Today is rung 3 of 4 on this topic
Supply, demand and why prices move
Can do: Explains how supply and demand set prices, and predicts the effect of a shock.
Why it matters
Prices are the most visible economics in a child's life, and understanding them defuses a lot of confusion about the news.
What it looks like when it's wobbly
Thinks prices are set arbitrarily by greed alone, with no mechanism behind them.
โฑ๏ธ Two-minute check
"A frost destroys half the coffee crop. What happens to the price, and why?"
Solid looks like: Supply falls, price rises, with the mechanism stated.
The full activity for this topic ยท 25 minutes
Run a Market
- 1Run a simple auction for a limited number of items among the household.
- 2Reduce supply and re-auction. Track the price.
- 3Increase supply dramatically and re-auction again.
- 4Graph the prices against the quantity available.
- 5Find a real example in the news this month and explain it with the same model.
If it's too hard
Two rounds, plenty versus scarce.
If it's too easy
Introduce a price cap and discuss what happens โ shortages, queues, black markets.
Say this
"Nothing changed about the item itself. So why did the price move?"