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Marketplace: The Trouble with Truffles

Key Economic Concepts:

• Demand
• Price
• Profit
• Scarcity
• Supply

Description:

In this lesson students listen to an audio file about the scarcity of French truffles in 2004; the file explains how this scarcity affected French buyers, sellers, and restaurant owners. Students identify major concepts in the audio file as well as their supporting details, using an interactive note-taker.

Lesson Objectives:

Students will:

• Demonstrate how the scarcity of goods and services directly affects prices.
• Compare and contrast how scarcity affects buyers and sellers.

Introduction:

Explain that market prices vary depending on many factors. When goods and services are scarce, market prices increase. This increase affects buyers and sellers. Buyers must decide if the good or service is worth the increased price and sellers must decide if they can make a profit by selling the good or service at an increased price. In this lesson students will learn how the scarcity of truffles in France in January 2004 affected market prices for buyers and sellers. Remind the students not to confuse the truffles discussed in this lesson with chocolate truffles. Truffles are a group of valuable and highly sought-after edible species. In many countries truffles are thought of as a highly prized food.

Resources:

[Note to teacher: The following link requires RealPlayer www.real.com/dmm/realplayer/search ^[2] .]

• The following two lessons may be good introductions to the topics discussed in this lesson.
  
  Demand Shifters
  www.econedlink.org/lessons/index.php?lesson=EM550
  
  Is the Price of Gasoline Really Too High?
  www.econedlink.org/lessons/index.php?lesson=EM60&page=teacher
   
• Marketplace audio file The Trouble with Truffles: marketplace.publicradio.org/shows/2004/01/26_mpp.html ^[1] play from 22:20 through 26:10. This is an audio clip about how a recent drought in France has caused the price of truffles to triple in price over the past year.
  
  [NOTE: you will need to select the Listen (entire show) link in the top left corner of the transcript.]
   
• The Trouble with Truffles note-taker. Students will use this note-taker to take notes on throughout the lesson.

Process:

Activity 1:

Have students listen to the Marketplace audio file The Trouble with This Year's Truffles ^[1] . As they listen they will complete an outline of important information contained in the story. Then they will use their outlines to answer both factual and evaluative questions about the economic concepts addressed in the story.

Give students the the following instructions:

Listen to the Marketplace audio file The Trouble with This Year's Truffles ^[1] , play from 22:20 through 26:10.

While you are listening, use the note-taker to find and record supporting details for three main ideas. The three main ideas you will focus on today are these:

1. Scarcity of Truffles
2. Price of Truffles
3. Buyers and Sellers of Truffles

Additionally, as you listen to the segment, record any words which you don't know or which you think are important economic terms.

Then listen to the audio file again to gather additional supporting details and possible definitions of the vocabulary words, using context clues; record these in your note-taker.

Finally, you will be asked a series of questions related to the story.

Teacher Notes:

While using the note-taker, students will identify the following:

1. Scarcity of Truffles
2. Price of Truffles
3. Buyers and Sellers of Truffles

Questions:

Question 1: Between January 2003 and January 2004, the price of truffles _______. [correct answer is c]

a) Doubled
b) Stayed the same
c) Tripled
d) Decreased

Question 2: Why do you think the price of truffles changed so much in one year? [Possible answers: there has always been a high demand for truffles; the drought affected hunters’ ability to find enough truffles; if the demand exceeds the supply, then the price should go up.]

Question 3: What contributed to the scarcity of truffles? [correct answer is d]

a) Truffles can't be produced in laboratories
b) The drought
c) Exactly where and why truffles grow is impossible to predict
d) All of the above

Question 4: If truffles could be mass-produced in a laboratory, what do you think would happen to their price? [Possible answers: the price should go down because the supply would go up; restaurants wouldn't have to raise prices because there would be a potentially limitless supply.]

Question 5: According to the news story, what did most restaurants do to compensate for the high price of truffles? [correct answer is d]

a) They used smaller quantities of truffles
b) They removed truffles from their menus
c) They raised prices
d) All of the above

Question 6: Why do some restaurant owners continue to use truffles despite the increased cost? What does the increased cost do to their profits? [Possible answers: Some restaurant owners continue to use truffles because they want to keep their customers happy. This makes their profits drop significantly because the meal costs them so much more to provide, yet the customers are paying the same price.]

Activity 2:
Conduct a class discussion about the news story. Ask the students to recall the effects that scarcity had on buyers and sellers in France.

Ask the students to recall the decisions that restaurant owners had to make in regard to truffles and their prices. Have the students discuss the decisions restaurant owners made and the possible effects those decisions had on their profits.

Have the students, working with partners, discuss the following scenario and think about each question. Ask the students to record their ideas on paper.

You are a restaurant owner and must decide how to deal with the scarcity of truffles. Consider the following:

Will you continue to sell truffles at a reasonable price, or raise your prices? [Answers will vary.]

What are the benefits of keeping your prices the same for the season even though you are spending more money to purchase truffles? How would keeping prices the same affect your profit? [If you raise prices to compensate for the additional money you are spending on truffles, customers will be unhappy. Keeping prices the same for the season, but doing so may also ensure customer loyalty for future seasons.]

What might happen if you raise your prices to compensate for the high cost of truffles? Could this affect your profit? [Your profit could go up because you are making back the additional money you spend on truffles. The demand for truffles is so high that people are willing to buy them at any price. Raising your prices could limit your profit if you lose customers due to the increase.]

What are the possible effects of removing truffles completely from your menu? [Your profit could increase because you aren't spending money on truffles and you don't have to raise your prices. Your profit could decrease if people continue to demand truffles -- they will go to restaurants that serve them.]

Conclusion:

By the conclusion of this lesson, the students should be able to identify at least three main effects that scarcity has on buyers and sellers. This will help them understand that scarcity directly affects profit in the market.

Assessment Activity:

1. Have the students hand in their note-takers. The students' work should reflect an understanding of scarcity and its effects on buyers, sellers, and market prices.
2. Lead the discussion in Activity 2 and have the students hand in their answers to the questions. The students' thoughts and answers should reflect the concepts of scarcity displayed in the lesson.

Extension Activity:

Have the students learn more about scarcity and market prices by completing Economics in the Headlines and Save the Moonflowers.

Links Used:

1. ^{^ ^ ^} "MarketPlace: The Trouble with Truffles" - (marketplace.publicradio.org) This is an audio clip about how a recent drought in France has caused the price of truffles to triple in price over the past year.
2. ^{^} "Real Player" - (www.real.com) Get real player at this website.

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