Lesson Plan - Get It!
- When you look at the graph above, what do you see?
It looks a little different from most graphs.
This graph displays the law of supply and demand that dictates many aspects of economics in the United States.
In this lesson, you will discover the law of supply and demand and look for real-world examples.
Economics is a social science that has to do with the production, distribution, and consumption of goods and services.
When you are 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 the price of a good or service is determined by the supply and demand.
Before moving on, think of an example of a time when supply or demand affected the price of an item.
Look at the graph below.
There is one line that represents supply and one line that represents demand.
You can see that when the demand exceeds the supply, the price is high. 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.
An example of the law of supply and demand is The Dollar Store. The Dollar Store typically sells items that were once in larger stores, such as Wal-Mart or Target. The Dollar Store is able to 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 is able to purchase excess supplies of brand-name items for low prices and resell the items for $1. Since they were able to purchase the goods at a such low prices, The Dollar Store is still able to generate a profit by reselling the items for only a dollar.
To learn more about supply and demand, watch the Crash Course Economics video Supply and Demand: Crash Course Economics #4:
After you watch the video, read more about supply and demand on Social Studies for Kids' Supply and Demand: Basic Economics. Make sure to read the first page, "Part 1: Basic Supply and Demand," and click the link to read the second page, "Supply Meets Demand."
After you have finished watching the video and reading the article, think of an example of supply and demand.