Write the numbers 5, 10 and 20 in even proportions on slips of paper, one for each member of your class. Put the slips into a bag, and shake it to mix it.
Invite students to draw a number from the bag. Give $5 in play money to the students who draw the number 5, $10 to the students who draw 10, and $20 to the students who draw 20.
Put a display of cookies on your desk, one for each student, with an index card in front of the cookies saying that they cost $2 per cookie. Invite the students one at a time to come to the desk and buy as many cookies as they want. Start with the students who have only $5.
Replace the index card with one listing the price as $5 when the cookie supply is visibly thinning. Watch as the students willingly pay more. Raise the price again, to $10, as you near the end of the supply.
Restock the cookies to their original numbers when the students who have $20 are about to approach the display. Keep the price at $10. Go through the students a second time.
Drop the price to $1 when the students are full and are no longer willing to pay $10 for cookies.
Ask the students who paid $10 for cookies when they were selling out how they felt about paying so much money. Ask the students who paid $10 after you restocked how they felt. Ask the students who were willing to pay $1 for a cookie they did not really want why they decided to do so.
Explain that they have just demonstrated supply and demand: when the demand was greater than the supply, you could raise your prices, but when the supply was greater than the demand, you had to lower prices in order to sell anything. For homework, have students write about how they think this relates to a country's economy.