President/CEO Texas Counci l on Economic Education (TCEE) economicstexas.org Smarter.texas.org

Describe how the free enterprise system works

Market Price: Changes in Supply and Demand

How do changes in demand affect market price? How does the market price guide what producers or suppliers produce?

Why must costs be subtracted from revenues to determine profits? How can certain events cause costs to change, which can affect profits?

1. What is meant by demand? 2. What are three things you demand economically? 3. How much will you pay for them? 4. What determines if you demand/buy them?

1. We will divide into factories with 4 to 6 workers in each factory. 2. Choose a production manager. 3. Choose an accountant

1. There will be 3 rounds of 5 minutes each. 2. You will produce any amount, but at least one of the apple, hammer, shirt and cup/saucer in 2 inch dimensions. 3. Each product must have 2 colors.

1. Each product must have 2 colors. 2. You may only use your hands – no capital. 3. You may specialize. 4. Produce at least one of each but as many as possible.

1. Each product must have 2 colors. 2. You may only use your hands – no capital. 3. You may specialize. 4. Produce at least one of each but as many as possible.

1. Count the quantity produced of each product. 2. Record the quantities on the “Revenues Worksheet” 3. We will do a class total. 4. We will draw a demand card. 5. We will determine prices and factory earnings.

Supply, Demand and Market Price Chart Goods Supplied by Class Resulting Market Price With NO Change in Demand Resulting Market Price with Decrease in Demand Resulting Market Price with Increase in Demand 0-8$10$8$ $7$5$ $5$3$ $3.50$2$4 Over 20$2$1$3

1. Tally your round one results 2. Plan your production strategy for round The production manager has the final authority on what to produce.

1. Each product must have 2 colors. 2. You may only use your hands – no capital. 3. You may specialize. 4. Produce at least one of each but as many as possible.

1. Count the quantity produced of each product. 2. Record the quantities on the “Revenues Worksheet. 3. We will do a class total. 4. We will draw a demand card. 5. We will determine prices and factory earnings.

Supply, Demand and Market Price Chart Goods Supplied by Class Resulting Market Price With NO Change in Demand Resulting Market Price with Decrease in Demand Resulting Market Price with Increase in Demand 0-8$10$8$ $7$5$ $5$3$ $3.50$2$4 Over 20$2$1$3

1. What patterns do you see in the Supply, Demand, and Market Price Chart? 2. In a market, what two things are needed for a price to be determined? 3. What caused price to change?

4.How did price influence your production decisions? 5. How did other groups influence your strategy and plans?

How do changes in demand and supply affect market price? How does market price help producers determine what to produce?

1. What trends do you see ? 2. What are three things you have learned about how the market or free enterprise system operates? 3. What concepts and TEKS would this activity teach?

Supply MARKET SUPPLY AND MARKET PRICE CHART (Assume that DEMAND is Constant) Goods Supplied to the Market Resulting by the Class: Market Price: 0-8 = $ = $ = $ = $3.00 Over 20 = $2.00

President Texas Council on Economic Education