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- Review the activity from the previous session.
- Explain that consumer demand contributes to the decision by entrepreneurs to produce particular products.
- Explain further that available supply plus consumer demand determines the price of a particular product.
- Distribute and discuss the chart on supply and demand found on Attachment E.
- Present several scenarios to help students understand the concept of supply and demand. For example:
• Tell students to imagine that they have only $5.00 to spend. They cannot get any more money anywhere else. State that you have concert tickets to see Willie Nelson. (Some students may not know who he is, but that does not matter for this exercise.) Ask students how many would pay $5.00 for your concert ticket. You probably will not have many buyers for your tickets. Drop the price until you are able to get several students willing to buy the tickets. Explain that entrepreneurs can set the price for a product, but that price only holds firm as long as there is a demand for the product and the consumer is willing to pay that amount. When the product does not sell for that amount, the entrepreneur must drop the price to get rid of the product.
• Conduct an exercise similar to the previous one but give each student $10.00, and tell them the concert tickets are for a group that is very popular among students their age. Point out how quickly you were able to sell each of your tickets at the full price. The demand was high.
• Now, using the same tickets for the popular group, tell the students that they now have $100.00 to spend but that you only have four tickets. Poll the students to find out how many would be willing to pay $10.00, then $20.00, then $50.00, then $80.00, and finally $100.00 for each ticket. Explain that in the previous scenario, the most you could charge for a ticket was $10.00, because the consumers did not have more money to spend. Explain that as the money supply increased and the supply of the desired product decreased, you were able to charge more for your product even though it did not cost you more to produce the product.
- Ask the students to share their observations from the exercise and discuss them as a class.
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