1 / 17

A Market in wheat

A Market in wheat. A SIMULATION OF THE MARKETPLACE. A Market in wheat (ROLES). Half the class are buyers The other half are sellers Two students will be record-keepers (one on the board; another on paper)

raja
Download Presentation

A Market in wheat

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. A Market in wheat A SIMULATION OF THE MARKETPLACE

  2. A Market in wheat(ROLES) • Half the class are buyers • The other half are sellers • Two students will be record-keepers (one on the board; another on paper) • Two students will distribute cards (one will hand out blue buy-order cards; the other will hand out yellow sell-order cards)

  3. A Market in wheat(set up) • Center of the room is designated as the “marketplace” • When the teacher says “The market is open,” buyers and sellers get one card, meet in the middle of the room and try to agree on a price for a bushel of wheat. • Any buyer can talk to any seller

  4. A Market in wheat(procedure) • Every time a price is agreed on and a sale made, write down the amount on your score sheet, report the transaction to the recorder and get a new card • Make as many transactions as you can • The goal: MAKE AS MUCH MONEY AS YOU CAN • When the teacher says, “The market is closed,” no further transactions will count.

  5. Discussion questionsafter ROUND #1 • To make a profit, should you be making many or few transactions? • Should you let other students see the information on your card? • Do you have to make a profit on every transaction to have a profit at the end? • Should you watch the classroom tally sheet on during the trading rounds?

  6. Discussion questionsafter ROUND #2 • At what price was wheat most frequently sold in each round? • This price is known as the “market-clearing” or equilibrium price. Why would economists calls it the “market-clearing” price? • In which round did the greatest spread in prices occur?

  7. Market Equilibrium = • The situation where the demand for a product at a given price = supply of a product at a given price. • No excess demand. No excess supply. • Point of maximum efficiency and maximum profit. • The producer makes just enough to sell at a given price without losing sales or making too much.

  8. Do you remember this graph? The equilibrium price = the price where the goods and services supplied by the producer equals the goods and services demanded by the customer(s).

  9. Who determined price? • Did buyers or sellers determine the price for wheat? • A: Yes, through their interaction in the marketplace • How did competition among the sellers and buyers influence the price? • A: Because of competition within both groups, no single buyer or seller controlled the price

  10. “The invisible hand” • A metaphor used by Adam Smith to describe how the market “regulates” itself • The forces of self-interest and competition push the market to the equilibrium Adam Smith, philosopher (1723-1790)

  11. “The invisible hand” • Sellers: Self-interest is to get the highest price, but competition among sellers keeps prices low • Buyers: Self-interest is to get the lowest price possible, but competition among buyers may push prices up (think auction) Adam Smith, philosopher (1723-1790)

  12. Round 3 & 4 • In Rounds 1 & 2 there were equal numbers of buyers and sellers. • What would happen if there were many more sellers than buyers? • What would happen if there were many more buyers than sellers? • Round 3: More Sellers • Round 4: More Buyers

  13. What would happen if there was only ONE seller? • What would this market look like? • What would happen to price? • Would the seller have to work hard to attract new buyers? • Described this market using the word “competition” • Is this good for the seller? • Is it good for the buyers? • What is this market situation called?

  14. Monopoly!

  15. Should the government create rules to avoid monopoly? • Why is a company without competition harmful to the country? • The United States has laws (called anti-trust or anti-monopoly) laws that allows them to break up monopolies

  16. Three historical examples: • Standard Oil Company, forced in 1911 to break into 33 separate companies • American Bell Telephone Company (now AT&T) forced to break into independent companies in 1984 • Microsoft Corporation sued by the Justice Department in 1998 for controlling the market

  17. Are these modern companies monopolies? • Google? • Facebook? • Do they use their market power to destroy competition?

More Related