Price Determination in Markets

Preparing to Teach HS Economics2014

Demand

Demand scheduleP Q

$5

$4

$3

$2

$1

0

P

Q

$1

$2

$3

$4

$5

*Change in price causes a move along the curve

Supply

Supply scheduleP Q

$5

$4

$3

$2

$1

0

P

Q

$1

$2

$3

$4

$5

*Change in price causes a move along the curve

DJ Econ: Demand & Supply Youtube

A Classroom Market for Cocoa

• Students are assigned to be buyers and sellers of cocoa

• Each student needs a score sheet and a buyer or seller card

• Enlist trusted students to distribute cards• Tally sales prices during the activity

Sample CardsSAMPLE BUYER CARDYou want to buy a unit of cocoa. You are willing and able to pay ______ for this unit, but you want to pay the lowest price you can. The lower the price you negotiate, the greater your gain.

SAMPLE SELLER CARDYou want to sell a unit of cocoa. This unit cost you ______ to produce, but you want to sell it for the highest price you can. The higher the price you negotiate, the greater your gain.

From Lesson 4, High School Economics, 3rd edition

Score Sheet

Transaction Number

Column A: Amount on

CardColumn B:

Price NegotiatedColumn C:

Gain or Loss (if Negative)

1 2 3 4 5 6 7 8 910

From Lesson 4, High School Economics, 3rd edition

Price per Unit Round 1 Round 2 Round 3$18

$19

$20

$21

$22

$23

$24

$25

$26

$27

$28

$29

$30

$31

$32

$33

$34

$35

$36

$37

$38

From Lesson 4, High School Economics, 3rd edition

Market Equilibrium

0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32$16$18$20$22$24$26$28$30$32$34$36$38

Number of units of cocoa

Pric

e pe

r uni

t

DemandSupply

From Lesson 4, High School Economics, 3rd edition

Surpluses and Shortages

0 2 4 6 8 101214161820222426283032$16$18$20$22$24$26$28$30$32$34$36$38

Number of units of cocoa

Pric

e pe

r uni

t

Demand Supply

From Lesson 4, High School Economics, 3rd edition

What prices would create a surplus of cocoa?What prices would create a shortage of cocoa?