CONTENT STATEMENT
- The interaction of supply and demand, influenced by competition, helps to determine price in a market. This interaction also determines the quantities of outputs produced and the quantities of productive resources (entrepreneurship, human resources, natural resources, and capital) used.
CONTENT ELABORATION
Understanding of markets becomes more complex in grade six as students study the interaction of supply and demand, the influence of competition, and productive resources and outputs. Basic examples can be used to illustrate the interaction of these economic concepts in preparation for more in-depth study in the following grades.
The availability of a good or service and the demand for that good or service interact to determine price. Examples of this interaction include:
Demand for gasoline increases beyond the capacity of refineries to provide adequate supplies, therefore, gasoline prices rise.
When refinery production exceeds demand, producers drop gasoline prices to encourage car owners to purchase more gasoline.
Price is influenced by competition among producers who compete to sell their goods and services. When multiple producers compete to sell a product that is in high-demand, consumers may benefit as the producers lower their prices to increase sales and compete for customers. For example, when several stores sell the same video game system, they are in competition with one another, and often choose to lower prices to attract consumers.
The interaction of supply, demand, and competition influences the quantities of goods and services produced (output) and therefore, the quantities of productive resources (e.g., entrepreneurship, human resources, natural resources and capital) used.
As supply, demand, and competition interact to determine the price of a product, the number of products created also is affected. For example, video game manufacturers might produce more copies of a popular game in anticipation of holiday shopping. As the demand for a game increases during the holiday season, manufacturers will increase their output (copies of the game), as well as their use of input (productive resources like plastic to create discs and workers to package them).
EXPECTATIONS FOR LEARNING
Explain how supply, demand, and competition interact to determine price.
Explain how supply, demand and, competition interact to influence quantities of productive resources and outputs.