demand for chocolate experiment

Demand for chocolate bars experiment:

Demand for chocolate bars experiment

Getting an idea of what demand is The demand for chocolate bars experiment :

Getting an idea of what demand is The demand for chocolate bars experiment In my shop I have 4 items 50p 50p 50p 50p

Slide 3:

Product Quantities Can of coke (50p) Snickers bar (50p) Pint of milk (50p) Mars bar (50p) Getting an idea of what demand is Stage 1 Each item is 50p each You have £2.50 income to spend and must spend it all You can buy any number of one product and do not have to buy all of the products When you have made your decision draw a table like the one below and fill it out

Stage 2:

Stage 2 It’s a new day and you have consumed everything that you bought yesterday A global shortage of peanuts has put the price up of a snickers bar to £1 50p 50p 50p £1

Slide 5:

Product Quantities Can of coke (50p) Snickers bar (£1) Pint of milk (50p) Mars bar (50p) Demand for chocolate bars experiment continued Stage 2 It’s a new day and you have consumed everything that you bought yesterday A global shortage of peanuts has put the price up of a snickers bar to £1 You still have £2.50 income to spend and must spend it all You can buy any number of one product and do not have to buy all of the products When you have made your decision draw a table like the one below again and fill it out with your new preferences

Slide 6:

Demand for chocolate bars experiment continued Stage 3 – calculating market demand Organise yourself into 2 groups Work out the market quantities for your group for stages 1 and 2. Do this by adding together the quantities for each product at each price level demanded by each person in your group. See an example below Product Quantities - Stage 1 (Snickers cost 50p) Quantities - Stage 2 (Snickers cost £1) Can of coke ||||| ||||| |||| 14 ||||| |||| 9 Snickers bar ||||| ||||| ||| 13 |||| 4 Pint of milk ||||| ||||| || 12 ||| 3 Mars bar ||||| ||||| ||||| |||| 19 ||||| ||||| |||| 14 What this represents is the demand for each product – the amount each person would like to purchase at the price stated. By adding together each individual’s demand we get the market demand Make your team a table like the one above and complete it

Slide 7:

Demand for chocolate bars experiment continued Stage 3 – calculating market demand Now lets represent this information in the form of a graph Use the graph paper provided Price goes on the vertical axis Quantity demanded goes on the horizontal axis Plot the quantity demanded of snickers bars for your group against the price (see the example below) You will see two points on the graph – one for the quantity demanded at 50p and another for the quantity demanded at £1 Draw these two points and draw a straight line through them like below

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Demand for chocolate bars experiment continued Stage 3 – calculating market demand Now compare your graph with the other group’s graph Are they the same shape? Do they both slope downwards from left to right? So what can you conclude about the relationship between price and the amount demanded? Use your graph to estimate the following for your group What is the demand likely to be if the price were 75p? What is the demand likely to be if the price were 25p? What is the demand likely to be if the price were 60p?

Slide 9:

Demand for chocolate bars experiment continued Let's now take the game one step further. Stage 4 It is now day three and the peanut crisis has eased. Snickers now cost 50p once more. The government has decided to provide all students with a grant As a result your income has increased and you now have £4 to spend. Again, in your groups work out market demand by adding together each person's demand for each product The rules are the same as before Fill out your individual table to find your individual demand Fill out your group table to find your market demand (the sum of all your individual demands) Then create a table like the one below Product Quantities - Stage 1 (Income is £2.50) Quantities - Stage 4 (Income is £4) Can of coke Snickers bar Pint of milk Mars bar

Slide 10:

Demand for chocolate bars experiment continued Stage 4 continued Comparing stage 1 and stage 4 what can we see? Was the demand for all of the goods greater than before? This is because demand is not static – it changes as a result of changes in factors that affect demand (other than price) So we know now that one of these factors is income; we saw that when we had an increase in income our demand levels increased. What other factors might increase demand? What factors might decrease demand? On your original graph plot the new snickers demand. Assume that you would get the same increase in demand at £1 and plot your second point. Now draw your new demand line What do we see? Now lets have a look at the theory of demand