ECONOMICS UNDERSTANDING SUPPLY AND DEMAND

ESSENTIAL QUESTIONS n How do competition, markets, and prices influence people’s behavior in consuming? n How does production and opportunity impact our purchases?

VOCABULARY

What Is a Business? n A business tries to make money by selling goods or providing a service n 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 n In our country, we have a market economy. n Buying and selling creates the marketplace. n Businesses are sellers. They sell goods and services to make money. n People who pay for goods and services are called buyers. n Buyers and sellers come together in the marketplace.

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

When Businesses compete… n they try to find ways to get you to choose them. n Buyers get to choose where to spend their money. n This is competition in the marketplace.

Competition in the Community n Burger, Burger! n Burger King and McDonalds are two hamburger restaurants. n Both sell soda, french fries, and hamburgers. n Both want you to eat at their restaurants. n Both want you to spend your money at their restaurants. n ARE THESE TWO RESTAURANTS COMPETITORS?

YES. BECAUSE THEY SELL SIMILAR ITEMS, THEY ARE CALLED COMPETITORS.

ANOTHER EXAMPLE n Target, K-Mart, and Wal-Mart n All three businesses sell clothing, food, and toys. n All three offer low prices. n ARE THESE STORES COMPETITORS?

Because they sell similar items, they are called competitors.

Burgers and Shoes! n Burger King© sells soda, french fries, and hamburgers. n ShoeTown sells shoes, boots, and sneakers. n Both businesses want your money. n ARE THESE BUSINESSES COMPETITORS?

ANSWER n Burger King only competes in the burger market with other burger sellers trying to attract burger buyers. n ShoeTown competes in the shoe market with other shoe stores, wanting shoe buyers to come to shop. n 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

n 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

n Look at the pictures on the right. Which of these pictures show goods and which ones show services? 1) 2) 3) 4)

n 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? n 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”.

n 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.

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

n 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

n 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 n Text Information: n Think Quest Junior: “Econopolis” [Online] Available Copyright Advanced Network and Services, Inc. n Pocket Dictionary for Economics. Available through Virginia Commonwealth Center for Economic Education (no copyright). n The Economic Songbook: Old Tunes with an Economic Twist. “We Are Consumers!” Copyright 1997, Martha C. Hopkins. James Madison University Center for Economic Education. n Graphics Information: n Microsoft Clip Gallery 3.0 (no sitations) n #1 Free Clip Art. [Online Graphics]. Available Copyright 1999 #1Free Clip Art