Though some have called economics, the “dismal science”, knowledge of it is both required in the curriculum and advisable in life. The challenge, however, remains in making the subject relevant to students and their interests. These lessons address that challenge by focusing on a “burger joint” and the need to understand the law of demand and just how it affects what students might pay for a hamburger. In this lesson, the use of technology is especially effective because it engages students in constructing a visible representation of a difficult abstraction. It also allows them to deal with variables in an efficient and orderly manner.

Introductory Lessons on Demand

To develop economic literacy students must understand the following basic economic problems confronting all societies.

1. Basic to all economic decision making is the problem of scarcity.

2. Scarcity requires all individuals and societies to make choices.

3. The problem of choice confronts every economic system when seeking to resolve what, how and for whom to produce.

4. ln a market systern, price determines the quantity demanded and supplied.

5. Prices provide information and incentives and serve to ration limited resources.

6. The interaction of demand curves and supply curves are a graphic illustration of the determination of prices in a market system. (History-Social Framework for Califomia Public Schools pages 17, 108, 109.)

The students will:

1. Develop a demand schedule.

2. Create a demand curve from the demand schedule.

3. Write the law of demand through their interpretation of the demand curve.

1. To have students understand the relationship between the price and the demand of a good.

2. To have students conduct a survey of the class demand at several prices and construct a demand schedule.

3. To transfer the demand schedule to a graph that represents a demand curve.

4. To use the demand curve slope to explain the relationship between price and the quantity demanded.

5. To explain the reasons for a downward sloping demand curve i.e. the availability of substitutes, the income effect and diminishing marginal utility.

Prerequisite knowledge: Basic to understanding the concept of the law of demand is the study of scarcity and opportunity cost Students should understand that all decisions in economics are made “on the margin”. Therefore, opportunity cost (the next best choice) is dependent on price. Any adjustment of price, up or down, effects the demand for a good or service. Students need to understand even non-monetary decisions have costs associated with them such as the loss of time or other courses of action.

Procedure

1. Pass out graph paper to the class or have them graph on a calculator or computer.

2. Explain to the students that they each have $25.00 to spend for lunches for the week.

3. Explain that you are going to construct a demand scheduie tor your new Beach Burger joint and need to know what the demand is at various prices.

4. Conduct surveys (either by the teacher or a group of students) of how many burgers each student would buy at each price.

5. Weave a story with each price change. For example, explain that you must raise your prices because there was a drought and wheat prices are sky high causing bread prices to rise or that there is an abundance of beef on the market and prices have fallen enabling you to lower prices. Whatever the scenario make sure students understand that price changes are related to conditions in the marketplace.

6. Have students create a demand schedule on their graph paper, calculator or computer.

   P	Q
   1.00	45
   1.50	38
   2.00	30
   2.50	22
   3.00	18
   3.50	15
   4.00	10

7. Now explain to the students that you want them to transfer the information from the demand schedule to a demand curve. Again, they can use the graphing paper, calculator or computer. Show them how the graph looks and explain that the vertical axis is always price and the horizontal axis quantity.

   

8. Once the students have completed the graph of a demand curve, ask them to interpret it by explaining what the curve means in a sentence. What you want them to write is that “the higher the price the lower the demand the lower the price, the higher the demand”. Share their etforts with the class.

9. Once the class has completed the schedule and graph, the final task is to discuss why the law of demand is true and why demand curves slope to the right. You can do this by asking the right questions:
   1. Why does demand go down when prices go up? They will answer that they will not buy a good if the price is too high. Explain then the “substitution effect” (i.e. demanders will buy pizza or hot dogs as substitutes for hamburgers).

   2. Why would I buy more hamburgers if the price is lower? Isn’t one per day enough? They will note that one might take a friend to lunch. Eventually, they will see that demanders will only demand more of a good if the price is lower and thus begin to comprehend the “income effect”, and the concept of “diminishing marginal utility”.

The Students will:

1. Develop graphs that represent a change in demand.
2. Prepare an explanation for shifts in demand

1. To have students understand the difference between a change in demand and a change in quantity demanded.

2. To graph shifts in demand.

3. To understand the causes of changes in demand.
   1. changes in income

   2. changes in the prices of substitutes or complements

   3. changes in taste

1. As a pretest, ask the students to write a paragraph speculating on the impact of a pizza joint opening next door to your Beach Burger establishment. I like to review a critical part of a previous lesson with a five minute journal entry followed by a short discussion. It allows me to take care of class business, summarize the earlier lesson and transition to the next lesson.

2. Explain to the students that their parents are faced with financial hardship and that their weekly lunch allowance has been cut to $15.00. Conduct a survey of the students’ demands for burgers at the same prices as yesterday. Create a demand scheduie and then transfer it to the same graph used yesterday. You can also give them an increase to $30.00 or $35.00 if time allows.

3. Once students can see the shift of the demand curve inward (loss of income) and outward (increase in income), you can then expiain the concept of a “change in demand”.

4. Here is where many students struggle because they confuse a change in demand with a change in quantity demanded. Explain that a change in quantity demanded is purely a function of price, whereas a change in demand means a shift of the entire curve inward or outward.

5. Ask the students what happened to cause demand to go up or down at every price. They will conclude at some point that it was a change in income. Then ask them for examples of ways for income to go up or down. They can begin to see the connection between public policy decisions and the demand for goods. For example, what would be the result of a tax cut? Tax increase? Would a tax cut that increases demand be a good thing (they would intuitively respond that it would be) or a bad thing for the economy? What if the economy was at full production?

6. At this point, you want to have the students brainstorm other reasons for changes in demand. What other reasons can you give for demand to go up or down at every price level? They will conclude (you hope) that: 1 changes in the prices of substitute or complimentary goods could cause a shift in demand, 2. a change in taste could cause a shift.

7. Have the students pick a partner and graph the following statements about curbing cigarette smoking:

1. In 1971, cigarette advertising was banned from television in the United States. Fewer teenagers smoke.

   

2. Cigarette taxes in the United States have caused the average price to rise drarnatically causing 2 million Americans to quit smoking.

   

3. Smoking in the United States is prohibited in many public places. Smokers are finding it more difficult to smoke.

   

   * When the students have finished the graphs, they must provide a written explanation for their answers Then ask for volunteers to share their answers.

12.1 Students understand common economic terms and concepts and economic reasoning.
1.	Examine the causal relationship between scarcity and the need for choices.
2.	Explain opportunity cost and marginal benefit and marginal cost.