This lesson we will be learning about Supply and Demand

This lesson we will be learning aboutSupply and Demand What do we mean by this? Tile and today’s date in your books

NO IDEA I NEED HELP NEVER HEARD OF IT OK I CAN DO THIS WITH SUPPORT SOME GUIDANCE NEEDED NEARLY AT MY TARGET GOT IT! VERY CONFIDENTWILL HIT MY TARGET GRADE EXCEED TARGET LEARNING OBJECTIVES To understand that a market is made up of buyers and sellers To explore the factors affecting demand and supply

Topic Areas in 1.5 1.5 Understanding the economic context • -market demand and supply • -impact of change of interest rates • -impact of changes in exchange rates • -business cycles • -effects on stakeholders

Fill in the gaps (essential notes) • 1.5 - Commodities • [Fill in the gaps] • _______________ like copper, iron, coal, oil and wheat • Commodity market – commodities are traded for an agreed price. • The _______ represent the __________ for a commodity and the ________ represent the __________ for a commodity. • ___________ are set by a balance of demand and supply • Demand in the commodity market • The amount that buyers are willing and able to purchase at a given price • If demand increases this may cause a ___________ (demand exceeds supply)

Commodity Market Commodities – raw materials like copper, iron, coal, oil and wheat Commodity market – commodities are traded for an agreed price. The buyers represent the demand for a commodity and the sellers represent the supply for a commodity. Prices are set by a balance of demand and supply

Demand in commodity markets The amount that buyers are willing and able to purchase at a given price If demand increases this may cause a shortage (demand exceeds supply) Question: What will happen to the price if there is a shortage? It will rise

Supply in commodity markets The amount that sellers are willing/ able to sell at any given price. In 2007 , bad weather hit wheat harvests in Australia, parts of Canada, the US and Europe, as a result the world supply of wheat fell. If supply exceeds demand there is a surplus in the market. If demand for a commodity is greater than supply, then there will be a shortage in the market. Question: What will happen to the price? It will increase

Goods Market Goods Market - The market for everyday goods e.g. crisps, magazines The price of products in a goods market changes a lot more gradually and less frequently than in a commodity market. Customers would find it confusing if prices changed regularly and businesses would find it time consuming and expensive to change price labels regularly.

Samples

Control over the goods market More control over prices in a goods market – businesses choose the price (price maker) they sell products at whereas commodities tend to go to auction and must take the price they get (price taker) Goods Market – Price maker Commodity Market – Price taker

http://www.youtube.com/watch?v=7KoJh5mwTG4 Add video on price markers and takers

Silver – Supply & Demand • Part 1 • http://www.youtube.com/watch?v=M3uNsEfgZXY&list=UUBL1EFppmbaKFAJU1gocB9A&index=3 • Part 2 • http://www.youtube.com/watch?v=2auBA7xaUCk&list=UUBL1EFppmbaKFAJU1gocB9A&index=2

Raw Material and Energy Costs Many small businesses have to buy raw materials (commodities) and energy. A café supplies goods in the goods market but uses / purchases electricity which is part of the commodity market. If commodity prices change it has a major effect on the costs of the business. Many businesses absorb the increase in prices rather than passing the price rise on in the short term Price increases in the goods market tend to get past on after an annual review of prices (known as inflation). If the costs of production increase how does this affect the businesses finances? Profit falls

TEST YOURSELF- Students must stick the handout in book • The price of oil rises on world markets. This is most likely to be because A the demand for oil has risen B the supply of oil has risen C the supply of oil has risen faster than demand or oil D the demand for oil has risen faster than the supply of oil Answer: D

TEST YOURSELF 2. Jake Wooley runs a flower shop in London. He buys most of his flowers from a supplier in the Netherlands. The supplier in the Netherlands increases its prices. Jakes decision about whether he puts up the price of flowers to his customers because of this cost increase is most likely to depend on A how much insurance he pays B how big is the increase in the price of the flowers he buys C the amount of flowers he sells each week D which supplier he buys his flowers from E how large a proportion of his total costs is made up from buying flowers 2 answers Answer:B + E

TEST YOURSELF 3. Dylan Parkes has reopened a former tin mine in Cornwall. He produces a small amount of tin which he sells at auction in London. He also uses the mine as a tourist attraction, charging visitors to come and see old workings. Which one of the following is most likely to be true about his business? A He has to accept whatever price is set at auction for his tin B He has no control over the price he sets for visitors to see the mine C He cannot charge a higher ticket price to visitors in July and August than at other times of the year D He can decide for what price he sells his tin Answer: A

OVER TO YOU Next – Go through some sample answers

Over to you – teacher notes 1. Steel is a commodity therefore the price is set by demand and supply. Demand has exceeded supply – shortage . The bigger the surplus the bigger the rise in price 3 marks 2. Two effects must be analysed -make a loss. Need to seek other ways of cutting costs -close down in the long run 6 marks 3. Unhappy, move to competitors, stay with Gillians due to their excellent customer service 6 marks 4. No because the increase in price is being used to cover the rise in commodity prices. Instead staff will be dealing with unhappy customers (complaining about the price rise) 6 marks

Quick Questions • What is Steel? Commodity or Good (why?) • ?? • How is the price for Steel set? • ?? • What happens if there is a shortage of steel?. ??

What is Steel? Commodity or Good (why?) • is a commodity • How id the price for Steel set? • As a commodity the price is set by demand • What happens if there is a shortage of steel?. Demand has exceeded supply – shortage . The bigger the surplus the bigger the rise in price

This lesson we will be learning about Supply and Demand