Supply and Demand in a Market Economy

Civics The American Economy Supply and Demand in a Market Economy
Students learn how supply and demand affect price in a market economy. Then they plan a class field trip and apply the concept of opportunity cost. Finally they plan a lemonade stand to look at factors that impact how a market functions, including supply and demand and opportunity cost.

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Overview

In this experience, students learn how supply and demand affect price in a market economy. Then they plan a class field trip and apply the concept of opportunity cost. Finally they plan a lemonade stand to look at factors that impact how a market functions, including supply and demand and opportunity cost.

Students will collaborate in small groups for scene 3 and scene 4.

Objectives

  • Explain how supply and demand work in a market economy.
  • Describe how scarcity and opportunity cost affect how a market functions.


Engage


the open space of a mall with three floors of shops overlooking it

View inside a mall on a busy day


Have you ever wanted to buy something, but couldn’t afford to pay for it? Do you sometimes wonder why what you want costs so much money? Think about the latest and greatest smart phone. The company that makes that phone must answer two important questions: How many new phones should we produce? How much should we charge for each new phone that we sell? The answers to these questions can be found in two economic concepts—supply and demand.

Objectives

  • Explain how supply and demand work in a market economy.
  • Describe how scarcity and opportunity cost affect how a market functions.

Imagine that you want to set up your first business, a lemonade stand. For your business, you need to make many decisions, such as how much lemonade to make, and how much to charge for each glass of lemonade.


Which of the following would be your business strategy?

A) Make as much lemonade as possible, I’m a great salesperson.
B) Make a little bit of lemonade, but charge a lot for each glass.
C) Make a lot of lemonade, but sell each glass for a low price.
D) Make a lot of lemonade, and keep the price high.

Ask for student volunteers to explain why they chose their preferred strategy. Point out that each strategy has possible benefits and risks.


As a business owner, you have many options when it comes to making economic decisions. However, only some of those choices may lead to success. If you made too much lemonade and didn’t sell it, you would lose money. If you charged too much for each glass, you might not sell as many glasses. In this experience, you will learn some of the concepts involved in economic decisions.


When everyone is ready to continue, unlock the next scene.

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The Complete List of Learning Experiences in The American Economy Unit.
Civics The American Economy What Is a Market Economy?
What Is a Market Economy?
Civics The American Economy American Production
American Production
Civics The American Economy Economic Choices
Economic Choices
Civics The American Economy Living in a Global Economy
Living in a Global Economy
Civics The American Economy The Government and Income Inequality
The Government and Income Inequality
Civics The American Economy Consumers
Consumers
Civics The American Economy Distributing Goods
Distributing Goods
Civics The American Economy The American Economy: Unit Review
The American Economy: Unit Review
Civics The American Economy Capitalism and Free Enterprise
Capitalism and Free Enterprise
Civics The American Economy Government's Role in the U.S. Economy
Government's Role in the U.S. Economy
Civics The American Economy Labor and Management
Labor and Management
Civics The American Economy Buying on Credit
Buying on Credit
Civics The American Economy The Federal Budget: Taxes and Spending
The Federal Budget: Taxes and Spending
Civics The American Economy How Businesses Are Organized
How Businesses Are Organized
Civics The American Economy Entrepreneurs
Entrepreneurs
Civics The American Economy Budgeting Your Money
Budgeting Your Money
Civics The American Economy Banks and Banking
Banks and Banking
Civics The American Economy Supply and Demand in a Market Economy
Supply and Demand in a Market Economy
Civics The American Economy Saving and Investing
Saving and Investing
Civics The American Economy Measuring the Economy
Measuring the Economy
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