Class: Senior Secondary School 2 (SS2 / SSS 2)
Term: 2nd Term
Week: 4
Age: 16 years
Duration: 45 minutes
Subject: Economics
Curriculum Theme: Microeconomics / Market Structure
Previous Lesson: Price Determination: Meaning, Equilibrium and Changes in Demand and Supply.
Topic: PRICE DETERMINATION
Subject Matter: Concept of elasticity (and its application), simple application of price theory (minimum price legislation, maximum price legislation)

Specific Objectives

By the end of the lesson, pupils should be able to:

Cognitive Domain:

Define the concept of elasticity in economics.
State the formulas for calculating price elasticity of demand and supply.
Explain the different types of elasticity and their interpretations.
Define price controls, including minimum and maximum price legislation.
Describe the effects of minimum and maximum price legislation on the market.

Affective Domain:

Appreciate the importance of elasticity in understanding market responses.
Recognize the real-world implications of government intervention through price controls.

Psychomotor Domain:

Calculate price elasticity from given data.
Interpret elasticity values using graphs.
Illustrate the effects of price controls using simple diagrams.

Participate actively in discussions about market dynamics and government policies.
Relate economic concepts to current events and societal issues like fuel price changes.

Reference Materials

The following resources were used in planning this lesson:

Senior Secondary Schools Education Curriculum
State Unified Scheme of Work
Adeyemi, K. (2018). Essential Economics for Senior Secondary Schools. Tonad Publishers Limited.

Instructional Materials

The teacher will teach this lesson with the aid of:

Whiteboard or chalkboard
Markers or chalk
Graphs illustrating elasticity of demand and supply
Charts showing formulas for elasticity.

Rationale for the Lesson

This lesson helps pupils understand how changes in price affect the quantity demanded and supplied in a market. It also enables them to understand why governments intervene in markets through price controls and the resulting effects on consumers and producers, relating these concepts to everyday experiences like fuel prices.

Prerequisite/Previous Knowledge

Pupils have a basic understanding of demand and supply, market equilibrium, and factors affecting demand and supply.

Lesson Content/Board Summary

PRICE DETERMINATION

Concept of Elasticity

Elasticity measures the responsiveness of quantity demanded or supplied to a change in its determinants. It shows how much quantity changes when there is a change in price or income.

The following are the main types of elasticity related to price:

Price Elasticity of Demand (PED): Measures the responsiveness of quantity demanded to a change in the price of the good.
Price Elasticity of Supply (PES): Measures the responsiveness of quantity supplied to a change in the price of the good.

Formulas for Elasticity:

Price Elasticity of Demand (PED) = (% Change in Quantity Demanded) / (% Change in Price)
Where % Change in Quantity Demanded = [(New Quantity – Old Quantity) / Old Quantity] * 100

And % Change in Price = [(New Price – Old Price) / Old Price] * 100

Note: PED is usually negative, but economists often use its absolute value.
Price Elasticity of Supply (PES) = (% Change in Quantity Supplied) / (% Change in Price)
Where % Change in Quantity Supplied = [(New Quantity – Old Quantity) / Old Quantity] * 100

And % Change in Price = [(New Price – Old Price) / Old Price] * 100

Interpretation of Elasticity Values:

Elastic (|E| > 1): Quantity changes more than proportionally to price change.
Inelastic (|E| < 1): Quantity changes less than proportionally to price change.
Unitary Elastic (|E| = 1): Quantity changes proportionally to price change.
Perfectly Elastic (|E| = ∞): Infinite change in quantity for a tiny price change (horizontal curve).
Perfectly Inelastic (|E| = 0): Quantity does not change regardless of price change (vertical curve).

Worked Example 1 (Price Elasticity of Demand):

If the price of a product increases from ₦100 to ₦120, and the quantity demanded falls from 500 units to 400 units, calculate the Price Elasticity of Demand.

Step 1: Calculate % Change in Quantity Demanded

Change in Quantity = 400 – 500 = -100 units
% Change in Quantity = (-100 / 500) * 100 = -20%

Step 2: Calculate % Change in Price

Change in Price = ₦120 – ₦100 = ₦20
% Change in Price = (₦20 / ₦100) * 100 = 20%

Step 3: Calculate PED

PED = (-20%) / (20%) = -1
Absolute value of PED = 1

Interpretation: The demand is unitary elastic, meaning a 1% change in price leads to a 1% change in quantity demanded.

Worked Example 2 (Price Elasticity of Supply):

A producer increases the quantity supplied of a good from 200 units to 250 units when the price rises from ₦50 to ₦60. Calculate the Price Elasticity of Supply.

Step 1: Calculate % Change in Quantity Supplied

Change in Quantity = 250 – 200 = 50 units
% Change in Quantity = (50 / 200) * 100 = 25%

Step 2: Calculate % Change in Price

Change in Price = ₦60 – ₦50 = ₦10
% Change in Price = (₦10 / ₦50) * 100 = 20%

Step 3: Calculate PES

PES = (25%) / (20%) = 1.25

Interpretation: The supply is elastic (1.25 > 1), meaning a 1% change in price leads to a 1.25% change in quantity supplied.

Application of Price Theory: Price Controls

Price controls are government-imposed limits on the prices that can be charged for goods and services. They are often implemented to achieve social or economic objectives.

The following are common types of price controls:

Minimum Price Legislation (Price Floor):
A minimum price (or price floor) is a government-imposed lower limit on the price at which a good or service can be sold. It is set above the equilibrium price.

Purpose: To protect producers by ensuring they receive a certain minimum income (e.g., agricultural products, minimum wage).

Effects: Leads to a surplus (quantity supplied exceeds quantity demanded) because the price is artificially high, discouraging consumption and encouraging production. Examples include minimum wage laws.
Maximum Price Legislation (Price Ceiling):
A maximum price (or price ceiling) is a government-imposed upper limit on the price at which a good or service can be sold. It is set below the equilibrium price.

Purpose: To protect consumers by making essential goods more affordable (e.g., rent control, essential food items).

Effects: Leads to a shortage (quantity demanded exceeds quantity supplied) because the price is artificially low, encouraging consumption and discouraging production. This can lead to black markets, rationing, and reduced quality. Examples include government control of fuel prices.

Teaching Methods/Instructional Techniques

Discussion, Lecture, Demonstration, Question and Answer, Visual Aids

Instructional Procedures

Step 1: Introduction

Time: 3 minutes
Teaching Skill: Set Induction
Teacher’s Activity: The teacher welcomes pupils and asks them to recall the previous lesson on market equilibrium. The teacher then introduces the topic of price determination by asking how changes in price affect how much people buy or sell, and if the government can set prices.
Pupils’ Activity: Pupils respond to the questions and listen attentively.
Learning Point: Pupils connect previous knowledge to the new topic and are prepared for the lesson.

Step 2: Explanation of Elasticity and Formulas

Time: 7 minutes
Teaching Skill: Explanation/Definition
Teacher’s Activity: The teacher defines elasticity, focusing on price elasticity of demand and supply. The teacher writes the formulas for PED and PES on the board and explains each component.
Pupils’ Activity: Pupils listen, copy definitions and formulas, and ask clarifying questions.
Learning Point: Pupils understand the concept of elasticity and its mathematical representation.

Step 3: Calculation and Interpretation of Elasticity

Time: 8 minutes
Teaching Skill: Demonstration/Calculation
Teacher’s Activity: The teacher presents simple numerical examples for PED and PES, guiding pupils through the step-by-step calculation on the board. The teacher then explains how to interpret the calculated values (elastic, inelastic, unitary).
Pupils’ Activity: Pupils follow the calculations, attempt to solve along, and interpret the results.
Learning Point: Pupils can calculate and interpret elasticity values from given data.

Step 4: Graphical Illustration of Elasticity

Time: 5 minutes
Teaching Skill: Visual Aids/Illustration
Teacher’s Activity: The teacher uses prepared graphs or sketches on the board to illustrate different types of demand and supply curves (e.g., steep for inelastic, flatter for elastic, vertical for perfectly inelastic).
Pupils’ Activity: Pupils observe the graphs and understand the visual representation of elasticity.
Learning Point: Pupils can visually identify elastic and inelastic curves.

Step 5: Introduction to Price Controls – Minimum Price Legislation

Time: 7 minutes
Teaching Skill: Explanation/Discussion
Teacher’s Activity: The teacher defines price controls and introduces minimum price legislation (price floor). The teacher explains its purpose, how it is set above equilibrium, and its effects on the market, citing examples like minimum wage.
Pupils’ Activity: Pupils listen, take notes, and contribute to the discussion on real-world examples.
Learning Point: Pupils understand what minimum price legislation is and its implications.

Step 6: Price Controls – Maximum Price Legislation

Time: 7 minutes
Teaching Skill: Explanation/Discussion
Teacher’s Activity: The teacher explains maximum price legislation (price ceiling), its purpose, how it is set below equilibrium, and its effects (e.g., shortages, black markets), linking it to Nigeria’s fuel price experiences.
Pupils’ Activity: Pupils listen, take notes, and share their experiences or observations related to price ceilings.
Learning Point: Pupils understand what maximum price legislation is and its potential consequences.

Step 7: Evaluation/Review

Time: 5 minutes

Teaching Skill: Questioning/Assessment

Teacher’s Activity: The teacher evaluates the learning by asking the following questions:

Define price elasticity of demand.
State the formula for calculating price elasticity of supply.
If a 10% increase in price leads to a 5% decrease in quantity demanded, what is the PED, and is demand elastic or inelastic?
What is minimum price legislation, and what is its main effect on the market?
Mention two effects of maximum price legislation.

Pupils’ Activity: Pupils answer orally and in writing.

Learning Point: Pupils demonstrate understanding of the lesson.

Step 8: Conclusion

Time: 3 minutes
Teaching Skill: Summarization
Teacher’s Activity: The teacher summarizes the key points of the lesson, reiterating the importance of elasticity in understanding market responses and the effects of government price controls.
Pupils’ Activity: Pupils listen and ask any final questions.
Learning Point: Pupils consolidate their understanding of the lesson’s main concepts.

Lesson Keywords

Elasticity – A measure of the responsiveness of quantity demanded or supplied to a change in its determinants.
Price Elasticity of Demand (PED) – Measures how much the quantity demanded of a good responds to a change in the price of that good.
Price Elasticity of Supply (PES) – Measures how much the quantity supplied of a good responds to a change in the price of that good.
Price Ceiling – A government-imposed legal maximum price that can be charged for a good or service.
Price Floor – A government-imposed legal minimum price that can be charged for a good or service.
Shortage – A situation where quantity demanded exceeds quantity supplied.
Surplus – A situation where quantity supplied exceeds quantity demanded.

Differentiation

For pupils who grasp concepts quickly, the teacher can provide more complex elasticity calculation problems or ask them to research real-world examples of price controls in Nigeria. For those who need more support, the teacher will provide simplified examples and additional guidance during calculations and explanations.

Note for teachers using this lesson plan

Teachers should emphasize real-world applications of elasticity and price controls, using current events and local examples to make the lesson relatable. Encourage pupils to critically analyze the benefits and drawbacks of government intervention in markets. Ensure clear diagrams are used to illustrate price floors and ceilings and their effects.