4.1: Understanding Demand

Chapter 4:1: Understanding Demand

• Guiding Question (p.85): Chart
  
• What is the Law of Demand? (p.86): How do these two images reflect the law of demand in action?
• Graph Skills (p.87): #1 & 2
• Checkpoint (p.88): What happens to demand for a good when the price increases?
• Economics in Action (p.88): Has the substitution effect been a factor in any of your recent purchases?  Explain.
• Chart Skills (p.89): #1 & 2
• Checkpoint (p.89): To have demand for a good, what two conditions must be met?
• Magazine (p.89): What other goods or services might consumers have less demand for during an economic downturn?
• Graph Skills (p.90): #1 & 2
• Checkpoint (p.90): What is a market demand curve?
• Section 1 Assessment (p.90): #1 - 11

Law of Demand (Parody of Sharp Dressed Man): http://youtu.be/tDkkkEQXJMw
Law of Demand (Investopedia): http://www.investopedia.com/video/play/law-demand/

The Law of Demand

Understanding Supply and Demand

BELL RINGER:  On a piece of paper, answer the following under "Bell Ringer" and then put them in the 3rd Block Bin:

1. Refresher: What is the difference between scarcity and shortage?
2. Think about your fictitious business and explain what product or service is supplied by you, and who demands that product or services.
3. What does the Latin phrase "ceteris paribus" mean?
4. Looking at the Supply & Demand graph (right), which of the lines is Supply and which is Demand?

Supply and Demand
As you would probably imagine, Supply and Demand are concepts that are the cornerstone of Economic Theory.  The entire concept of Economics is the study of how and why people choose to buy the things they do.  So much, in fact, that out of the 61 Tennessee Economics Standards, 6 of them specifically involve Supply and Demand.

• E.11 Define supply and demand, and provide relevant examples. (E)
• E.12 Describe the role of buyers and sellers in determining the equilibrium price. (E)
• E.13 Describe how prices of products as well as interest rate and wage rates send signals to buyers and sellers of products, loanable funds, and labor. (E)
• E.14 Explain that consumers ultimately determine what is produced in a market economy (consumer sovereignty). (C, E)
• E.17 Identify factors that cause changes in market supply and demand. (E)
• E.18 Demonstrate how changes in supply and demand influence equilibrium price and quantity in the product, resource, and financial markets. (E)

In addition to supply and demand, we will be working on the following standards:

• E.2 Explain how consumers and producers confront the condition of scarcity, by making choices that involve opportunity costs and tradeoffs. (E)
• E.4 Describe how people respond predictably to positive and negative incentives. (C, E)
• E.5 Explain that voluntary exchange occurs when all participating parties expect to gain. (E)
• E.23 Compare and contrast the following forms of business organization: sole proprietorship, partnership, and corporation. (E)

Watching the video clips, answer the following questions:  Demand and Supply Explained
Demand:

1. When the price goes _______ the quantity demanded goes _______.
2. A Demand Curve is a ________________ sloping curve.
3. What is the Substitution Effect?
4. What is the Income Effect?
5. What is the Law of Diminishing Marginal Utility?
6. The Demand Curve shifting left indicates a _______________ in quantity demanded.
7. The Demand Curve shifting right indicates a ______________ in quantity demanded.
8. What are the 5 Shifters of Demand:
1. Tastes/Preferences: ____________________________________.
2. Number of Consumers: ____________________________________.
3. Price of Related Goods: ____________________________________.
4. Income: ____________________________________.
5. Expectations: ____________________________________.
9. What are "substitutes"?
10. What are "complements"?

A clip demonstrating the Law of Diminishing Marginal Utility: Matilda: Bruce Bogtrotter
Supply:

1. When the price goes _________ for a product, the quantity producers make will __________.
2. A Supply Curve is a ________________ sloping curve.
3. The Supply Curve shifting left indicates a _______________ in quantity supplied.
4. The Supply Curve shifting right indicates a ______________ in quantity supplied.
5. What are the 5 Shifters of Supply:
1. Price of Resources: ____________________________________.
2. Number of Producers: ____________________________________.
3. Technology: ____________________________________.
4. Taxes & Subsidies: ____________________________________.
5. Expectations: ____________________________________.
6. What happens to supply for a product when the price increases?  ______________.
7. What is the Market Equilibrium ____________________________________.
8. What is a "Surplus"? ____________________________________.
9. What is a "Shortage"? ____________________________________.

Discussion & Short Answer:

Your Business:  
Using your virtual/fictitious business, describe how the following Shifters affect Demand in your business:

1. Tastes/Preferences: 
2. Number of Consumers: 
3. Price of Related Goods: 
4. Income: 
5. Expectations: 

Using your virtual business, describe how the following Shifters affect Supply in your business:

1. Price of Resources: 
2. Number of Producers: 
3. Technology: 
4. Taxes & Subsidies: 
5. Expectations: 

Download a worksheet here: WORKSHEET

Next we will have a short discussion and share some of the progress we are making on our Business Project and our Making a Difference project.

Business Project:

• What business have you come up with?
• Where would you locate your business?
• What is your target demographic?
• What design considerations (logo, colors, etc.) will you use?
• Will your business be a sole proprietorship, a partnership or a corporation?

Making a Difference:

• What is an idea you think would make your community better?
• What is an idea you think would make our school better?
• Did anything surprise you as you began thinking about how you could make a difference in your community or in your school?
• How might any these changes have an effect on the economics of your community?

Chapter 3 Assessment

Chapter 3 Assessment

• Critical Thinking (p.74): #1, 2, 3, 4
• Applying Your Math Skills (p.74): #5, 6, 7, 8
• Analyzing Documents (p.75): #1, 2, 3
• Writing About Economics (p.75): When may a government take private property for public use?
• Looking at the two farm-related graphs on page 76, how are farms changing in America?  Why do you think that is?
• Looking at the Median Weekly Earnings graph on page 78, what are some trends that you can deduce?
• Looking at the Unemployment Rates chart on page 79, how were African Americans (men and women) faring in the workplace in 2007?  How might this have affected the 2008 election?
• Looking at the Selected Personal Consumption Expenditures chart on page 81, where do Americans spend the majority of their money?  If Americans are trying to save money, which areas will they have to cut back on?  Explain.
• Unit 1 Challenge (p.82): Writing Activity

3.4: Providing a Safety Net

Chapter 3 Section 4: Providing a Safety Net

• Checkpoint (p.69): What is the goal of the government welfare programs?
• Economics & You (p.69): Identify another way that the government may use your money to help somebody else.
• Checkpoint (p.71): Identify four programs that provide cash benefits to the poor.
• Checkpoint (p.72): How does the tax law provide an incentive to help the needy?
• Section 4 Assessment (p.72): # 3, 4, 5, 6, 8, 9, 10
• Roles of the Government (p.73): What are the roles of government?

Chapter 3: Section 2 and 3

Chapter 3 Section 2: Promoting Growth and Stability

• Guiding Questions (p.56): Chart
• Graph Skills (p.57): #1 & 2
• Checkpoint (p.57): Why do government experts track the business cycle?
• Checkpoint (p.58): What three goals does the government try to meet when promoting economic strength?
• Explain "obsolescence" using a real world example [other than telephones].  
• Business by the Bootstraps (p.60): Applying Economic Principles
• Checkpoint (p.61): How does improved technology help the economy?
• Section 2 Assessment (p.61): #1, 4, 5, 6, 7, 9, 10, 11

Chapter 3 Section 3: Providing Public Goods

Assignment:

• How are Public Goods Created? (pp.64-65): #1 & 2
• Checkpoint (p.64): What two criteria must be present for a public good?
• Checkpoint (p.65): Why are public goods examples of market failure?
• Graph Skills (p.66): #1 & 2
• Checkpoint (p.67): What does the government do in response to negative externalities?
• Poster Analysis (p.67): How does this poster deal with a negative externality of being a consumer?
• Section 3 Assessment (p.67): #2, 3, 4, 5, 6, 8, 9

3.1: Benefits of Free Enterprise

This [very] old cartoon is a fun way to look at Economics -- and specifically, the concept of Free Enterprise.

It's Everybody's Business (1954)
Chapter 3 Section 1: Benefits of Free Enterprise
Assignment:

• Benefits of Free Enterprise (p.49): Chart
• What is Free Enterprise (p.50): Choose two of the characteristics and explain how they protect your freedom of choice.
• Checkpoint (p.51): What are three key economic rights that American's enjoy?
• Checkpoint (p.52): What role do consumers play in the free enterprise system?
• Free Enterprise in the World (p.52): What are the advantages and disadvantages of allowing business to operate with few government limits?
• Critical Thinking (p.53): How did the American economy provide an environment for Oscar de la Renta's success?
• Checkpoint (p.53): What Constitutional protections make it possible for American's to conduct business?
• Chart Skills (p.54): #1 & 2
• Checkpoint (p.55): Why does government place some limits on the freedom of businesses?
• Cartoon (p.55): What is this cartoonist's view of federal regulation?
• Section 1 Assessment (p.55): #1, 2, 3, 6, 7, 9, 10, 11

This video is a clip from a company called "AMWAY" -- a MLM (Multi Level Marketing) company.  It's used to showcase their company, but you can see how they use "Free Enterprise" to boast patriotism.

Free Enterprise: The American Dream

One term that this section (Chapter 3.2) discusses is Eminent Domain.Property Battle: Eminent DomainMore on eminent domain with John Stossel:

2.4: Mixed Economies

Chapter 2 Section 4: Mixed Economies

Assignment:

• What are the characteristics of a mixed economy? (p.39): Chart
• Graph Skills (p.40): #1 & 2
  
• Checkpoint (p.40): What is one reason the government plays a role in the economy?
• How does the Circular Flow of a Mixed Economy (p.40) differ from the the Circular Flow Model of a Market Economy?  Why?
• Graph Skills (p.41): #1 & 2
• Checkpoint (p.41): How are governments involved in the product market?
• Applying Economic Principles (p.42): How does the debate over helmet laws represent a conflict between different goals?  Which goal do you think should be given a higher priority?
• Checkpoint (p.43): Why is China's economy more mixed than North Korea's?
• Economics & You (p.43): List two other goods or services that are affected by legal restrictions.
• Checkpoint (p.44): Why is the United States said to have a free enterprise system?
• Section 4 Assessment (p.44): #1, 3, 4, 5, 7, 10

1. What problems does the FDA try to prevent?
2. What laws does the FDA enforce?
3. How does the FDA limit the market for medicines?