Supply and Demand activity
Our economic system is called capitalism, and its basic engine is called the market. A market economy is made up of buyers and sellers. Buyers try to get what they want for the lowest price possible, and sellers want to get the most money they can for the things they are selling. Together, this push-pull effect helps keep the market system in balance.
One of the mechanisms that helps maintain this balance is called supply and demand. The central principle of supply and demand is that prices are determined by the levels of supply (amount of items available) and demand (degree to which an item is desired). If more people want to buy a particular kind of product, the large demand will make the price increase. If fewer people want that kind of product, the price will decrease. Supply is quite similar. If there is a low supply of a particular product, the price will be higher than if there is a glut of similar resources on the market.
How does this interaction of supply and demand affect pricing? What happens if supplies run low of something everyone needs in order to live?
Market forces of supply and demand help to keep the capitalist system in balance. Earthquakes, floods, and other natural disasters often cause extreme shifts in the supply of and demand for certain items. When extreme events affect supply or demand for a particular item, pricing may seem outrageously inflated - something people often refer to as "price-gouging." In fact, however, when demand outstrips supply in an extreme way, the natural response of a market should be for the price to increase significantly.
Go to the following link for the activity "Disaster Zone" and follow the instructions:
http://www.econedlink.org/lessons/popup.php?lesson_number=508&&flash_name=em508_pricegouging-disasterzonev1.swf
In a market economy, supply and demand are the primary determinants of pricing. When the supply of a product outpaces the demand for that product, prices will naturally go down as sellers compete for consumers. When the supply of a product is not able to keep up with the demand for it, prices increase - sometimes dramatically - in response to the sellers' ability to attract consumers.
Other methods for the distribution of products can be considered, but none would be any more or less "fair" than exchange of money for goods or services - the dominant method of distribution in a market economy.
If someone asked you to explain the principle of supply and demand, could you do it? Get together with the person sitting next to you, or with a group, and answer the following questionson a separate sheet of paper:
Answer each question in one paragraph or less.
How do fluctuations in levels of supply and demand affect prices?
What can happen when the demand for something is extremely high for something and the supply is extremely low?
What are some of the ways in which scarce supplies can be distributed?
Our economic system is called capitalism, and its basic engine is called the market. A market economy is made up of buyers and sellers. Buyers try to get what they want for the lowest price possible, and sellers want to get the most money they can for the things they are selling. Together, this push-pull effect helps keep the market system in balance.
One of the mechanisms that helps maintain this balance is called supply and demand. The central principle of supply and demand is that prices are determined by the levels of supply (amount of items available) and demand (degree to which an item is desired). If more people want to buy a particular kind of product, the large demand will make the price increase. If fewer people want that kind of product, the price will decrease. Supply is quite similar. If there is a low supply of a particular product, the price will be higher than if there is a glut of similar resources on the market.
How does this interaction of supply and demand affect pricing? What happens if supplies run low of something everyone needs in order to live?
Market forces of supply and demand help to keep the capitalist system in balance. Earthquakes, floods, and other natural disasters often cause extreme shifts in the supply of and demand for certain items. When extreme events affect supply or demand for a particular item, pricing may seem outrageously inflated - something people often refer to as "price-gouging." In fact, however, when demand outstrips supply in an extreme way, the natural response of a market should be for the price to increase significantly.
Go to the following link for the activity "Disaster Zone" and follow the instructions:
http://www.econedlink.org/lessons/popup.php?lesson_number=508&&flash_name=em508_pricegouging-disasterzonev1.swf
In a market economy, supply and demand are the primary determinants of pricing. When the supply of a product outpaces the demand for that product, prices will naturally go down as sellers compete for consumers. When the supply of a product is not able to keep up with the demand for it, prices increase - sometimes dramatically - in response to the sellers' ability to attract consumers.
Other methods for the distribution of products can be considered, but none would be any more or less "fair" than exchange of money for goods or services - the dominant method of distribution in a market economy.
If someone asked you to explain the principle of supply and demand, could you do it? Get together with the person sitting next to you, or with a group, and answer the following questionson a separate sheet of paper:
Answer each question in one paragraph or less.
How do fluctuations in levels of supply and demand affect prices?
What can happen when the demand for something is extremely high for something and the supply is extremely low?
What are some of the ways in which scarce supplies can be distributed?
No comments:
Post a Comment