Author:  Lori Alden

Audience:  High school and college economics students

Time required:  About 50 minutes

NCEE Standards:  8 (Role of price in market system)

Summary:  Teams of students solve supply and demand problems using overhead transparencies and present their solutions to their classmates.

Average grade from reviewers:  A (1 review)

Instructions:  Give each student a copy of the following handout.  Break students into teams of two and give each team a blank overhead transparency and transparency pen.  Assign each team a supply and demand problem from the handout and give students about ten minutes to solve the problems and draw their solutions on the transparencies.  Have each team come up to the front of the class and explain its solution.  Note that there are two trick questions.  Since a change in a good's own price can never shift the supply and demand curves, a change in the price of hamburgers won't affect either the supply or demand curves for hamburger and a change in the price of jellybeans won't affect the curves for jellybeans.  In these problems, students shouldn't shift either curve.  Explain that it's a question of cause and effect:  shifts in the curves cause the price to change, not vice versa.

Handout:

For each of the following problems, state which curve would shift:  the supply curve or the demand curve.  Then state whether the curve would shift to the right (an increase in supply or demand), or shift to the left (a decrease in supply or demand). (Hint:  Beware of two trick questions!)

Market

Event

Would the demand curve or supply curve shift?

Would the curve shift to the right or left?

wheat

A drought destroys much of the crop.

Supply

Left

redwood lumber

Environmentalists urge consumers to boycott redwood products.

 

 

cigars

A new study shows that smoking cigars results in lots of wrinkles.

 

 

butter

The price of margarine goes up.

 

 

paper

The price of wood pulp rises.

 

 

Hula hoops

Brad Pitt confides to People magazine that "he gets a big kick out of his hula hoop."

 

 

yachts

The average price of stocks falls by over 20% between now and the end of the year.

 

 

gasoline

Large sports-utility vehicles (like Suburbans and Expeditions) become more popular.

 

 

umbrellas

Heavy rain is forecast.

 

 

tofu

E. Coli bacteria is found in another meat plant.

 

 

gasoline

Two oil supertankers collide.

 

 

hamburger

The price of hamburger rises.

 

 

oranges

There's an early frost which destroys much of the crop.

 

 

apples

A new pesticide is developed which controls tent caterpillars.

 

 

grapes

The National Marines Fisheries Service bans pesticide spraying within 1,000 feet of waterways containing coho salmon.

 

 

wine

The average wage of grape harvesters rises by 10%.

 

 

U.S. cars

The U.S. imposes a tariff on Japanese car imports.

 

 

hospital beds

Scientists discover a pill that cures cancer.

 

 

cement

A 7.9 earthquake hits San Francisco.

 

 

Video rentals

The price of getting cable TV goes up.

 

 

windshields

A new law is passed requiring gravel trucks to cover their loads with tarps.

 

 

Taxi service

Local subway workers go on strike

 

 

Bike helmets

The price of bicycles goes down

 

 

melons

The cost of water goes up.

 

 

Lucerne milk

The price of Safeway milk goes down.

 

 

jellybeans

The price of jellybeans goes up.

 

 

Oreo cookies

The price of milk increases.

 

 

Burger King whoppers

McDonald's lowers the price of Big Macs.

 

 

 

Hot dogs

60 Minutes does an expose called "The Truth about Hot Dogs."

 

 

Hot dog buns

The price of flour rises

 

 

butter

Mad Cow Disease wipes out a lot of dairy cows.

 

 

candles

An electric company official announces that a computer bug will likely result in power outages.

 

 

Cowboy boots

Old Navy launches an ad campaign called "Everyone in cowboy boots."

 

 

 

 

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