Transcript Supply and Demand

Where’s the Beef?
Understanding Supply
and Demand
The cattle industry
was very profitable in
Texas, and many
people became wealthy
in the ranching
business.
The cattle drives in
Texas were a perfect
example of a concept
called
Supply is how much of
something that is available.
If you have
five cows, you
have a supply
of five.
Demand is how much of
something people want.
•If you have five cows,
but your customer
wants eight, then your
demand is more than
your supply.
Scarcity is when the supply
does not meet the demand.
If the product is
scarce, it affects the
price of the item.
Two basics rules of supply
and demand:
1. If the demand for the
product is more than the
supply, the price may increase.
2. If the supply of the product is
more than the demand, the price
may decrease.
After the Civil War,
there were large herds
of cattle in Texas.
cattle ranchers could
only sell cattle for $4 a
head in Texas. But...
Overhead and Profit
• Overhead is the total cost of a product
including the cost of the product itself and
any costs related to maintaining that product
until it is sold.
• Profit is the difference between the
overhead cost and the amount the product is
sold for.
…buyers in the North
were willing to pay $40
per head.
cities in the North were
more populated and
needed food.
Texas ranchers wanted to
sell their cattle to the
markets in the North for
a higher price...
there wasn’t a way to
transport the cattle to
market.
In the late 1800’s,
railroads didn’t come all
the way to Texas.
Railroads (and
railheads) were in
Kansas and Missouri.
So...
Ranchers created cattle
drives to meet with the
railroads.
Once railroads came to
Texas, cattle drives
stopped.
The cattle industry was in
a “boom” cycle during the
cattle drives.
The industry continued
in the “boom” cycle even
though cattle drives had
stopped.
Even though there have
been some slow economic
periods, the cattle
industry still remains a
major part of the Texas
economy.
Supply and Demand Activity
• You own 100 head of
Angus cattle.
• You bought them for $5
each.
• Each cow eats 20lb of
feed each day.
• Each lb of feed costs 10
cents.
• In 30 days, you can sell
your cows for $100 each
at the railhead in
Ellsworth, Kansas.
• Calculate how much
overhead (total cost of
cattle) you will need to
get your cows to the
railhead.
• Calculate how much you
will sell your herd for.
• Calculate the profit from
your sale.
What if…
• One month after the sale, you learn that
people in the northeast really like your beef.
• However, you can only handle 100 head of
cattle at a time.
• Your overhead will remain the same, but
you have many requests for your beef.
• Write a paragraph explaining what you
could do now, and why you could do it.