Part 1 Part 2 Exploration Exploration Invention Invention Application Application

Invention

Activity

Take a look at the table below which shows quantity demanded and quantity supplied of wheat at various prices. Holding everything else constant, what happens to the quantity demanded of this product when the price goes up? What happens to the quantity supplied? Do you believe the relationship between price and quantity demanded is true of most goods? Can you think of an instance where this relationship does not exist?

Supply Schedule:

 Price No. of Sellers Willing to Sell 10 Bushels of Wheat at the Price Indicated or a Higher Price Supply Schedule \$3.50 4 sellers (=40 bushels) 40 3.70 6 sellers (=60 bushels) 100 3.90 6 sellers (=60 bushels) 160 4.10 4 sellers (=40 bushels) 200 4.30 4 sellers (=40 bushels) 240 4.50 2 sellers (=20 bushels) 260 4.70 2 sellers (=20 bushels) 280 4.90 2 sellers (=20 bushels) 300 5.10 2 sellers (=20 bushels) 320

Demand Schedule:

 Price No. of Buyers Willing to Buy 10 Bushels of Wheat at the Price Indicated or a Lower Price Demand Schedule \$5.30 4 buyers (=40 bushels) 40 5.10 4 buyers (=40 bushels) 80 4.90 4 buyers (=40 bushels) 120 4.70 4 buyers (=40 bushels) 160 4.50 4 buyers (=40 bushels) 200 4.30 4 buyers (=40 bushels) 240 4.10 2 buyers (=20 bushels) 260 3.90 2 buyers (=20 bushels) 280 3.70 2 buyers (=20 bushels) 300 3.50 2 buyers (=20 bushels) 320

To gain more insight into the relationship between price and quantity, let's make use of a graph. Graphs are very handy tools (once you've figured out the basics) for displaying relationships. We also use them to get a rough idea about what happens when certain variables change. In the Shockwave activity below, indicate where the various combinations of price and quantity should appear.

Drag the dots next to the price/quantity combinations to their correct location on the graph.
(Note: In order to participate in this activity you will need to download Shockwave)

Discussion

D
iscuss the following questions:

What does the demand schedule show?

What does the supply schedule show?

When the only thing that changes is the price of a product, what relationship exists between the price of a good or service and the quantity people are willing to buy?

When the only thing that changes is the price of a product, what relationship exists between the price of a good or service and the quantity producers are willing to sell?

Research

Watch the following clip about supply and demand.

Is this presentation similar to the activity you completed in Part A? What happened to quantity demanded and quantity supplied as the price of widgets increased? If you could describe the relationship between price and quantity demanded in a single sentence, what would you say? What about price and quantity supplied?

When you are ready, go on to Application.