Supply and Demand

Lesson Plan - Get It!

Audio:

This sure would be a yummy lesson if it were about ice cream supply and demand!

The law of supply and demand shown in the graph dictates many aspects of economics in the United States.

Economics is a social science that has to do with the production, distribution, and consumption of goods and services.

When talking about economics, one of the most important concepts to be aware of is the law of supply and demand.

Supply tells how much of something is available, and demand describes how much people want something. The law of supply and demand states that supply and demand determine the price of a good or service.

Before moving on, think of an example of a time when supply or demand affected the price of an item.

• What if the worldwide vanilla bean crop were destroyed, but everyone still wanted vanilla ice cream?
• Do you think its price would go up or down at the local store?

Look at the graph below. There is one line that represents supply and one line that represents demand.

You can see that the price is high when the demand exceeds the supply. When the supply is greater than the demand, the price is low.

The place where the two lines intersect is called the equilibrium. This is the place where supply and demand are balanced.

The Dollar Store is an example of the law of supply and demand.

The Dollar Store typically sells items once in larger stores like Wal-Mart or Target. The Dollar Store can sell certain items for only $1 because it purchases closeout items — items that the larger stores had an excess supply of because they misjudged the demand.

The Dollar Store can purchase excess supplies of brand-name items for low prices and resell the items for $1. Since they could purchase the goods at such low prices, The Dollar Store can still profit by reselling them for only a dollar.

To learn more about supply and demand, watch the video below.

After you watch the video, read more Basic Economics: Supply and Demand. Be sure to read both pages.

• Can you think of a real-world example of supply and demand now?

Keep going in the Got It? section!