“IN THE CHIPS” SIMULATION

IN THE CHIPS”- DIRECTIONS

On your “Student Score Sheet”- circle buyer or seller.

The goal for both buyers and sellers is to make a profit.

If you are a buyer, you will make a “profit” if you buy at a price lower than the price shown on your card.

Ex. Card= $4.90 and you buy for $4.50= .40 profit

If you are a seller, you will make a “profit” if you sell at a higher price shown on your card.

Ex. Card= $4.10 and you sell for $4.80= .70 profit

Buyers and sellers will meet in the center of the class and negotiate a transaction price.

Both buyers and sellers will record the transaction prices on their “Student Score Sheet.”

Buyers and sellers will then log whether the transaction created a gain or loss.

After each transaction, buyers and sellers must get a new card.

** After each transaction the sellers must report the transaction price to me!

Buyers and sellers can make a maximum of 5 transactions in each round.

After each round buyers and sellers will add up their profit and loss for each transaction to determine their total profit for the round.

1. How much money did you make/lose?

2. What conditions made this “Chips” market work well?

- Competition created an equal number of buyers and sellers

- Like product for sale

- Clear rules

- Idea of making a profit (incentive)

3. Analyze class tally sheet…

- In which round was there the greatest range in price? Look at the chart.

- Why?

Still figuring out the market

- Why did the transaction price become more clustered in round #3?

Competition (many buyers and sellers competing leads to an equilibrium price).

4. Who determined the “Equilibrium” price for computer chips?

Both buyers (demanders) and sellers (suppliers).

5. What happened in round #4 when a“price floor” was set to protect the computer chip manufacturers?

A surplus was created (suppliers wanted to supply more than the buyers demanded)

The free market slowed down to fewer transactions