economics understanding supply and demand. essential questions n how do competition, markets, and...

ECONOMICS

UNDERSTANDING SUPPLY AND DEMAND

ESSENTIAL QUESTIONS

How do competition, markets, and prices influence people’s behavior in consuming?

How does production and opportunity impact our purchases?

VOCABULARY

What Is a Business? A business tries

to make money by selling goods or providing a service

Here is a list of a few businesses in your community. Can you think of more? 

- grocery stores - clothing store - jewelry store - discount store - drugstore - car repair shop - doctor's office - dry cleaners - bank - movie theater

Here is a list of a few businesses in your community. Can you think of more? 

The Marketplace In our country, we have a market

economy. Buying and selling creates the

marketplace. Businesses are sellers. They sell goods

and services to make money. People who pay for goods and services

are called buyers. Buyers and sellers come together in the

marketplace.

Competition in the Marketplace

Can you think of two stores that sell candy? Those two stores are competitors. They are competing for your money. Both stores want you to buy their candy.

When two or more businesses sell the same goods or service, they are competing for the same market.

When Businesses compete…

they try to find ways to get you to choose them.

Buyers get to choose where to spend their money.

This is competition in the marketplace.

Competition in the Community Burger, Burger! Burger King and McDonalds are two

hamburger restaurants. Both sell soda, french fries, and

hamburgers. Both want you to eat at their restaurants. Both want you to spend your money at

their restaurants.

ARE THESE TWO RESTAURANTS COMPETITORS?

YES.

BECAUSE THEY SELL SIMILAR ITEMS, THEY ARE

CALLED COMPETITORS.

ANOTHER EXAMPLE

Target, K-Mart, and Wal-Mart All three businesses sell clothing, food,

and toys. All three offer low prices.

ARE THESE STORES COMPETITORS?

Because they sell similar items, they are

called competitors.

Burgers and Shoes! Burger King© sells soda, french fries,

and hamburgers. ShoeTown sells shoes, boots, and

sneakers. Both businesses want your money.

ARE THESE BUSINESSES COMPETITORS?

ANSWER Burger King only competes in the

burger market with other burger sellers trying to attract burger buyers.

ShoeTown competes in the shoe market with other shoe stores, wanting shoe buyers to come to shop.

So Burger King© and ShoeTown are not competitors: They and do not compete in the market for the same customers.

COMPLETE THE FOLLOWING EXAMPLES FROM THE FOLLOWING

LINK:

SUPPLY AND

DEMAND

Yesterday, when Stan was walking through town, he decided to go to “Bubba’s Ice Cream”. His friend Diana works there. Diana provides a service to Stan because she serves him ice cream. A service is any kind of work performed for others. The ice cream is a good. A good is something you can feel, or any kind of merchandise.

Bubba’s Ice Cream

Look at the pictures on the right. Which of these pictures show goods and which ones show services?

1)

2)

3)

4)

Stan asked Diana for a double scoop of his favorite kind of ice cream: mint chocolate chip. “I am sorry Stan, we are all out of that flavor”, she said. Disappointed, he settled for vanilla.

I’m sorry Stan!

What is supply and demand? The supply of mint

chocolate chip ice cream at “Bubba’s” was gone because it was in high demand (wanted) by many customers. Look at the chart on the left to see what flavors are in supply at “Bubba’s Ice Cream”.

0102030405060708090

100

Gallons

vanilla choc. straw. mintchoc.

Flavors

Diana asked Stan if he would like his vanilla ice cream in a cup or a cone. He asked for a cone. Diana said he was lucky because there was only one more cone available. The little boy behind him in line cried, “I wanted my ice cream in a cone!” Stan told Diana that the little boy could have the last cone, and that he would have his in a dish with chocolate syrup.

There was a scarcity of cones at Bubba’s. Scarcity means that there are limited resources, and therefore, people must make choices. Look at the pictures on the right. Which pictures show a scarcity?

1)

2)

3)

PRODUCERS AND CONSUMERS

A boy, named Andy, answered: “We’ve saved up all our money and today we are going to the toy store! My sister Sara wants to buy either a rabbit or a bike and I want to buy either a basketball net or a skateboard”.

Toy Store

What are producers and consumers?

The two children in this example are consumers. A consumer is anyone who buys a good or a service.

The toy store owner in this example is a producer. A producer is anyone who makes or grows a good or performs a service.

What is opportunity cost? Andy had $65.00

to spend at the toy store. The basketball net cost $50.00, so he had to buy that instead of the skateboard, which cost $75.00.

Sara had enough money for either the rabbit or the bike. She decided to buy the bike because then she could ride bikes with her friends after school.

Opportunity cost is

the process of choosing one good or service over another. The item that you don’t pick is the opportunity cost. The rabbit is Sara’s opportunity cost and the skateboard is Andy’s opportunity cost.

Opportunity Costs

Purchases

This completes my lesson on economics! I hope you enjoyed the tour. Economics is an important part of our lives. Think of all of the ways you use economics everyday!

Goodbye!

References Text Information: Think Quest Junior: “Econopolis” [Online] Available

http://tqjunior.advanced.org/3901/ Copyright 1997. Advanced Network and Services, Inc.

Pocket Dictionary for Economics. Available through Virginia Commonwealth Center for Economic Education (no copyright).

The Economic Songbook: Old Tunes with an Economic Twist. “We Are Consumers!” Copyright 1997, Martha C. Hopkins. James Madison University Center for Economic Education.

Graphics Information:

Microsoft Clip Gallery 3.0 (no sitations) #1 Free Clip Art. [Online Graphics]. Available

www.1cli[part.com/ Copyright 1999 #1Free Clip Art