missouri ffa and agriculture education - student … supply and... · web viewdefine elasticity,...

EP5

Agriculture Management, Economics, & SalesSupply and Demand

Unit: Economic Principles in Agribusiness

Lesson Title: Supply and Demand

Standards

ABS.01.01.01.a. Recognize principles of capitalism as related to AFNR businesses.ABS.04.01.03.a. Explain the importance of return on investment for an agribusiness enterprise.CS.01.04.03.b. Assess the alternative outcome of specific actions.

CCSS.Math.Content.HSA-REI.D.10 Understand that the graph of an equation in two variables is the set of all its solutions plotted in the coordinate plane, often forming a curve (which could be a line).CCSS.Math.Content.HSF-IF.C.7 Graph functions expressed symbolically and show key features of the graph, by hand in simple cases and using technology for more complicated cases.CCSS.Math.Content.HSS-ID.A.1 Represent data with plots on the real number line (dot plots, histograms, and box plots).CCSS.ELA-Literacy.W.11-12.7 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.

Student Learning Objectives

Slide 2 in EP5 Supply and Demand Lesson ObjectiveAfter completing the lesson on supply and demand, students will demonstrate their ability to apply the concept in real-world situations by obtaining a minimum score of 80% on a Supply and Demand Experience.

Enabling ObjectivesAs a result of this lesson, the student will…

1. Contrast demand and quantity demanded, define and illustrate the Law of Demand, identify three factors that may shift the demand curve, and contrast luxury and necessity items.

2. Contrast supply and quantity supplied, define and illustrate the Law of Supply, and identify three factors that may shift the supply curve.

3. Demonstrate how to determine price and what factors affect price to change, determine the point of equilibrium, and identify the reasons for surplus and shortage.

4. Define elasticity, describe three types of elasticity, calculate the price elasticity for supply and demand, and illustrate the importance of understanding elasticities.

Time: Approximately 250 minutes

List of ResourcesBacon K., Boren N., Kirkwood V., Birkenholz R., Plain R., Rohrbach N.

(1988). Agriculture Management and Economics Instructor Guide.Columbia: Instructional Materials Laboratory.

Bacon K., Boren N., Kirkwood V., Birkenholz R., Plain R., Rohrbach N. (1988). Agriculture Management and Economics Student Reference Guide. Columbia: Instructional Materials Laboratory.

Instructional Materials Laboratory. (1997). Agribusiness Sales, Marketing, and Management Instructor Guide. Columbia: University of Missouri.

Schneiderheinze R., Wood C. (1997). Agribusiness Sales, Marketing, and Management Student Reference. Columbia: Instructional Materials Laboratory.

List of Tools, Equipment, and SuppliesEP5 PowerPoint PresentationEP5 Activity Sheet and Evaluation PacketNote cards or small sheets of paper for review activityItems for class to consider buying during Interest Approach – bottle of water, warm coat, iPhone, etc.

Key Terms

Slide 3 in EP5 Supply and Demand The following terms are presented in this lesson (shown in bold italics):

DemandQuantity demandedLaw of DemandLuxury itemsNecessity items SupplyQuantity suppliedLaw of Supply

Economic Principles in Agriculture EP5 Supply and Demand

SurplusShortageEquilibriumPriceElasticityElasticInelasticSubstitutesComplimentsNormal GoodInferior Good


Interest Approach: Use an interest approach that will prepare the students for the lesson. Teachers often develop approaches for their unique class and student situations. A possible approach is included here.

Slide 4 in EP5 Supply and Demand How much would you pay? – Bring into class a bunch of different items for students to consider buying – a warm coat, bottle of water, etc. Hold up each item individually and ask students how much they would pay today for that item. Next, change the circumstances and ask students how much they would pay given this change? Chart all responses/prices on the board to examine after all items have been discussed.

Warm coat – Hold up the warm coat. How much would you pay to buy this right now? How much would you pay if it was 110 degrees outside? What if it was -40 degrees?

Bottle of water – How much would you pay for this bottle of water right now? Let’s do 20 jumping jacks. Now how much would you pay? What if you just finished running a marathon?

Continue the process above for each item. Have students propose new items to buy to discuss if necessary. Once all items have been discussed and charted quickly on the board, have students consider the following questions: How did the prices change? Why did they change? How is today’s market similar to this?

To further discussion, have students consider: What if you were still cold after you bought the warm coat? What if you purchased an iPhone and it malfunctioned and broke after only two weeks? Listen for students to discuss utility and customer satisfaction as covered in a previous lesson.

Conclude interest approach once students have begun to grasp who drives supply and demand, ideas on how price is established, and some of the effects on price, supply, and demand.


Summary of Content and Teaching Strategies

Objective 1: Contrast demand and quantity demanded, define and illustrate the Law of Demand, identify three factors that may shift the demand curve, and contrast luxury and necessity items.

Teaching Strategies Related Content1. Refer back to the interest approach

reference of “utility” and the point that consumers drive demand while introducing demand and quantity demanded.

Slide 5 in EP5 Supply and Demand

2. Chart student responses on the board: Each of you has $5.00 to spend if you choose. How many of you would be willing to spend $1.00 on a slice of pizza at a ball game? How many would be willing to spend $2.00 on the same slice of pizza? How many would be willing to spend $3.00? How many would pay $4.00 for one slice of pizza? How many of you would use all $5.00 on one slice of pizza?

Chart should depict that fewer people were willing to spend more money on one slice of pizza. Use this to introduce the Law of Demand.


3. As a class, create a demand schedule for a slice of pizza using EP5.1. Place

Demand Amount buyers are willing and able to

purchase at different prices and at a given time and place

Demand is the first component of price Many people may be willing to buy a

new car now, but if they are not able to, they have no effect on demand.

Quantity Demanded How much buyers are willing to buy at

each specific price As the price changes, the quantity

demanded will change

Law of Demand When the price of a product is

increased with no change in factors other than price, less product will be purchased.

When the price of a product is decreased with no change in factors other than price, more product will be purchased.

Consumers are willing and able to buy more at lower prices and less at higher prices.

Demand schedule


this on a document camera to illustrate for students as they copy the agreed upon information onto their own EP5.1. Ask them, “How many slices of pizza would you buy if they were $.50 a slice?” Put this total in the first box. Continue for each price and put the agreed upon total in the “slices bought” column. An example is to the right.


4. As a class, use the demand schedule for a slice of pizza on EP5.1 to plot a demand curve. An example is to the right.


5. Gather ideas from the class about what factors could shift the demand for something. Use examples like pizza, cell phones, I-pads, etc.

Slide 9-10 in EP5 Supply and Demand

A set of prices and the corresponding quantities of an item that would be purchased at each price at a given time and place

Price/Slice Slices of Pizza Bought$.50 7$1.00 4$2.00 2$3.00 1$4.00 0

Demand curve Each point along the demand curve

can be used to estimate the quantity demanded for a specific price level

Demand Shifters Consumer income – people have more

money to spend and are usually more willing to buy an item

Population – the number of people trying to buy the same item increases, so the demand will also increase

Individual taste – some buy a product because it is needed, some buy it because it is a luxury, some buy it because it is the “in” thing to have

Competing products – if the price of a competing product is much lower than the standard price for an item, consumers will try the competing


0 1 2 4 7$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

Slices of Pizza Bought

6. Use EP5.1 to illustrate the changes to the demand curve.


7. Recall discussing the difference between demand and quantity demanded. Introduce to students that these changes carry through to the demand curve.


8. What comes to mind when you think of “luxury?” How about “necessity?”


Luxury Items – driving a fancy sports car, eating a steak every day, owning an I-phone, etc.

product; if they stay with the new product, the demand for the old product will decrease

Consumer expectations – if consumers expect a price to increase, they will more likely stock up on that item; if consumers expect a price to decline, they may hold off making larger purchases; if enough people react the same way at the same time, it can affect demand and price

Advertising and promotions – increase consumer awareness and desire to have a certain product

Changes to the demand curve When the price of goods and services

change, the quantities demanded change along the demand curve.

Increase in demand = demand curve will shift upward and to the right

Decrease in demand = demand curve will shift downward and to the left

Changes to the Demand Curve Change in Quantity Demand is a

movement along the same demand curve

Change in Demand causes us to move the demand curve to the right or left

Luxury item Goods or services that are generally

considered nonessential to the survival or well-being of an individual

In good economic times, consumers will spend more on luxury items than they will in hard times

Necessity items Goods or services that are generally

considered essential to the survival or well-being of an individual

Shelter, food, clothing, medication

Compliments and Substitutes


9. These luxury and necessity items play a role in demand and quantity demanded as do compliments and substitutes. Have students come up with their own examples of compliments and substitutes to add to the list.


10. Use the next few PowerPoint slides to illustrate students’ understanding of the movement of the demand curve.


Compliments – Goods that people consume hand in hand; Hamburgers and cheese slices, hot dogs and hot dog buns; DVD players and DVDs

Substitutes – Goods that can be exchanged for one another; Pepsi and Coke, ground pork and ground turkey, margarine and butter

Objective 2: Contrast supply and quantity supplied, define and illustrate the Law of Supply, and identify three factors that may shift the supply curve.

Teaching Strategies Related Content1. Refer back to the interest approach and

how supply is driven producers.


2. Chart student responses on the board: You own a pizzeria. How many slices of pizza would you be willing to sell for $1.00? How many slices would you sell for $2.00? How many for $3.00? How many for $4.00? How many for $5.00?

Chart should depict the pizzeria owner will sell more slices of pizza as the prices get higher. Use this to introduce the Law of Supply.

Supply The amount of a product or commodity

that producers are willing and able to provide at different prices and a given time and place

Second component of price Buyers may be very willing and able to

buy a product, but if there is a limited supply, the demand may not be met immediately.

Quantity supplied How much suppliers are willing and

able to provide at each specific price

Law of Supply When the price of a product is lowered,

assuming there is no change in factors other than price, less of the product will


in EP5 Supply and Demand

3. As a class, create a supply schedule for slices of pizza using EP5.2. Place this on a document camera to illustrate for students as they copy the agreed upon information onto their own EP5.2. Ask them, “How many slices of pizza would you be willing to sell for $4.00?” Put this total in the first box. Continue for each price and put the agreed upon total in the “slices sold” column. An example is to the right.


4. As a class, use the supply schedule for a slice of pizza on EP5.2 to plot a supply curve. An example is to the right.


5. Gather ideas from the class about what factors could shift the supply for

be supplied. When the price of a product is

increased, assuming there is no change in factors other than price, more of the product will be supplied

Supply Schedule A listing of the amount of a product the

industry is willing to offer for sale at different prices

Price/Slice Slices of Pizza Sold$4.00 7$3.00 6$2.00 5$1.00 3$.50 0

Supply Curve Indicates the quantity of a product that

supplies are willing to provide at various price levels

Plotted in the opposite direction to the demand curve

Supply shifters Supplier expectations – suppliers try to

predict the best strategy for the future; if they expect an increase in price, they will try to increase production

Natural forces – floods, droughts, etc.


0 1 2 3 4 5 6 7$0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 $4.00 $4.50

Slices of Pizza Sold

something. Use examples like pizza, cell phones, I-pads, etc.


6. Use EP5.2 to illustrate the changes to the supply curve.


7. Check for understanding of changes in the supply and demand curve.


8. Recall discussing the difference between supply and quantity supplied. Introduce to students that these changes carry through to the supply curve.


9. Use the next few PowerPoint slides to illustrate students’ understanding of the movement of the demand curve.


Storage and perishability – storing grain at harvest when prices are normally lowest; hard to store fresh fruit and vegetables; harder to control supply of perishables, so dramatic price shifts may result

Cost of production – increase in cost of production will cause producers to produce less amounts of the item

Technology – huge increases in the amount of crops produced from each acre of land

Government programs – develop policies to try to control supply and increase prices of agricultural products

Changes to the supply curve When the prices of goods and services

change, the quantities supplied change along supply curves

Increase in supply = supply curve will shift to the right

Decrease in supply = supply curve will shift to the left


Objective 3: Demonstrate how to determine price and what factors affect price to change, determine the point of equilibrium, and identify the reasons for surplus and shortage.

Teaching Strategies Related Content


1. Discuss with students their ideas on how supply and demand relate to price.

2. Determine price


3. Discuss with students possible scenarios to demonstrate the interaction between a demand or supply increase or decrease and price. For example, if there was a severe drought in a cattle-producing area, what might happen? (Think about feed prices, what farmers would do if prices were too high, if they sold their cattle and no one was willing and able to buy them, etc.) Other scenarios could center around a hurricane in the southern states where citrus is heavily produced, severe tornadoes damage crops in the Midwest, foreign imports of beef continue to increase, new phone features are added to the I-phone or a new version/model is released, etc.

4. Using the above discussion, have students predict the effect on price.


5. Let’s revisit our supply and demand curves. What do you notice when you compare the two? (they lie in opposite directions) What would happen if these lines were placed on the same graph? (somewhere they would have to cross)


6. What will happen if the price is too high and the quantity supplied is greater than the quantity demanded? (surplus) What will happen if the price

Price The result of the interaction of the

forces of supply and demand

If demand increases without a change in supply, the price will go up

If supply increases without a change in demand, the price will drop

Point of Equilibrium The point where supply and demand

curves cross Represented by the equilibrium point The price at which demand and supply

are equal If there is a change in either supply or

demand, there will be a new equilibrium point

If the price is too high Supply will be greater than demand A surplus will develop Price will be pushed down towards the

equilibrium price due to competition among sellers


is too low and there is a high demand for an item? (shortage) If a shortage occurs, what will happen to the price?


7. Practice these concepts using EP5.4 as a class, small group, partners, or individually.

If the price is too low Demand will be greater than supply A shortage will result Price will be pushed upwards to the

equilibrium price due to competition among buyers

Objective 4: Define elasticity, describe three types of elasticity, calculate the price elasticity for supply and demand, and illustrate the importance of understanding elasticities.

Teaching Strategies Related Content1. Define elasticity and the three types of

elasticity.


2. Given what we know about demand and who or what drives demand, what are your thoughts on “demand price

Elasticity – the measure of how sensitive the market is to changes in price or quantity; measure of responsiveness

Inelastic – change in price is greater than the relative change in quantity; the price can change drastically, and consumers will still buy nearly the same amount; inelastic items are needed for health or well-being; less responsive; < 1.0

Elastic – change in price is less than the relative change in quantity available; a small change in price can have a huge effect on sales; tend to be luxury items; responsive; > 1.0

Unit elastic (unitary) – change in price is equal to the relative change in quantity available; only exists under special conditions; if a store has a sale, the reduction in price must be exactly offset by the increase in items sold. If there is an increase in price, the increase must exactly offset the loss due to fewer items sold; equal responsiveness; = 1


elasticity?”


3. Practice calculating demand price elasticity using EP5.3.


4. There are a number of factors that affect a good’s elasticity. What do you think these might be?


5. Have students create their own scenario and figure out the elasticity response on EP5.3.

6. Just like demand is affected by substitutes and compliments, as is demand elasticity. This is known as “Cross Price Elasticity.”


7. Complete an example as a class on EP5.3.



Demand price elasticity The amount consumers will change

their buying habits after a price change is measured by demand price elasticity

% change in quantity demanded/% change in price

Factors Affecting A Good’s Elasticity Number of substitutes – If a good has

more and better substitutes, its demand will be more elastic; Coffee vs. electric power

How necessary the good is – A necessity has more of an inelastic demand curve than a luxury

Its importance is relative to the consumer’s budget – Goods that make up a relatively small portion of a consumer’s budget have less elastic demand curves; Milk vs. a new car

How long the consumer has to make the decision – Longer the consumer has to “shop around” and find substitutes, the more elastic the demand curve; A drink bought right before class or one purchased for a picnic next week

Cross price elasticity Measure the responsiveness of quantity

demanded of one good compared with the price change of another good

Determine if they are substitutes, compliments, or not related

Substitutes and compliments Substitute - + (positive); Consumers are


8. Demand is also changed by consumer income.


9. Complete an example as a class on EP5.3.



10. Given what we know about supply and who or what drives supply, what are your thoughts on “supply price elasticity?”


11. Practice calculating demand price elasticity using EP5.3.


12. Why do you think knowledge of the demand and supply price elasticity is important?


responsive; Elastic Compliment - - (negative); Consumers

are not responsive; Inelastic

Income elasticity of demand Measure the responsiveness of change

in demand given a change in consumer income

Determine if goods are normal or inferior

Normal and inferior goods Normal Good - + (positive); Elastic;

When income increases, people buy more; When income decreases, people buy less

Inferior Good - - (negative); Inelastic; When income increases, people buy less; When income decreases, people buy more

Supply price elasticity The amount suppliers will change their

production levels due to a change or expected change in price is measured by supply price elasticity

% change in quantity supplied/% change in price

Demand price elasticity allows us to estimate how much price will change when the quantity supplied goes up or down.

Supply price elasticity allows us to estimate how much production will change when the price goes up or down.

These tools show how demand and supply are interacting and trying to reach a new equilibrium point.

Using these tools, an agribusiness manager can


predict whether a business decision will be profitable.

Review/SummarySlide 59 in EP5 Supply and Demand

Supply and demand are two key concepts in determining how much is produced, what the price is, and how much is stored. Some items have different reactions to supply and demand. These reactions are measured as elasticity.

Review: Supply and Demand Review: As a small group, with partners, or individually, complete EP5.5 using the notes page and supplemental activity sheets completed throughout the lesson. When all students are finished, go over answers as a class in order to answer questions or clarify points where needed. This could also be used as homework and a review to start class the following day.

Slide 60 in EP5 Supply and DemandExit cards: Students will answer the following questions on a note card or small slip of paper and hand to teacher as they exit:

What did you learn today about supply and demand? What questions do you still have about supply and demand, supply and demand graphs,

elasticity, imports, and exports?

Application

Extended ActivitiesEach student will find a historical video clip, picture, or article from the gas and food rationing time. Have students examine their findings by asking themselves: What if this happened today? What would you be thinking? What would you be feeling? What would the gas station owner or food stand worker, etc. be thinking? How would this affect price? Students will present their thoughts and conclusions in a paper or electronic format for others to view gallery-style during one class period. Following viewings, the teacher will lead a discussion on students’ historical findings.Each student will locate an article in a farm journal pertaining to his/her Supervised Agricultural Experience Program. After reading an article, have students decipher the main product discussed throughout the article. Next, have students consider the effects of the following in regard to that particular product: a massive surplus of the product, a great shortage of the product, an outbreak of a terrible disease due to using the product, findings that conclude this product to be detrimental to future agricultural practices, findings that conclude this product or the use of this product could cure a disease or save lives, etc. Students will present their findings, considerations, thoughts, etc. to the teacher in a two-page paper or will orally present to the class. If presented to the class, the teacher should facilitate a discussion to get students’ thoughts and opinions on each other’s topics.


EvaluationSupply and Demand Experience EP5.6

Alternate - Paper-pencil Quiz Evaluation EP5.7

Answers to EvaluationEvaluation EP5.6Answers will vary. Use scoring guide on EP5.6 to assess student work.

Alternate Evaluation EP5.71. D2. D3. C4. D5. A6. C7. B8. B9. A10. A11. B12. C13. D14. A15. C16. A17. C18. D19. D20. B21. A22. A23. C24. A25. A26. D27. A28. B29. A30. B


missouri ffa and agriculture education - student … supply and... · web viewdefine elasticity,...

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