Understanding Animal Production

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!

• WHST.6‐8.1- Write arguments to support claims with clear reasons and relevant evidence. (MS‐LS2‐4)

• SL.8.5 - Integrate multimedia and visual displays into presentations to clarify information, strengthen claims and evidence, and add interest. (MS‐LS1‐7),(MS‐LS2‐3) WHST.6‐8.1 Write arguments focused on discipline content. (MS‐LS1‐4)

• WHST.6‐8.8 - Gather relevant information from multiple print and digital sources; assess the credibility of each source; and quote or paraphrase the data and conclusions of others while avoiding plagiarism and providing basic bibliographic information for sources. (MS‐LS4‐5)

Career Cluster Standards – Agriculture, Food and Natural Resources.

• Pathway Content Standard: The student will demonstrate competence in the application of principles and techniques for the development and management of agribusiness systems.

• ABS.01. Performance Element: Utilize economic principles to establish and manage an AFNR enterprise.

• ABS.01.01. Performance Indicator: Apply principles of capitalism in the business environment.

– ABS.01.01.01.a. Recognize principles of capitalism as related to AFNR businesses

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 CostTypes of Cost Fixed Costs Fixed Costs Variable CostsVariable Costs

InsuranceInsurance XX

TaxesTaxes XX

Interest on Interest on InvestmentsInvestments

XX

Land or Large Land or Large Machinery Machinery

XX

LaborLabor XX

FeedFeed XX

MedicinesMedicines XX

FuelFuel XX

Seed, FertilizerSeed, Fertilizer XX

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?

The End!