Students will examine examples of price gouging in the early days of the coronavirus epidemic. Students will take ethical positions on the necessity of price‐​gouging legislation. Students will gain understanding of the function of the forces of supply and demand in setting prices and allocating goods and services in a market economy. Students will evaluate the effects of anti‐​price‐​gouging laws and tactics on short‐ and long‐​run supply of necessary goods and services.

• Students will be able to explain how determinants of supply and demand affect market equilibrium prices.
• Students will be able to evaluate the effect of price‐​gouging restrictions on necessary goods and services in an emergency.

The teacher should hang the Agree and Disagree signs in corners of the room in advance if possible. It may be helpful for students to conceptually understand supply, demand, and how market equilibrium price and quantity are determined. It might be helpful to understand how to graph these, but it is not necessary if you can quickly demonstrate how the graphing works.

• Students will view the AP photograph of sanitizer price gouging
• Students will complete a graphic organizer in which they identify what they notice, think, and wonder
• Students and teacher will discuss photo using guiding questions:
  • What is happening in the picture?
  • Why might there be a shortage of hand sanitizer?
  • Is there any reason the hand sanitizer might have been particularly important in 2020?
  • Are there other things people could have used instead of hand sanitizer?
  • Are these prices fair? Why or why not?

Quotes Agree/​Disagree Gradient Activity

• Have students stand. Indicate which side of the room represents agreement with the quotes and which side represents disagreement.
• Have students respond to each of the quotes by standing on the side of the room that represents their opinion. If students choose to stand in the middle, this is a great opportunity to ask why they are conflicted. Students without any knowledge of supply and demand will probably agree with all the statements.
• It may be worthwhile to give students copies of the statements and have them each draw an X on the gradient to represent their degree of agreement with the statements.
• These statements will be revisited at the end of the lesson.

Vocabulary preview

• Break students into pairs to discuss vocabulary graphic organizers. You may want to complete one graphic organizer as a whole group and let students complete the rest in the pairs.
• Have students complete the vocabulary preview worksheet graphic organizers
  • Demand
    • These are the goods and services buyers are willing and able to purchase in markets.
    • See the graphic organizer for more details.
  • Price gouging
    • This is when the seller increases the price of a good or service to a level higher than what is considered reasonable or fair.
    • See the graphic organizer for more details.
  • Supply
    • Supply is the goods and services producers are willing and able to take to market.
    • See the graphic organizer for more details

Sanitizer excerpt reading and application

• Ask students to review what they know or remember about the early days of the COVID-19 pandemic.
• Have students read the sanitizer excerpts and answer questions in pairs. You may split these pairs into three groups that specialize in each excerpt and have those groups share their learning in a jigsaw manner if you choose. Similarly, you can model with the first excerpt and have students complete the second and third on their own.
• Review questions and graph
  • Excerpt A
    • B
    • B
    • People were willing to pay more for hand sanitizer because they wanted it badly. Public health officials had talked about the importance of keeping hands clean.
  • Excerpt B
    • A
    • Producers can offer workers overtime or hire more employees.
  • Excerpt C
    • A
    • A
    • C

Sanitizer excerpt reading and application

• Have students read the sanitizer excerpt and answer questions.
• Review questions and the graph:
  • How was the demand for hand sanitizer affected by the coronavirus pandemic? Why?
    • Consumers demanded more hand sanitizer at all price levels.
    • This can be reflected on a graph by shifting demand to the right. Demonstrate this shift on the board or PowerPoint.
  • What happened to the price of hand sanitizer as a result? Why?
    • The price of hand sanitizer increased, especially for resellers.
    • Demonstrate this with the graph you drew for question 1. Show that the equilibrium price of hand sanitizer should have increased.
  • What should have happened to the supply for hand sanitizer? Why?
    • Producers should have responded to the increase in price by producing more hand sanitizer.
    • Show students how price would have actually recovered by graphing a shift in supply on top of your original graph.
  • What should have happened to the quantity of hand sanitizer demanded? Why?
    • The quantity of hand sanitizer demanded should have decreased as consumers would have reduced their consumption or switched to soap.
    • This might be a good time to share the concept of substitute goods and graph the increased demand for soap

Check for understanding

• Take a poll: Producers should be able to charge higher prices for essential products when there is a shortage.
• This is a pulse check. You can do this with a raise of hands, but if you have time, have students put themselves in a gradient based on how much they agree or disagree with the statement. This allows them to talk to each other to think more deeply about the issue.

Practicing with demand

• Show students the Shifts in Demand worksheet,
• Explain that the demand curve slopes down and to the right because consumers want to purchase higher quantities at lower prices and lower quantities at higher prices.
• Ask students what kinds of things would make them want higher quantities of something at all price levels. This lesson does not cover determinants of demand, but teachers can start with examples in the text that have already been discussed. People wanted more hand sanitizer because there was a pandemic and because hand sanitizer was something that might slow the spread. People wanted more soap because hand sanitizer became expensive. Students might talk about products becoming popular on TikTok. They might mention having a change in income. They might mention thinking that something is going to get more expensive later.
• Show students what happens when demand increases. The curve shifts to the right, raising price and quantity. Make clear that if consumers are responding to price or quantity, they are moving along the curve, not shifting it.
• Ask students what kinds of things would make them want less of something at every price level. These should be the opposites of the examples in the previous step.
• Show students what happens when demand decreases. The curve shifts to the left, which results in lower prices and lower quantities.
• Review responses
  • Facemasks: demand increase based on expectations, tastes, and preferences; increase in price and quantity
  • Groceries: demand increase based on tastes and preferences; increase in price and quantity
  • Delivered food: demand increase based on tastes and preferences; increase in price and quantity
  • Dine‐​in restaurants: decrease in demand based on tastes and preferences; decrease in price and quantity
  • Travel: decrease in demand based on tastes and preferences; decrease in price and quantity
  • Movie theaters: decrease in demand based on tastes and preferences; decrease in price and quantity
  • Home streaming services: increase in demand as a substitute, but this is really shifting tastes and preferences; increase in price and quantity
  • Toilet paper: increase in demand based on expectations; increase in price and quantity
• Teachers may extend this by asking students to brainstorm other effects like the loss of a job, the increase in outdoor gatherings, etc.

Shifts in supply practice

• Have students brainstorm responses to the following question: Other than price, what might make a producer willing and able to provide more of a product at every price level?
• This lesson does not describe and define determinants of supply, but hopefully students will come up with answers that illustrate some of these. If a producer makes a technological advancement, they may be willing and able to supply more at every price level. If prices of inputs fall, a producer may be willing and able to supply more at every price level. If a government subsidizes an industry, a producer may be willing and able to supply more at every price level. If more suppliers enter a market, they will be willing and able to supply more at every price level.
• Use the Shifts in Supply worksheet to illustrate that these changes shift the entire supply curve to the right, which will decrease price and increase quantities.
• Remind students again that if producers are responding only to price and quantity, they are moving along the supply curve, not shifting the entire curve.
• Ask students what might make a producer less willing and able to supply a good or service at every price level. These examples are the opposite of the first examples and may include broken machinery, higher input costs, or taxes on an industry.
• Read the excerpt together.
• Meat: decrease in supply; increase in price and decrease in quantity.
• Have students in pairs generate at least one additional supply example.
• Pairs should share their example and graph with the class.
• Examples that are possible:
  • Essential workers demand better pay: increase in input costs decreases supply of essential services, increasing price and decreasing the quantity of these services available.
  • People open Etsy shops for homemade masks: increase in the number of producers increases supply, decreases price, and increases quantity.
  • People who have lost their jobs start driving for DoorDash: increase in the number of suppliers increases supply, driving a decrease in price and an increase in quantity.
  • Government gives grants to airlines to remain in operation: government subsidies lead to increase in supply, decrease in prices, and increase in quantity.
  • People working from home decide to sell their vehicles: increase in suppliers willing to sell vehicles leads to increase in supply of used vehicles, which leads to a decrease in price and an increase in quantity.
  • Government shuts down hair salons: Government embargo leads to reduced supply of haircuts given by people willing to perform these services in a client’s home. This leads to a decrease in supply, increased prices, and decreased quantity.

Price‐​gouging excerpts

• Have students read the price‐​gouging excerpts and answer the open‐​ended questions.
• Again, you can break this process up and provide further supports, allowing students to work in pairs or small groups.
  • According to the excerpt, why are price increases desirable? Provide evidence from the text.
    • Price increases work to affect the behavior of consumers and producers. Consumers may buy fewer things, and producers may produce more.
    • Students may answer on the supply side, the demand side, or both. They should provide evidence from the text.
  • According to the author, is the charge of “price gouging” fair? Why or why not?
    • The author seems to imply that prices should be allowed to fluctuate.
    • A sophisticated answer may include that prices are set by forces of both supply and demand and that charges of price gouging seem to imply that only producers are in control of the price.
  • According to the excerpt, what are the effects of laws against price gouging? Provide evidence from the text.
    • Anti‐​price‐​gouging laws prevent small businesses from responding to demand even when large suppliers are concerned about their reputations.
    • Anti‐​price‐​gouging laws create shortages. The author gives us the image of empty shelves.
  • According to the excerpt, what is the effect of anti‐​price‐​gouging laws on consumers? Why?
    • The author tells us that the anti‐​price‐​gouging laws worsen shortages.
    • The student should provide evidence from the text.

Exit ticket

• Repeat the activity from the warm‐​up.
• Note any changes in student opinion regarding the political statements.
• If students marked their positions on paper, have them compare their own original position to their new position.
• Discuss why student positions changed.