How are prices influenced? Starter www.bbc.co.uk/learningzone/clips/the-supply- and-demand-of-the-world-banana- market/502.html Think pair share: How are prices influenced? Beauchamps High School

GCSE Business Studies Demand and Supply Beauchamps High School

Learning Objectives by the end of this lesson students…. Will be able to evaluate how changes in supply can impact on a business Evaluation ~ GCSE Grade A* Will be able to propose reasons for changes in supply/demand Synthesis~ GCSE Grade A Will be able to analyse the impact of a shortage or surplus in supply Analysis ~ GCSE Grade B Will be able to demonstrate understanding by using examples/cases Application ~ GCSE Grade C Will be able to explain the difference between supply and demand Comprehension ~ GCSE Grade D Will be able to recall key terms supply and demand Knowledge ~ GCSE Grade E 10 Draw in the margin of your book and put your number 1

Theory Notes Demand and Supply Demand – the amount consumers are willing and able to buy at any given price Supply – the amount sellers are willing to offer for sale at any given price Beauchamps High School

England Replica kit When are prices highest in England? Why do you think this is? What will kit suppliers do during this period? Beauchamps High School

Theory Notes Supply Quantity S The higher the price, the more enthusiastic the business will be to supply. So as price rises, the quantity supplied increases 0 2 4 6 8 Price 0 5 10 15 20 25 30 EXAM TIP: A supply line ALWAYS goes in an UPWARDS direction. To help you remember the word UP is in sUPply.

Demand As prices fall, quantity demanded increases Theory Notes Demand Quantity As prices fall, quantity demanded increases E.g. If prices are reduced from £2.50 to £1 demand will increase 0 2 4 6 8 Price D 0 5 10 15 20 25 30 EXAM TIP: A demand line ALWAYS goes in a DOWNWARDS direction. To help you remember Demand and Down both start will the letter D.

What happens when there is a shortage in supply? Theory Notes What happens when there is a shortage in supply? Shortage When there is a demand for a good or service is greater than the supply. When a shortage exists, prices will tend to rise. Beauchamps High School

What happens when there is a surplus in supply? Theory Notes What happens when there is a surplus in supply? Surplus When demand for a good or service is less than the available supply When a surplus exists, prices will tend to fall Beauchamps High School

What happens when there is a shortage or surplus in supply? http://news.bbc.co.uk/1/hi/world/afri ca/8213597.stm Beauchamps High School

So how is the price decided? Theory Notes So how is the price decided? The equilibrium point is the optimal price. Equilibrium point – where the supply and demand lines cross. Quantity At equilibrium point: Businesses are willing to supply for £4 Consumers are willing to buy for £4 Businesses can’t charge prices that consumers won’t pay Businesses won’t supply goods at low prices S 0 2 4 6 8 Price D 0 5 10 15 20 25 30

Theory Notes Shortage or Surplus? We can see below that the equilibrium price is £4 and the quantity is 15. Quantity If the price is greater than 4 the quantity demanded will fall but the quantity supplied will increase. This will cause a SURPLUS. S 0 2 4 6 8 Price D If the price is less than 4 the quantity demanded will rise but the quantity supplied will decrease. This will cause a SHORTAGE. 0 5 10 15 20 25 30 Progress Arrow

What are all these products? Beauchamps High School

What are all these products? Theory Notes What are all these products? These are raw materials e.g. coal, oil, copper, wheat Also known as Commodities Beauchamps High School

Where buyers and sellers meet to exchange commodities Theory Notes Commodity Market Where buyers and sellers meet to exchange commodities Beauchamps High School

Differences between markets Theory Notes Differences between markets Price of Oil has changed very quickly – rising sharply then falling back Price of most items in shops do not change like this There is a difference between commodity markets and market for everyday goods/services which are called Goods Markets. Beauchamps High School

Changing commodity prices Theory Notes Changing commodity prices Business have little control over the price they have to pay for raw materials Prices are determined on international markets These can affect small businesses e.g. cost of oil, petrol Cash Flow forecasts are impacted Beauchamps High School

Theory Notes The size of the effect How much of total costs are made up of raw materials and energy costs? How large is the change in price? Can the business pass on the increase in costs? (absorption) Progress Arrow Beauchamps High School

Learning Objectives by the end of this lesson students…. Will be able to evaluate how changes in supply can impact on a business Evaluation ~ GCSE Grade A* Will be able to propose reasons for changes in supply/demand Synthesis~ GCSE Grade A Will be able to analyse the impact of a shortage or surplus in supply Analysis ~ GCSE Grade B Will be able to demonstrate understanding by using examples/cases Application ~ GCSE Grade C Will be able to explain the difference between supply and demand Comprehension ~ GCSE Grade D Will be able to recall key terms supply and demand Knowledge ~ GCSE Grade E 10 1