Year 11 Economics

Diamond Trading Simulation

Year 11 Economics students had fun learning about the forces of supply and demand this week when they participated in a diamond trading simulation. 

In the first two rounds, everyone got a turn at being a buyer and a seller, negotiating what they thought was a fair price with their counterpart. We were interested to see that there was less variation in the prices in round 2, after some students realised they got a raw deal the first time around! 

Then things got interesting… the price of sapphires decreased, reducing the number of buyers in the diamond market. These savvy diamond buyers saw their opportunity to bargain sellers down, with many sellers willing to sell their wares for cheap to secure their sale. Prices averaged only $30, after averaging closer to $100 in round 1. 

Finally, in round 4, conflict in diamond mining nations resulted in a shortage of diamonds. With students now clearly understanding the dynamics of supply and demand, those few sellers who had managed to source their diamonds were able to hold out for some extraordinary prices, up to $10,000 - $15,000 per diamond in some cases. 

What a great introduction to some important Economic theories. As well as an opportunity to practise those negotiation (haggling?) skills in preparation for returning to local markets at our favourite international holiday destinations. 

Mrs Jackman and Ms Todaro 

VCE Economics Teachers