How markets work
Summary
CollapseContext for Use
Class size: 50 and under
Prior knowledge: Students will need to have an understanding of supply, demand and equilibrium.
Time: About 1 hour: 15 minutes to read, 10 minutes to draw graphs, 20 minutes to evaluate each, 10 minutes discussion
Overview
Students will read an article about McDonald's move to all-day breakfast and analyze the impact this will have on the market for eggs. Students will use the information provided in the article to create a market graph and explain how supply and demand interact to create equilibrium.
Expected Student Learning Outcomes
In this exercise students will use provided information to create a market graph and explain how supply and demand interact to create equilibrium.
Information Given to Students
You would expect to see an economic article in the Business section of a newspaper but you might not expect to see on in the Food section. But, economic markets are everywhere. After all, a market is about supply (sellers) and demand (buyers) working together to determine equilibrium price. We are always buying and selling goods and services.
In this exercise, you will use the information in "Breakfast All Day Bad for the Egg Supply?" to determine what is happening in the market for eggs. Work with your group to:
1. Draw the market for eggs in the United States prior to McDonalds' decision to switch to all-day breakfast. (For students who might need additional instructions: Be sure to label your axes. Label your first demand curve D1 and your first supply curve S1. Label your initial equilibrium price P1 and initial equilibrium quantity Q1)
2. Show what has happened in the market for eggs since McDonalds moved to all day breakfast.
Reporting will be done in gallery walk format.
Article for McDonald's impact on egg market (Acrobat (PDF) 160kB Jul13 18)
Teaching Notes and Tips
Who eats at McDonalds'? Chances are everyone in this room has eaten there at least once in their lives, if not once a month or maybe once a week for some. A few years ago, McDonalds decided to start selling breakfast all day. Why do you think they did this? (sales and receipts were declining) What do they need a lot more of when they are selling breakfast items all day? (eggs, English muffins, etc.) Do you think this move by McDonalds might have an impact on the market price of any of these ingredients? (only ask if they haven't already read the article). Let's see!
Teaching notes:
Perhaps have teams vote on the best graph (other than their own). You can then call up a couple of examples (better and worse) and ask students to articulate why one graph is better than another. In closing, point out the features of the "better" graphs (clear labeling, etc.).
Discussion questions:
In this article, which curve shifts? How do you know?
What happened to the demand for eggs? Why? Shift left or right? What was the impact on PE and QE?
In the article, what happened to the supply of eggs? Why? Was it due to McDonalds? So, if you were only drawing the impact of McDonalds' all-day breakfast on the market for eggs, should the supply curve shift?What other things could cause similar shifts in the supply curve or demand curve for eggs? This may lead to a discussion of all the things that are held constant with the ceteris paribus assumption.
Closing remarks/take aways:
Top 3 takeaways
1. a market is just buyers & sellers, the interaction between demand and supply (so markets are happening everywhere, all the time)
2. certain things will shift the demand curve (list them) while other things will shift the supply curve (list them); when determining impact on market stop and think: "which curve shifts and in which direction?"
3. both supply AND demand have an impact on equilibrium price and quantity; need BOTH
Assessment
References and Resources
http://adage.com/article/cmo-strategy/mcdonald-s-day-breakfast-worsen-u-s-egg-shortage/300199/