Give each student a bag of tokens. Randomly choose one color of token to have the value of $1. Instruct students to remove all tokens of this color from their bag. Hold up one desirable item to show the class. Give a sales pitch for the item, and ask if anyone would like to purchase it. Find a student who does not have many tokens to spend. Ask her if she would like to buy the item, and how much she would be willing to pay for it. Think about her offer, and ask if anyone else would be willing to pay you more. Continue this process until you receive the best offer, and sell the desirable item to the student with the highest bid. Ask students why they think you did not sell the desirable item to the first student willing to purchase it. (The answer, of course, is that you could get a higher profit from other students' bids.) Ask students what happens to prices when the demand for an item is greater than the supply. (The answer, of course, is the price rises.)
Suddenly "discover" you have more of the desirable item you can sell. Do not show the class your entire supply. Ask the students to begin the bidding or purchasing process for the desirable item. Later, "discover" that you have an overstock -- more of the item than students in the class -- of the desirable item, and will now be selling the item for the sale price of $1 (or one token) each. Sell whatever you can. Ask students what happens to prices when the supply is greater than the demand. (The prices go down.) Ask the student who purchased the first desirable item how he feels, knowing other students got the same item for $1. Would he make a different decision if he knew how low the price would fall because the supply was higher than the demand?
Introduce the concepts of opportunity of cost -- what consumers give up to buy the desired item -- and scarcity -- when people want more of something than is available. Tell students to write a list of 10 favorite things they would like to do with a friend. When they finish their lists, explain that they will only be able to do three of the activities. Tell them to circle the three activities they most want to do. When they have circled their choices, tell them their friend called and left a message saying he can do only one activity. Tell them to choose the activity they most want to do with their friend.
Sponsor a flea market in your school's gym or parking lot. Ask parents to sign up with their children for a table. Invite the community to the sale. Explain to parents that they should help their children with pricing items and handling the money. Include the children in price "negotiations" during the sale. Discuss the students' experiences at the flea market. Which items sold? Which didn't? Did students lower the price on any items to sell them? The flea market doesn't have to feature real money; pretend currency that looks real also aids students' understanding of the Law of Supply and Demand.
This activity will test students' understanding of the economics concept and allow them to burn off excess energy. You need one clean, empty plastic milk jug, one empty egg carton, and a large, empty pickle jar. On the milk jug, cut a hole on the side that is large enough to fit a hand through. On small slips of paper, write 10 or more "what if" questions about milk and eggs. Examples include what would happen if: people preferred juice instead of milk; the milk supply had bacterial contamination; the price of eggs fell to 25 cents per dozen; and many of the eggs in a shipment broke by the time they reached the supermarket because the chickens laid eggs with shells that were too thin. Fold the slips of paper and place them in the appropriate container. Divide the class into three teams. Give each team one of the containers. Teams will take turns reading a what-if question, and answering the following questions about their scenario: What happens to the supply? What happens to the demand? What happens to the price? If the demand, supply or price rises, the team will stand up. If the demand, supply or price falls, the team will sit.