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In this lesson students watch a 60 minutes report on the market for truffles. The report explains how high demand from consumers coupled with the uncontrollable nature of truffle production affects the market. Students identify major concepts in the report as well as their supporting details, using an interactive note-taker.

KEY CONCEPTS

Demand, Price, Profit, Scarcity, Supply

STUDENTS WILL

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

INTRODUCTION

TruffleMarket prices vary depending on many factors. When goods and services become relatively more scarce or the demand for those goods and services grows, market prices increase. The 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 you will learn how consumer demand for the delicacy known as a truffle drives entrepreneurs to invest resources in producing them. Students will also learn of the darker side of the truffle market. Unmet demand has lead to an influx of inferior truffles from Chinese producers attempted at being passed off has the real thing. 

RESOURCES

PROCESS

Activity 1:
Have students watch the 60 minutes report: 'The Trouble With Truffles.'  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:

Watch the 60 Minutes Report .

While you are watching, 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 watch the report 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

1)Why are truffles so valuable _______.
a) Consumer preferences[CORRECT] 
b) Abundance
c) Shortage
d) Chinese Substitutes 

2) What is the incentive to a producer to use the Chinese truffles but not explicitly label their product as such?
a) Increase their sales in China
b) Decrease their sales in China
c) Sell Truffles at a lower price than they otherwise would
d) Sell Truffles at a higher price than they otherwise would [CORRECT]

3) What contributes to the scarcity of truffles?
a) Pigs eating them
b) Truffle demand in the United States
c) Truffles from China
d) The uncontrollable nature of their growth[CORRECT]

Question 4: What is the price per pound of black truffles? [$1000.]

Question 5: 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 6: Why do some restaurant owners continue to use truffles despite the increased cost and risk? What does the increased cost and risk do to their profits? [Possible answers: Some restaurant owners continue to use truffles because they want to keep their customers happy. The increase security costs or insurance costs will eat into profit margins or be passed onto consumers.]

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

RestaurantAsk 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 the current 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 higher cost of selling 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

Notebook1. 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.

EDUCATOR REVIEWS

  • “This lesson looks fantastic and I would love to use it, but the link to the audio file is a broken link and goes to a page that no longer houses the audio file. Is there a way to get the original link or a redirection?”

    jennifer B., Allentown, PA   POSTED ON March 4, 2012

  • “I think this lesson is excellent!”

    P R., Hughes, AR   POSTED ON September 2, 2012

  • “My econ students loved this! The video can also be found on youtube. Just search "The Trouble with Truffles" and it should come up.”

    Kristen C., Pearland, TX   POSTED ON January 17, 2014

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