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Trading in a Pit Market

Trading in a Pit Market. Introduction to Demand and Supply. You need a pen and a chair only. Roles. Graph Plotter - 1 Recorder - 1 Assistant Recorder cum Timer - 1 Players – 22 Observers – 2. Sellers. Number on your card represents the cost you incur if you make a sale.

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Trading in a Pit Market

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  1. Trading in a Pit Market Introduction to Demand and Supply

  2. You need a pen and a chair only.

  3. Roles • Graph Plotter - 1 • Recorder - 1 • Assistant Recorder cum Timer - 1 • Players – 22 • Observers – 2

  4. Sellers • Number on your card represents the cost you incur if you make a sale. • You must sell at a price higher or equal to the cost reflected on your card • Your earnings is the difference between your costs and your price. • If you sell below your costs, your deal is invalidated by the recorders. • To earn more, you need to sell as high a price as possible.

  5. Buyers • The number on your card is the highest price you can pay for the commodity. • Your earnings is the difference between the transacted price and the number on your card. • To increase your earnings, you need to pay as little as possible!

  6. Buyers • The number on your card is the highest price you can pay for the commodity. • Your earnings is the difference between the transacted price and the number on your card. • To increase your earnings, you need to pay as little as possible!

  7. Trading • Buyers and sellers to meet at the centre of the classroom • Trading time is 5 mins for each cycle • Prices must change by multiples of 50 cents • Once you agree on a price, approach the front to report on the transacted price • Buyer and seller to return the card to the recording secretaries

  8. Transactions • When both agree on a price, go to the front immediately. • Wait in line if there are people ahead • After your price is accepted by the recorders, return to your seats and record your earnings. • Transacted Prices will be announced loudly and reflected on the PP Slides.

  9. Are you ready? • You have 5 minutes left

  10. Transacted Prices – Period 1

  11. Transacted Prices – Period 2

  12. Transacted Prices – Period 3

  13. Transacted Prices – Period 4

  14. Transacted Prices – Period 5

  15. Transacted Prices – Period 6

  16. Transacted Prices – Period 7

  17. Transacted Prices – Period 8

  18. Discussion

  19. Questions • 1. Describe the price dispersion plotted. Explain the causes for the trend.

  20. Questions • 2. What does the Earnings represent? • 3. Does the market always lead to the “best outcome” for buyers sellers?

  21. Questions • 4. Is market intervention necessary for the market to function properly? How to intervene?

  22. Questions • 5. What happens when a tax is enforced? • 6. Further clarifications / questions?

  23. Summary

  24. Summary • Role of price as rationing mechanism • Conditions that make price mechanism work • Self-interest • Information flow • Government laying down ‘ground rules’ for competition • Others?

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