- Supply
And Demand
- Adapted from materials by
the American Paper Institute
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- Back to Trash Goes To School
- GRADE LEVELS:
7-8
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- SUBJECT AREAS:
economics, social studies
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- CONCEPT:
Supply and demand.
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- OBJECTIVE:
To realize that there can be and is a demand for things we throw
away.
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- MATERIALS:
flow chart
handout: Supply and Demand
pen or pencil
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- KEYWORDS:
supply, demand
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- BACKGROUND:
Recycling is an increasingly important part of the business world.
Materials like used paper, glass, metal, and plastic are valuable
resources. Many of these products are in demand and some are
looking for markets. Just like any new business, the recycling
business is finding out where it fits into the economic structure.
If we want to help recycling succeed, we must buy items made
from recycled materials. The following exercise addresses the
supply and demand of waste paper.
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- The supply of a material is the amount
the owners are willing to sell at any one time, place, and price.
The supply of one material affects the production, supply, and
price of other materials. For example, if waste paper is in short
supply, then the cost of cellulose insulation, which is made
of waste paper, will be relatively high.
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- Demand is the amount of an item that
buyers are willing to purchase at any one time, place, and price.
The demand for one material may affect the demand and price of
other, very different materials.
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- Supply and demand interact, each having
an effect on the other and on the cost of materials and goods.
When the price of a material such as waste paper is high, more
people are willing to sell it. Therefore, the supply of waste
paper for sales goes up. When the supply increases past the demand,
sellers must compete for buyers. They lower their prices to sell
their supply. At the lower price, some sellers no longer want
to sell their waste paper. Therefore, the supply of waste paper
for sale goes down. When the demand for waste paper is high,
the mill raises the price they are willing to pay. When the price
goes up, the circle of supply and demand starts again.
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- Flow chart for waste paper
- Collectors gather 10 tons of
waste paper > > > > > >
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- This supply is bought by a
waste paper dealer,
who bales it and ships it to a recycling mill > > >
> > >
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- The mill makes 9 tons of recycled
paperboard > > > > > >
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- This paperboard is sold to
a carton manufacturer > > > > > >
- The carton manufacturer makes
30,000 paperboard cartons > > > > > >
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- The cartons are sold to a soap
factory > > > > > >
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- The soap factory fills the
cartons > > > > > >
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- The soap goes to the supermarket
for the public to buy > > > > > >
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- and the cardboard cartons are
collected for recycling > > > > > >
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- PROCEDURE:
Discuss the flow chart and how the ideas of supply and demand
affect recycling of paper. Then have the students complete the
supply and demand questions.
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- Supply
and Demand
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- SUPPLY
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- 1. How does the supply of waste paper
affect the ability of soap manufacturers to package their products
in cartons made from recycled paperboard?
- _____________________________________________________________
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- _____________________________________________________________
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- _____________________________________________________________
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- 2. List three things you can do to
affect the supply of waste paper.
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- a ._____________________________________
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- b ._____________________________________
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- c ._____________________________________
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- 3. If people collect more waste than
a recycling mill can use, what will the mill do?
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- _____________________________________________________________
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- _____________________________________________________________
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- _____________________________________________________________
- 4. If there is a shortage of waste
paper, what will be the effect on the recycling mill?
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- _____________________________________________________________
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- _____________________________________________________________
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- _____________________________________________________________
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- 5. What can the mill do to increase
the supply of waste paper?
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- _____________________________________________________________
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- _____________________________________________________________
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- _____________________________________________________________
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- 6. If a waste paper dealer pays collectors
$12 per ton of paper, and his business expenses are $25 per ton,
what must he charge the recycling mill in order to make a 10%
profit on his cost?
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- _____________________________________________________________
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- _____________________________________________________________
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- _____________________________________________________________
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- 7. If the price of a raw material goes
up, what is the usual effect on the price of the finished product?
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- _____________________________________________________________
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- _____________________________________________________________
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- _____________________________________________________________
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- DEMAND
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- 1. List three things that could affect
the demand for a particular brand of soap.
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- a.____________________________________
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- b.____________________________________
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- c.____________________________________
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- 2. Let's assume that "Brand-x"
soap becomes very popular. Every box in the supermarket is sold,
and people still want more. The supermarket then orders 75% more
boxes of soap instead of their usual order of 30,000. List in
chronological sequence the effect this change in demand will
have on each of the operations shown in the flow chart above.
- _____________________________________________________________
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- _____________________________________________________________
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- _____________________________________________________________
- 3. In the following table, the first
set of figures has been filled in for you. Find the figures that
are missing from the second and third set of figures. Round off
your answers to the nearest whole number. Note: the dealer's
profit is 10% of his total expenses per ton or $5.00 per ton,
whichever is less.
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- Create a fourth set of figures yourself,
based on the same dealer's expenses and percentage of profit.
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| |
Collector Receives |
Dealer's Expenses |
Dealer's Profit |
Mill Pays |
| 1. |
$12/ton |
$25/ton |
$3.70/ton |
$40.70/ton |
| 2. |
$20/ton |
$25/ton |
|
$49.50/ton |
| 3. |
|
$25/ton |
$5.00/ton |
$65/ton |
| 4. |
|
|
|
|
SUPPLY AND DEMAND
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- 1. You can graph the relationship between
supply and demand:
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-
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- 2. The supply curve shows how many
tons collectors will supply at each price.
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- a. Fill in the above graph with the
numbers from your chart.
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- b. Suppose waste paper sells for $18/ton,
and at that price, collectors will supply 70 tons. Put a dot
where the $18 line meets the 70-ton line.
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- c. If the price falls to $14/ton, collectors
will supply 50 tons. Put a dot where the $14 line meets the 50-ton
line.
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- d. When the waste paper sells for $10/ton,
collectors will think it is worth their while to sell only 30
tons. Put a dot where the $10 line meets the 30-ton line.
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- e. When waste paper sells for $8/ton,
collectors will want to sell only 10 tons. Put a dot where the
$8 line crosses the 10-ton line.
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- f. Now connect all the dots. The line
is called the Supply Curve.
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- 3. Questions:
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- a. Now suppose the economy is in a
recession, and the products made from waste paper are not selling
well. If the mill is forced to lower its demand from 70 tons
to 40 tons, what will be the effect on the price of waste paper?
Graph the results on the Supply Curve.
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- b. If the demand is further lowered
to 10 tons, what will be the effect on the price? Graph the results
on the curve.
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- c. When the demand for paper increases
and the mill needs 60 tons, what price will it pay, based on
the supply curve? Graph the results.
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- d. What will happen if collectors begin
to supply more than the dealers demand?
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- _____________________________________________________________
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- _____________________________________________________________
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- _____________________________________________________________
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- e. What will happen if the supply falls
below what the dealers need?
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- _____________________________________________________________
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- _____________________________________________________________
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- _____________________________________________________________
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