Supply and Demand


Demand lesson plan teaches students the basic concept of supply and demand. Students learn related vocabulary and work with real-world examples to solidify their understanding of the concept.

Included with this lesson are some adjustments or additions that you can make if you’d like, found in the “Options for Lesson” section of the Classroom Procedure page. One of the optional additions to this lesson is to invite a business owner to speak to your students about supply and demand as it relates to their company.

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What our Supply and Demand lesson plan includes

Lesson Objective and Overview: Supply and Demand introduces students to the concept of supply and demand. Most students purchase products and services either using parent’s money or an allowance or income they have earned. It is important for students to understand supply and demand as it relates to the cost of the products they purchase or the products they wish to purchase in the future. At the end of the lesson, students will be able to define and explain the concept of supply and demand and use specific examples to demonstrate the use of supply and demand as it relates prices and purchases. This lesson is for students in 5th grade and 6th grade.

Classroom Procedure

Every lesson plan provides you with a classroom procedure page that outlines a step-by-step guide to follow. You do not have to follow the guide exactly. The guide helps you organize the lesson and details when to hand out worksheets. It also lists information in the orange box that you might find useful. You will find the lesson objectives, state standards, and number of class sessions the lesson should take to complete in this area. In addition, it describes the supplies you will need as well as what and how you need to prepare beforehand. The only supplies you need for this lesson are the handouts.

Options for Lesson

Included with this lesson is an “Options for Lesson” section that lists a number of suggestions for activities to add to the lesson or substitutions for the ones already in the lesson. One optional addition to this lesson is to have your students create additional graphs showing actual prices and quantity of products as they relate to supply and demand. You could also invite a business owner to speak to your students about supply and demand as it relates to their company. Finally, you could assign a product or service to pairs of students to research; they will gather information about the prices, supply, and demand for the product in the past and will present their findings to the class.

Teacher Notes

The teacher notes page includes a paragraph with additional guidelines and things to think about as you begin to plan your lesson. This page also includes lines that you can use to add your own notes as you’re preparing for this lesson.


The Prices of Products

The Supply and Demand lesson plan includes three content pages. Products can cost less one day and more the next, especially things like gas, airline tickets, stocks, gold, and more. Though this may seem confusing, there are several reasons that this happens.

Sometimes, the person or place selling a product or service has a sale to try to get people into their store or to buy their product. They hope that, once someone is in their store, they’ll also buy more products than the one on sale.

New businesses sometimes start with low prices. They want to encourage people to learn about their products, and attract customers at the risk of losing some money. Businesses like the publicity they gain from having sales. People who use their products will tell their friends about them, also called word-of-mouth advertising.

Sometimes, businesses increase prices instead. Their expenses, like utilities, equipment, taxes, and more, might increase. One of the main costs of running a business are employees’ salaries and benefits like health care and vacation time. Businesses also need equipment like vehicles, machines, shelving, computers, and more, and this equipment might increase in cost. All of these expenses contribute to the cost of doing business and might influence a business to raise their prices.

One important economic concept that affects the cost of products or services is supply and demand. We use this idea in free market economies, where the amount of supply and demand for that product determines the price of that product.


Businesses don’t have an unlimited supply of the things they sell. The amount of product available to customers to purchase at a set price is its supply. For example, if you sell car batteries, you only have a certain number of batteries to sell at any given time. If the price of the battery is too high, people might not buy it.

However, if they set their prices too low, they won’t make enough money from the sales to cover the costs of the business. Therefore, they need to set the price of their batteries at the right level.

The law of supply says that, as the price of something increases, a manufacturing company will build more of that thing. Using the example, if they increase the price of the car battery, the manufacturing company who makes the batteries would increase the number of batteries they create. If they increase the price, that means there must be more demand for their product.


The demand for the products a business sells varies from day to day. Demand is the amount of product people want to purchase at a given price. The business that sells car batteries sells their product based on the demand for that product. They wouldn’t sell snow tires during the summer, for example, because the demand is too low.

The law of demand says that, as the price of something increases, the less of that product people will purchase. If they increase the price of car batteries, demand might drop. Higher price equals less demand.

Some people find it confusing that, as prices rise, manufacturers make more batteries, even though demand might drop. This is where the four basic laws of supply and demand can explain how this works.

Supply + Demand = Price

Supply + demand = price and demand + supply = price. The supply and demand of something determines the price of that thing.

For example, on a hot day during an outdoor event, people want water because they’re thirsty. Therefore, the demand for water is high and price of water rises. The person who sells the water increases their supply to meet the demand. During cooler temperatures, the demand and price of water decreases. The seller might have the same amount of supply. However, they want to sell as much of that supply as possible so they lower the price.

We have four basic laws that describe how supply and demand influence the price of a product.

First, when supply increases and demand stays the same, the price goes down. If there’s plenty of water, sellers want to get rid of it.

Second, when supply decreases and demand stays the same, the price goes up. If there’s less water, sellers can sell it at a higher price.

Third, when supply stays the same and demand increases, the price goes up. If more people want water, they’re willing to pay a higher price for it.

Fourth, when supply stays the same and demand decreases, the price goes down. If less people want water, the seller must lower the price to sell the same amount of water.

When supply meet demand, we call that market equilibrium. Market equilibrium and supply and demand of a product can change very suddenly. For example, on a clear day, the demand for umbrellas is small. However, if the forecast says it will rain several times in the next few days, demand for umbrellas increases and prices might rise as well.

There are many other factors that also impact the supply and demand of a product. Demand increases with an increase in income (people have more money to spend), population (there are more people to buy products), and competition (competitors increase the price for the same product). Demand decreases if preference decreases (when customers tire of a product and it becomes unpopular).

Supply increases with an increase in the number of sellers (when more people are selling the product) and quality of technology (improvements to manufacturing and better machinery). Supply decreases with a decrease in resources (less resources available to build a product) and cost (higher cost to manufacture a product).

There are even more events that can influence supply, demand, or price of a product or service. For example, after a severe weather event, the demand for construction increases. This leads to higher prices for the supplies needed to rebuild homes and roads.

To summarize, increased demand usually leads to an increased price and decreased demand usually leads to a decreased price. Increased supply usually leads to a decreased price and decreased supply usually leads to an increased price. Many factors influence these things, most of which impact price.


The Supply and Demand lesson plan includes three worksheets: an activity worksheet, a practice worksheet, and a homework assignment. You can refer to the guide on the classroom procedure page to determine when to hand out each worksheet.


For the activity worksheet, students will create a label a graph for several different scenarios. They will not include specific data points or intervals, just the correct slope of the line.

Students can also work in pairs to complete this activity.


The practice worksheet asks students to first fill in the blanks in 15 sentences with either “increases” or “decreases.” They will then fill in the blanks in a few more sentences with terms from the lesson. Finally, they will describe how the concept of supply and demand may affect a neighborhood lemonade stand.


For the homework assignment, students will answer seven questions about the lesson material.

Worksheet Answer Keys

This lesson plan includes answer keys for the activity worksheet, the practice worksheet, and the homework assignment. If you choose to administer the lesson pages to your students via PDF, you will need to save a new file that omits these pages. Otherwise, you can simply print out the applicable pages and keep these as reference for yourself when grading assignments.

Additional information


5th Grade, 6th Grade


Social Studies

State Educational Standards


Lessons are aligned to meet the education objectives and goals of most states. For more information on your state objectives, contact your local Board of Education or Department of Education in your state.