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What is responsible for the shortage of babysitters in Washington, DC? Identify the parts of the article which indicate a decrease in supply and an increase in demand.

KEY CONCEPTS

Demand, Goods, Incentive, Services, Shortage, Supply

INTRODUCTION

Read "Calling All Babysitters ", an article from The Washington Post about babysitter shortages.

RESOURCES


PROCESS

What is responsible for the shortage of babysitters in Washington, DC? Identify the parts of the article which indicate a decrease in supply and an increase in demand.

What happens to the market price of babysitters when supply decreases? What happens to quantity of babysitters demanded? What happens to the market price of babysitters when demand increases? What happens to quantity of babysitters supplied?

What happens when both supply decreases and demand increases (with an inadequate increase in price?)

How can the shortage of babysitters be alleviated? List some ways to reduce the demand for babysitting. List ways to increase the supply of babysitters. How can a price change work to reduce the shortage?

Read the following excerpt from the Washington Post article:

David Gordon, who lives in upper Northwest Washington, says that in moments of desperation he's called 15-year-olds who usually charge $6 an hour and offered more... "They'll say, 'I don't know, I have a lot of homework,'" said Gordon, who then will offer $8 an hour. "Finally they'll say, 'Oh all right,' as if they're doing you a favor."

Look at the supply schedule below for Linda, who provides a babysitting service.

  • Price

$10

$7

$5

$2

  • Quantity of babysitting hours supplied

25

20

10

5

 

1. What happened to the quantity of babysitting hours supplied as the price decreased?
[The quantity supplied fell in response.

2. What happened to the quantity of babysitting hours supplied as the price increased?
[The quantity supplied rose.] 

3. Why is Linda willing to babysit more hours when the price increases?
[The opportunity cost of foregoing the wage received while babysitting becomes larger enough to incentivize Linda to prefer baby sitting rather than engaging in leisure.]

4. If she received $12.50 per hour for babysitting, do you suppose she would rather watch television or babysit after school?
[Linda would rather babysit, as she values spending her time babysitting above watching television at this given wage rate.]

5. If she received $1.00 per hour, do you think she would rather babysit or watch television?
[Watch television. The wage rate is not high enough to induce Linda to babysit. The opportunity cost of not babysitting is $1.00 per hour, this means that Linda is willing able to give $1.00 an hour not to babysit.] 

6. What is responsible for the decreased supply of babysitters in Washington, DC?
[Decreasing wage rates.]

*Adapted from "Lesson 9: Producers and Supply," Master Curriculum Guide 5-6. Copyright 1995, Council for Economic Education , 1140 Avenue of the Americas, New York, NY 10036

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  • “The students responded to this lesson very well, mostly because almost all of them could relate to the content matter. What a great way to actually make the students understand what they have been trying to learn for a week now!”

    Jessicka Manley   POSTED ON January 27, 2005

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