Tales from Towne: Supply, Demand and the Warehouse

Young Americans Center for Financial Education Young AmeriTowne Leave a Comment

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Arguably one of the busiest shops in Young Ameritowne is the Warehouse.  The employees here are responsible for stocking bins and delivering products to 12 of the 17 businesses in Young Ameritowne.  Each shop that sells products will only receive two shipments of products a day: one in the morning and one in the afternoon.

If a business runs out of products in the morning, they must wait until after lunch before they receive a second shipment.  So, when a business sells out, this tells us two things:

  1. The students underestimated the demand for their products.
  2. The students didn’t raise their prices high enough to meet that demand.

At school, supply and demand is one of the most important concepts taught that is necessary to a successful day in Young Ameritowne.  Since each shop’s goal is to make enough money to pay back a bank loan and make a profit, it’s important that they understand the basics of supply and demand.

High demand + low supply= Raise your price!

Low demand + high supply=Advertise!  Try to increase the demand.

As staff members, we encourage the students to raise their prices if their products are selling well.  They can raise their price $3.00 higher than the suggested starting price.  If their products are not selling well, if they have low demand, we encourage them to advertise before lowering their prices.  (For advertising ideas, see this blog entry ).

The Warehouse does sell a product: dog tag necklaces.  They can be engraved with three letters of the students’ choice.  The process to buy a dog tag necklace is different than the other products in Young Ameritowne.  It is similar to online shopping.  First the customer must order a dog tag necklace on one of the four kiosks in the center of Towne.  There, they will decide which three letters they would like engraved on their necklace.  The order instantly appears on the Warehouse tablet, where an employee must process the order and engrave the necklace.  Finally, a Parcel Carrier will come over to pick up the finished product and deliver it to the student.

Teachers Tip:

Make sure that each student is aware that one of their business goals is to pay back a bank loan.  This will motivate the students to use the concept of supply and demand to help make money for their shops.  However, don’t penalize shops that are unable to pay back their bank loan.  Often shops will try hard to accomplish this goal, but cannot reach this fate for various reasons (really low demand for a product, not enough money circulating the economy).  This is a great opportunity for discussion after Towne.

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