Microeconomics Understanding the Market System Program Support Notes by: Reproducing these support notes Helen Voidis B.Ec, Dip.Ed, Cert. IV You may download and print one copy of TAA these support notes from our website for your reference. Further copying or printing must be Produced by: reported to CAL as per the Copyright Act VEA Pty Ltd 1968 . Commissioning Editor: Sandra Frerichs B.Ed, M.Ed. Executive Producer: Simon Garner B.Ed, Dip Management © Video Education Australasia Pty Ltd 2011 Video Education America - Phone 1-866-727-080 - Preview programs online www.VEAvideo.com Microeconomics Understanding the Market System For Teachers Introduction Economics investigates human behavior and its consequences in a world with scarce resources. Economic decisions involve the use of these resources in the production process of goods and services and the distribution of the proceeds of production. Microeconomics is a branch of economics that focuses on the allocation of scarce resources and the elasticity or sensitivity of consumers at the household level and producers at the firm level. This program will explore the way in which markets operate, the way market prices are determined and the means that are available for governments to intervene where market failure occurs. Timeline 00:00:00 Introducing the market system 00:02:44 The law of demand and supply 00:06:15 Price elasticity 00:12:03 Market structures 00:15:08 Market failure and Government response 00:19:09 Credits 00:19:45 End program Recommended Resources http://bised.ac.uk www.economicstutor.com.au Http://economics.mrwood.com.au www.econweb.com www.econguru.com/micro 2 © Video Education Australasia Pty Ltd 2011 Reproducing these support notes You may download and print one copy of these support notes from our website for your reference. Further copying or printing must be reported to CAL as per the Copyright Act 1968 . Microeconomics Understanding the Market System Student Worksheet Initiate Prior Learning 1. Pair and share activity. At the start of his book ‘Eat the Rich’ American writer PJ O’Rourke posed an interesting question: ‘Why do some places prosper and thrive while others just suck?’ In pairs discuss this statement and create a list of three of the wealthiest countries in the world and three of the poorest and give reasons for your choice. Share this with another group and as a class map the countries and list the reasons that you have identified for both categories. 2. Group activity. You and three others were on a cruise boat that was sinking in the Pacific Ocean. Thankfully you have managed to escape on the rowboat but you can only take five of the following items. In your group decide which five items you will take. After you have made your selection create a table that lists the items, your reasons for choosing them and the opportunity cost related to each. Each group will report back to the whole class promoting a discussion of the economic term ‘opportunity cost.’ The items available for selection are: • a digital camera • 3 bottles of water • Oars • Flare • Sunscreen • lifejackets for each of you • first aid kit • binoculars • two fishing rods • two torches and spare batteries 3 © Video Education Australasia Pty Ltd 2011 Reproducing these support notes You may download and print one copy of these support notes from our website for your reference. Further copying or printing must be reported to CAL as per the Copyright Act 1968 . Microeconomics Understanding the Market System 3. Brainstorm activity. Tab Diet Cola was a soft drink introduced by Coca-Cola in 1963. Sales around the world declined with the introduction of Diet Cola in 1982. The diet drink is still available for purchase today in some parts of Africa, Spain, Hong Kong and the USA. Why do you think it disappeared from Australian supermarkets? Develop a list of other products that have been available on the market but have now disappeared. As a class brainstorm some of the possible reasons why. 4. Analytical activity. A market is a place or situation where potential buyers and sellers get together to exchange goods or services. Create a table with three headings: Local market, National market and International market and identify at least three markets that belong to each of these categories. Local Market National Market International Market 4 © Video Education Australasia Pty Ltd 2011 Reproducing these support notes You may download and print one copy of these support notes from our website for your reference. Further copying or printing must be reported to CAL as per the Copyright Act 1968 . Microeconomics Understanding the Market System Active Viewing Guide Introducing the market system 1. Fill in the missing words to complete the following sentence: The fundamental problem of scarcity relates to people having ____________________ ____________________ and ____________________ ____________________. 2. Define the term ‘opportunity cost of a resource’ and provide an example to demonstrate your understanding. _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ 3. Identify the three important questions that every nation needs to answer when dealing with the problem of scarcity: • Question 1 _________________________________________________________________________________ _________________________________________________________________________________ • Question 2 _________________________________________________________________________________ _________________________________________________________________________________ • Question 3 _________________________________________________________________________________ _________________________________________________________________________________ 5 © Video Education Australasia Pty Ltd 2011 Reproducing these support notes You may download and print one copy of these support notes from our website for your reference. Further copying or printing must be reported to CAL as per the Copyright Act 1968 . Microeconomics Understanding the Market System 4. Provide an explanation for each of the economic terms in the table below: Key economic term Explanation Market Market mechanism Equilibrium price Consumer sovereignty The law of demand and supply 5. The Law of Demand states that: _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ 6. Circle True or False for the following statements: a) A demand curve shows the effect of price on the quantity demanded. True or False b) If the price is low the quantity demanded will also be low. True or False c) A small rise in price leads to an increase in demand for that product. True or False d) Movement along the demand curve is controlled by consumer preferences. True or False 6 © Video Education Australasia Pty Ltd 2011 Reproducing these support notes You may download and print one copy of these support notes from our website for your reference. Further copying or printing must be reported to CAL as per the Copyright Act 1968 . Microeconomics Understanding the Market System e) The demand curve can shift to the right or left because of changes in a consumer’s disposable income. True or False 7. If the price of coffee increased this will lead to a rise in demand for: _________________________________________________________________________________ _________________________________________________________________________________ 8. The law of supply tells us: _________________________________________________________________________________ _________________________________________________________________________________ 9. Movement along the supply curve is controlled by price – provide an example to demonstrate your understanding of this principle. _________________________________________________________________________________ _________________________________________________________________________________ _________________________________________________________________________________ 10. Circle True or False for the following statements: a) If the supply curve shifts to the right then the supply will increase at all price levels. True or False b) If the price of inputs increased then the supply curve would shift to the right. True or False c) A shortage of goods is created when demand is much lower than the supply available. True or False d) When the price of goods is too high, demand will fall below the supply levels creating a surplus of goods. True or False 7 © Video Education Australasia Pty Ltd 2011 Reproducing these support notes You may download and print one copy of these support notes from our website for your reference. Further copying or printing must be reported to CAL as per the Copyright Act 1968 . Microeconomics Understanding the Market System Price elasticity 11. Elasticity = _____________________________ 12. a) Which of these items would not be considered an inelastic good? petrol jewellery salt b) Which of these items would be considered elastic goods? luxury cars chocolate bars massages 13. Factors that affect the elasticity of demand include: