Supply and demand shifters using local examples

Michael Levine, San Bernardino Valley College,
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Summary

This activity asks students to consider some common shifters of demand and supply and rank them based on what the think would have the greatest impact in the market. I specify local markets and a local branch of a chain pizza restaurant in order for the discussion to stay on tangible changes, as opposed to the vague descriptions of markets like produce often populating introductory courses.

Learning Goals

  • Students will identify factors that increase or decrease demand.
  • Students will identify factors that increase or decrease supply.

Context for Use

This activity is designed for a principles of microeconomics course. Students will have learned to construct supply and demand models and will have learned about what economic events cause shifts in the demand and supply schedules. This is a relatively short exercise that can be done in approximately 20 minutes by groups of no more than five students.

Overview

This activity asks students to consider some common shifters of demand and supply and rank them based on what the think would have the greatest impact in the market. I specify local markets and a local branch of a chain pizza restaurant in order for the discussion to stay on tangible changes, as opposed to the vague descriptions of markets like produce often populating introductory courses.

Information Given to Students

[These examples were chosen specifically for San Bernardino Valley College. The attached .docx file highlights elements you should consider customizing.]

Demand and Supply Shifters using Local Examples.docx (Microsoft Word 2007 (.docx) 13kB Jan28 20)

1. Consider the Little Caesar's Pizza on Mill and Mount Vernon. Put the following events in order of likely causing the greatest increase on the demand for Little Caesar's Pizza to likely causing the greatest decrease.

A. A sponsored ad pushed to every San Bernardino resident advertising fifty cent two-liter bottles of soda.
B. The next recession hits, the unemployment rate in San Bernardino increases to 14%.
C. Enrollment at SBVC increases so there are 500 more full-time students.
D. The Pizza Hut across Mount Vernon goes out of business.
E. The CEO of Little Caesar's hosts a Trump reelection fundraiser causing people to advocate for a a boycott of Little Caesar's.

2. Consider the market for rideshare rides in and around San Bernardino (think Uber, Lyft, etc.). Put the following events in order of likely causing the greatest increase on the supply of rides (number of drivers) to likely causing the greatest decrease.

A. A $1 drop in the price of a gallon of gas.
B. The opening of a new corporate distribution headquarters for a large retailer creates a 5% increase in the population of San Bernardino.
C. The next recession hits, the unemployment rate in San Bernardino increases to 14%
D. In an effort to lower emissions, a 10% county tax is levied on any rideshare driver not driving a zero-emissions vehicle.
E. A new service, PiqUp launches offering a similar service to Uber and Lyft

Teaching Notes and Tips

Obviously these questions were crafted for San Bernardino, but with some easy edits they can apply to any locality. I chose a product for the demand side that may be a normal or inferior good (cheap, bad, pizza), make sure to check how students interpreted the good.
This discussion should move past what the textbook says will impact demand to what will actually influence demand. Sure a social media boycott of a restaurant might have an impact in a big city, but would anybody really care here?

Assessment

This exercise precedes a homework or exam where the traditional intro microeconomic questions where students identify changes to price and quantity in a market after an economic event impacts supply and/or demand.