Define "supply" and "demand." Explain that "supply" is the amount or availability of goods and that "demand" is the customers' desire for goods. Define other relevant terms, such as "market," "equilibrium price," "economic good," "surplus" and "shortage."
Explain that supply and demand inversely affect prices in a competitive market, as evidenced by the laws of supply and demand. Specifically, explain the following laws: If demand increases but supply is constant the equilibrium price increases. If demand decreases, but supply is constant, the equilibrium price decreases. If supply increases, but demand is constant, the equilibrium price decreases. And if supply decreases, but demand is constant, the equilibrium price increases.
Historically situate the concept of supply and demand. Discuss how the phrase "supply and demand" was first used by James Denham-Steuart in 1767, but that earlier economists, such as John Locke and Ibn Taymiyyah, wrote about the concept. Explain that Adam Smith is credited for publicizing the concept in his famous 1776 book, "The Wealth of Nations."
Reinforce your lesson on supply and demand with an activity or assignment. For instance, assign students to write a one- or two-page paper chronicling the rise and fall of the price of a commodity. Challenge students to apply the concepts of supply and demand to explain the fluctuations of the equilibrium price. This assignment may involve a fictional or real commodity.