This lesson is designed to review the three types of productive resources-natural resources, human resources, and capital resources-needed to produce goods and services. Students use the internet to identify examples of each - first in the production of pizza, then the mining of gold during the California gold rush.

KEY CONCEPTS

Demand, Natural Resources, Shortage, Supply, Surplus

STUDENTS WILL

  • Identify productive resources as natural resources, human resources, and capital resources.
  • Explain the laws of supply and of demand.
  • Explain how a market clearing price is established.
  • Define surplus and shortage.

INTRODUCTION

goldEvery day bread arrives at grocery stores, toys are sent to toy stores, and raw materials are delivered at manufacturing facilities. Yet students have little understanding of how people decide how much of a good or service should be produced and at what price. In this lesson students review the productive resources used to produce goods and services, and they learn how decisions are made in a market economy through the interactions of buyers and sellers. With an understanding of how markets work, students will be better prepared to make decisions both as consumers and producers.

RESOURCES

PROCESS

Part I:

Tell the students that many things are needed to make a good or a service. These things are called productive resources.

Tell the students that productive resources include human resources, natural resources, and capital resources.

Define human resources as the workers. Define natural resources as things that come from nature and are unchanged by human hands. Ask students for examples of natural resources. [Water, air, trees, minerals, animals]

Define capital resources as man-made tools and equipment used to produce a product. Ask students for examples of capital resources. [Factories, equipment, and tools such as hammers, saws, and computers]

Instruct students to categorize types of productive resources by dragging each resource to the type of resource it represents.


Review the students' answers.

[Blender, mixing spoon, and delivery van are capital resources. Water and walnuts are natural resources; truck driver and baker are human resources.]
Tell the students that many productive resources are needed to make pizza.

Instruct the students to read the art of pizza article. Tell them to use this site to find the following:

  1. An example of a human resource in the first paragraph. [Baker]
  2. An example of a natural resource in the fourth or sixth paragraph. [Herbs, tomatoes, garlic, onion]
  3. An example of capital resources in the fourth paragraph. [Mixers, oven]

Part II:

Tell the students that pizza is a very popular food. Americans eat 350 slices every second and consume 100 acres of pizza daily.

moneyInform the students that they have $10 to spend. Be sure to tell then they don't have to spend the whole $10, but they cannot spend more than $10. Ask them to think about how many slices of pizza they would be willing and able to buy at each of the following prices. Instruct them to write the number of slices they would be willing and able to buy at each price in the chart.

Ask students to print a copy of Activity 1. Explain they are to ask three of their friends how many slices of cheese pizza they would be willing and able to buy at each of the various prices, if they had an extra $10 to spend.

After the students have completed Activity 1, have them transfer the information to the Demand Schedule for Cheese Pizza. Point out that the table already shows amounts for each student - how much each is willing and able to buy. Ask the students to add how many slices their three friends are willing and able to buy at each price and determine the total amount demanded at each price and record it under the column labeled total.

Alternatively, the student version of this lesson has the activity below available online:


Tell the students that the demand schedule for Slices of Cheese Pizza can be shown in a graph. Instruct the students to study the graph and answer the questions.

Instruct students to look at the schedule, Market for Slices of Cheese Pizza. 

Market Schedule for Slices of Cheese Pizza

Price per Slice

Quantity Demanded

Quantity Supplied

$2.50

200

1000

$2.00

400

800

$1.50

600

600

$1.00

800

400

$ .50

1000

0

Tell students that the Market Schedule for Slices of Cheese Pizza shows the quantity supplied and the quantity demanded at various prices. Tell the students this information can be shown as a graph.

chart
Ask the students to look at the alternative prices for slices of cheese pizza and use the information to answer the questions. Review students' answers.


The pizza owners would like to sell the pizza at $2.50 a slice. How many slices are the pizza owners willing and able to supply at $2.50? [1,000]

  1. How many slices are consumers willing to buy at $2.50? [The consumers are willing to buy 200 slices at $2.50.]
     
  2. What problem does this create? [At a price of $2.50, the pizza owners will find that they are unable to sell all the pizza slices they produce. They will have a surplus of 800 pizza slices.]

Explain that a surplus exists in a market when the quantity supplied exceeds the quantity demanded at a particular price. Ask the students how the surplus can be eliminated or reduced. [Decrease price.] Explain [When price decreases, both consumers and businesses will respond. At a price of $2.00, the quantity supplied would decrease to 800 and the quantity demanded would increase to 400. Consumers are willing and able to buy more at a price of $2.00 and businesses are willing and able to supply less.]

Review with students their answers to the following questions.

 

  1. How much would the surplus be at $2.00? [The surplus would be 400 at $2.00.]
     
  2. Explain how you determined this amount of surplus. [To determine the surplus subtract the quantity demanded at a price of $2.00 from the quantity supplied at $2.00. The surplus would be 800-400=400.]
     
  3. What would happen if the price is set at $1.00?[There will be a shortage.]
     
  4. How many slices are the pizza owners willing and able to supply at $1.00? [The pizza owners are willing and able to supply 400 slices at $1.00.]
     
  5. At a $1.00, how many slices are consumers willing and able to buy? [At $1.00, consumers are willing and able to buy 800 slices.]

Explain that at a price of $1.00 consumers want to buy 800 slices of cheese pizza but producers are willing to offer only 400 slices for sale. At a price of $1.00 there won't be enough slices available for everyone who is willing and able to buy slices of cheese pizza at $1.00. This is called a shortage. A shortage exists in the market when quantity demanded exceeds the quantity supplied at a particular price.

 

  1. How could this shortage be eliminated? Explain. [This shortage could be eliminated by raising the price because consumers are willing and able to buy less and businesses are willing and able to supply more at each increase in price.]
     
  2. A surplus exists at $2.50 per slice and a shortage exists at $1.00 per slice. How much could pizza owners charge for a slice of pizza without causing a shortage or a surplus? Explain. [Pizza owners could charge $1.50 for a slice without causing a shortage or surplus because at a price of $1.50, the quantity of slices of pizza demanded equals the quantity of slices of pizza supplied. At this price there are no shortages or surpluses.]

Tell the students this price is called the market clearing price or equilibrium price.

Part III:

Tell the students that they are now going to apply what they have learned to blue jeans.

To learn more about the gold rush and blue jeans, direct the students to these sites:

panningInform the students that mining for gold required many productive resources. To find some of the resources used, direct the students to the Mining for Gold site.

Have the students look at the picture and find an example of each type of productive resource-natural, human, and capital.

Review the students' answers. [Natural-water, human-miners, both men and a woman, capital-shovels, trough.]

Tell the students that during the Gold Rush, Levi Strauss made durable pants for the miners out of canvas. Later he made the pants from a heavy blue denim called genes in France, which became "jeans" in America. Even today, consumers love to wear jeans.

Direct the students to print a copy of Activity 2. Use the information from the Market Schedule for Blue Jeans to make their own graph.

Market Schedule for Blue Jeans

Price per Pair of Blue Jeans

Quantity Demanded

Quantity Supplied

$60

20

100

$50

40

80

$40

60

60

$30

80

40

$20

100

20

Review student answers. 

 

  1. jeansWhat is the market clearing price or equilibrium price for blue jeans? [The market clearing price or equilibrium price for blue jeans is $40.  The market clearing or equilibrium price is the point where the quantity supplied equals the quantity demanded. At that price all the consumers willing and able to buy a pair of jeans can do so and the producers willing and able to sell can do so.]
     
  2. At what price would there be a shortage? [There would be a shortage at $20.]
     
  3. Why would there be a shortage? [A shortage occurs when the quantity demanded is greater than the quantity supplied at a given price.]
     
  4. At what prices would a surplus occur? [A surplus would occur at $50 and $60.]

CONCLUSION

To review, instruct students to complete Activity 3.

Review the students' answers.

  1. goes down; goes up
  2. market clearing price or equilibrium price
  3. quantity supplied
  4. goes up, goes down
  5. quantity demanded
  6. shortage
  7. surplus
  8. income
  9. substitute

ASSESSMENT ACTIVITY

Instruct the students to use the information from the table, Market for DVD Players, to answer the questions

Market for DVD Players
Price per Player
Quantity Demanded
Quantity Supplied
$599
25
600
$499
75
525
$379
150
400
$279
325
325
$199
500
75


DVD playerTo produce one DVD player costs ACE Electronics, a major producer of DVDs, at least $179.00. ACE Electronics wants to sell them at $499 each. Is this the price at which they should sell the DVD? Use what you know about markets to explain your answer.[No. At $499 ACE Electronics will have a surplus. The quantity supplied at that price is greater than the quantity demanded. ACE should sell the DVD for $279. At this price , the quantity demanded equals the quantity supplied.]

EDUCATOR REVIEWS

  • “This seems like a great lesson to understand demand, supply, and price. They are all interrelated.”

    Gita Varadarajan, India   POSTED ON April 18, 2005

  • “I don't think this was an appropriate lesson to be teaching seniors in high school; I felt it was a little too easy.”

    Damon   POSTED ON February 9, 2006

  • “I liked this because it helped me with my resources and supply and demand. I never got this until now.”

    Nate B., Columbus, DC   POSTED ON March 19, 2009

  • “I think this helped me understand supply demand and price as well as resources. I liked it.”

    Nate B., Columbus, OH   POSTED ON March 19, 2009

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