Lemonade Stand Assignment

Lemonade Stand Project (Performance)

Website to use: http://www.coolmath-games.com/lemonade/

Objective: To apply all accumulated economics knowledge through chapters 1-6 on a mastery level using a simple program called “Lemonade Stand” as a market.

Part I

Directions: Answer the following questions BEFORE playing. You may type your answers, or write them out.

1. Apply the following economic principles to your lemonade stand before playing: a. Thinking at the margin b. Trade makes people better off c. Scarcity forces trade-offs (clearly, someone has fronted you the 20.00 to start your lemonade stand as kids, or dogs and cats, don’t have 20.00 laying around)

2. In a “pay what you want model” how successful would your lemonade stand be?

3. Using what you know about the three factors of production, in this instance identify the land, labor, and capital of your lemonade stand.

4. How would your lemonade stand be different in a socialist society (command economy)?

5. Go back and read about “comparative advantage” on page 62. In this instance, what, if any is your comparative advantage?

6. When using a lemonade stand simulation, how do you know when you have achieved market equilibrium?

Part II

Directions: Complete the following while running your lemonade stand. Select the 14 DAY TERM for running your stand. Do not change the price of your lemonade while the clock is running! You will create #1 and 2 AS YOU GO THROUGH THE DAYS.

** When you plot your points, you WILL have some outliers. You will need to determine which points to throw out. Usually, this will happen when you use the same price more than once, or when there is an unexpected occurrence, such as rain.

1. Create four different demand and supply schedules. Demand schedule one should be days 1- 7, and schedule two should be days 8-14. The supply schedules should follow with the same day values. Use price increments of .05.

2. Create two different supply and demand curves for your stand. Supply and demand curve one and two should be on the same graph, and should show a point of equilibrium. Graph one should be days 1-7, and graph two should be days 8-14. Use price increments of .05.

Hint: If you continually have a surplus of lemonade, your graphs may not intersect, or will look scattered.

Hint #2: Record all of your data in a 3 column chart first labeled “Price / Cups Avaliable / Sold” Part III

Directions: Complete the following questions after you have completed both weeks one and two of lemonade stand.

1. When comparing the demand and supply curves for weeks one and two, what do you think caused the demand to shift? The supply? Clue: Be sure to look at the six shifters and use proper terminology.

2. Would you say the demand for lemonade, when comparing price changes, and weeks one and two is elastic, or inelastic? The supply? Why? Include diagrams to support your findings.

3. Identify at what price you found market equilibrium in weeks one and two – what was your equilibrium price? Your equilibrium quantity?

4. Did you turn a profit, if so, how much did you make – or if you reported a loss, how much was the loss? Why do you think your outcome was or was not representative of how you operated the stand?

5. What problems did you run into while selling lemonade and / or completing the assignment?

Part IV

Directions: Using the equilibrium rates you found (price / quantity) run your lemonade stand for a week using only those numbers (or as close as you can get). Show your results in a one paragraph statement.