX MedicinesX FuelX 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?

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