Supply

Learning A–Z level V Multi-level S V Y

Grade 4 Word Count 1,397
Lexile 980L Nonfiction • Informational

Refer to the Focus Question on page 2 of this title to guide

discussion and support additional learning connected to the text.
and
Every time we purchase goods and services, we are taking
part in the push and pull between supply and demand.
Supply and Demand introduces students to the principles
and relationships that help explain why things cost what
Demand
they cost. Relatable examples will help students better
understand the foundations of economics. The book can
also be used to teach students how to determine cause-
and-effect relationships and to identify root words. The
book is also available for levels S and Y.

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 Supply Focus Question
What are supply and demand,
and how are they related?

and
Demand Words to Know
demand merchandise
endorsed perspective
fixed product
fluctuate supply
hypothetical surplus
intertwined virtual

Above: Many workers, including factory workers, warehouse workers, and
delivery drivers, play a part in bringing products to customers.
Cover: Large stores are often designed with bright lights and clear pathways
to make shopping easier for customers.
Written by Keith and Sarah Kortemartin
Connections
Writing
Think of a product there is a great demand for right
now. Write a paragraph describing what factors are
causing the current demand. Be sure to include when
you think the demand is likely to decrease.
Math
Imagine you sell bracelets. The supplies cost $15.
If you sell them for $1.50 each, how many bracelets
would you have to sell to make a profit? Show your
thinking in two ways.
 Who Sets the Price?
Have you ever wanted to purchase a new
product, such as a T-shirt featuring your favorite
movie character, but decided that it was too
expensive? Did you ever stop to wonder who set
the price and how they chose that number? Maybe
you saw the T-shirt on sale at the store or online
a few months later . Did you buy it? Probably not .
After all, you’d rather purchase merchandise
associated with a newer movie .

Would it come as a great surprise to learn

that you and other buyers actually fulfill
important roles in determining the cost of goods
and services? When you decide to purchase
something, you’re participating in an interaction
Customers looking for paper goods often found store shelves empty during
the COVID-19 pandemic.
with the seller in a market .

Table of Contents
Who Sets the Price? . . . . . . . . . . . . . . . . . . . . . . . . 4

Supply and Demand at Work . . . . . . . . . . . . . . . . 7

Striking a Balance . . . . . . . . . . . . . . . . . . . . . . . . . 12

How Emotions Affect Supply and Demand . . . 13

How Do You Play a Role

in Supply and Demand? . . . . . . . . . . . . . . . . . . . 15
Some scientists say that shopping can affect people’s brains by making them
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 feel excited and happy.

Supply and Demand • Level V 3 4

 A market is any place, physical or virtual,
where sellers and buyers interact to conduct
business . In a market, buyers exchange money
with sellers for goods, such as T-shirts, and
services, such as haircuts . You’ve probably noticed
that prices can vary widely for the same kinds
of things, such as cars, clothes, and food . Even a
T-shirt can be very expensive! Where the T-shirt
was made, the material from which it’s made, the
stores where it’s sold, and who appears in
its advertisements can all affect its price .
Prices for the same products change and depend on different factors,
Ultimately, a seller can set any price, but whether including popularity, location, and season.
a buyer is willing to purchase the good or service
is another issue . Bear in mind that prices change regularly
because supply and demand themselves
Sellers design signs with big letters
and bright colors to catch people’s
constantly fluctuate . This also works in reverse:
interest and draw them into their variations in price can result in fluctuations
store or onto their website.
in both supply and demand . Did the movie
People who have jobs explaining how associated with the T-shirt earn a lot of money?
buying, selling, and wealth work together are The movie’s popularity ultimately affects the price
called economists . They use the law of supply of the merchandise connected to it . If a movie is
and demand to describe how and why the cost a hit, sellers can continue to ask top price for its
of goods and services in the market constantly merchandise . On the other hand, sellers are likely
changes . This is the study of economics . Supply to slash prices for merchandise connected to a
refers to how much there is of a good or service, movie that didn’t do as well as anticipated . Supply,
while demand indicates how much of a good or demand, and price aren’t fixed . Rather, they’re
service people want . Supply and demand control intertwined, influencing each other from moment
the price of everything! to moment .

Supply and Demand • Level V 5 6

 Supply and Demand at Work
Envision this: Your stomach is grumbling . You
realize it’s lunchtime, and you’re craving a chicken
sandwich . You head to a local restaurant and are
delighted that the special is chicken sandwiches .
You purchase two sandwiches for the price of
one—what a deal! In this case, the price of the
sandwich decreased, and demand increased . You
decided to get two sandwiches instead of just one
(you were hungry, and the extra sandwich was
free) . The price drop created a spike in demand .
Think about the special from the perspective
of the seller . What prompted the restaurant to
advertise the two-for-one sandwich deal? Perhaps
it had a few too many chicken patties and needed
to sell them by a certain date to avoid spoilage . In
this case, the restaurant had more chicken patties
than people wanted to buy . When
there is a surplus in the market, as in
this example, prices often decrease .
Scarcity: In Short Supply
Scarcity is the balance between a limited supply and
unlimited demand. The opposite is abundance. Prices of toilet paper
skyrocketed during the start of the COVID-19 pandemic in 2020.
Businesses quickly sold out. Some customers hoarded toilet paper.
Others were unable to find any to buy. A common household item
suddenly became scarce.
Supply and Demand • Level V
People are willing to pay a lot more money for popcorn at a movie theater
than at a supermarket.
Generally, sellers are motivated to sell goods
and services for as much money as the market
will allow . Sellers attempt to make a profit by
selling goods and services for more money than
they cost to make . Buyers, on the other hand,
are frequently motivated to purchase goods
and services for as little money as possible . The
tension between the two helps balance supply
and demand .
Let’s consider how this works . If a seller
prices an item too high, demand frequently
falls . Recall the hypothetical chicken sandwich
situation . What would happen if you arrived at
the restaurant and discovered it was charging one
hundred dollars apiece for chicken sandwiches?
You’d probably hightail it out of there and go
eat somewhere else . Demand for the chicken
sandwich would decrease as the price increased .
7 8
 Supply, Demand, and Price
The supply and demand of products and services
are always changing. This table shows how they work
together to affect prices.
Supply Demand Effect on Price

If the supply stays and demand the price

the same increases, increases.

If the supply stays and demand the price

the same decreases, decreases.

If the supply and demand the price

increases stays the same, decreases.

If the supply and demand the price

decreases stays the same, increases. Buyers are willing to do a lot for a good sale, including waiting in line
overnight or even longer!

If a seller prices an item too low, however,
demand is likely to increase sharply . Imagine
that you arrived at the restaurant and found that
chicken sandwiches were a dollar apiece . You’d
likely buy as many as you could eat (and some for
friends, too) . The restaurant would probably run
out of chicken sandwiches very quickly! Neither
the buyer nor the seller benefit in the long term
from either situation .
In the first situation, chicken sandwiches
were priced too high, demand decreased, the
restaurant didn’t make the sale, and the customer
went home empty-handed . In the second example,
sandwiches were priced too cheap, the restaurant
ran out of its supply, and many customers likely
left disappointed . Additionally, the restaurant
probably wasn’t selling enough to cover the cost
of making the chicken sandwiches .

Supply and Demand • Level V 9 10


The price of a chicken sandwich in a local
restaurant might seem like a simple calculation . In
reality, it represents a complex set of calculations .
The restaurant must consider the price it pays
for ingredients from suppliers . It has to estimate
the cost of paying its employees . The cost of
maintaining the restaurant (including energy bills
and rent) is also significant . The restaurant must
factor in the price other restaurants in the area
charge for chicken sandwiches and consider how
successful these other restaurants are . Ultimately,
it’s difficult to balance all these factors, and prices
fluctuate as a result .
Stores try to clear out
holiday merchandise
once the big day passes.
Supply, Demand, and the Holiday Season
The next time your area celebrates a holiday, look at how
seasonal items—like holiday-themed candy—are sold. Before the
holiday, the candy is usually much more expensive than it is after
the holiday passes. Based on what you now know about supply and
demand, can you guess why?
Supply and Demand • Level V
Supply and Demand for Chicken Sandwiches
High D em Market
an d Equilibrium
Price
p ly
Sup
Low Supply and Demand High
Striking a Balance
Both buyers and sellers benefit from a market
in which supply and demand are more evenly
balanced . Economists have a name—market
equilibrium—for a market in which balance is
achieved between supply and demand . In the
chicken sandwich situation, a market equilibrium
would exist if chicken sandwiches were priced so
that every sandwich sold, but the seller never ran
out of sandwiches .
Let’s ponder another situation, this time about
concert tickets: an international pop band tours
your city every summer . Its popularity is steadily
increasing . As long as it continues to play in the
same stadium, the supply of available tickets to
its show remains fixed . In this case, the market
equilibrium price of a ticket is likely to rise year
after year . As the band becomes more popular,
demand for tickets to see it perform increases
in turn .
11 12
 How Emotions Affect Supply and Demand
Everyone has different preferences and values,
which can impact their buying habits . This helps
explain why supply and demand constantly cause
the price of goods and services to fluctuate . How
much is too much to pay for a concert ticket?
Emotion plays an important role . Consider when
two different bands play in the same theater .
Although the same number of tickets are available
for each show, ticket prices can vary . It all depends
on how much fans are willing to pay .
When people lose interest in a trend, such as fidget spinners, it can have
a huge impact on the supply and demand of goods and services connected
to the fad.
Supply and Demand • Level V
Buyers’ perceptions about the things they
buy—the ways in which they see and evaluate
goods and services—also play a role in supply
and demand . Buyers are often willing to pay more
for goods, services, or experiences they perceive
as valuable or cool . Each buyer makes those
calculations differently on the basis of their own
personality and budget .
Shoes are another example of an item that can
vary significantly in price, depending on buyer
preference . A pair of plain sneakers is typically
much cheaper than a pair endorsed by a celebrity
athlete . Some buyers perceive value in the athlete’s
endorsement and are willing to pay more for the
celebrity factor . Other buyers are motivated to buy
the cheapest shoes they can find . Based on their
own values and circumstances, every buyer
is different .
Nike’s Air Jordan sneakers, named after
basketball player Michael Jordan, have
many different—often very expensive—
editions since 1985.
13 14
 Glossary
demand (n.) page 5 merchandise (n.) page 4
the need or desire for items that are bought
a good or service or sold

endorsed (v.) page 14 perspective (n.) page 7

publicly supported or a person’s mental
approved of a product outlook or point of view
or service, sometimes in
product (n.) page 4
exchange for money
something that is made,
You choose what you want to buy. As a consumer, you hold the power
to affect supply and demand!
fixed (adj.) page 6 grown, or produced,
unable to be changed usually for sale
How Do You Play a Role in Supply and Demand?
fluctuate (v.) page 6 supply (n.) page 5
By now you must have realized how often you to change often the amount of
and everyone you know participate in economic something available for
markets in daily life . Take a moment to consider hypothetical (adj.)
sale or use
the goods and services you and your family page 8
purchase regularly . The next time the price of one based on an imagined surplus (n.) page 7
of those items increases or decreases, notice your situation or idea that an amount left over
reaction . Did demand for the item (how much could possibly happen after needs have
you wanted it) change as a result of the change or be true been met
in price? Why? What can you conclude about intertwined (adj.) virtual (adj.) page 5
the available supply of the goods and services page 6 created or experienced
you buy, based on their price? When you or your closely connected in a digital world rather
family members buy something—a piece of candy or twisted together than the real world
or a house—you’re engaging in a much larger
conversation: the push and pull between supply
and demand .

Supply and Demand • Level V 15 16