☰ Contents · Economics

Demand and the law of demand

Lessons 20 · 1 lessons · E. Sariqov, B. Khaydarov. Foundations of Economics, Grade 8. “Huquq va Jamiyat” Publishing House, Tashkent, 2019
20

Demand and the law of demand

Textbook: pp. 88–91
GoalExplains the difference between demand and quantity demanded, builds a demand schedule and a demand curve (D), and knows the law of demand and its explanation through the income and substitution effects.
New words
demand: the relation between a good’s price and the quantities buyers are able to buy at different prices · talabquantity demanded: how much buyers can buy at one given price in a given period · talab miqdorilaw of demand: the higher the price, the smaller the quantity demanded, other things equal · talab qonunidemand curve (D): the line drawn through the points of a demand schedule · talab chizig‘i
Explanation

Wanting alone is not demand: a wish becomes demand only when it comes with the ability to pay. Demand is the relation between price and the quantity buyers can buy, while quantity demanded is that quantity at one specific price. If the price changes, the quantity demanded changes, while the schedule itself stays the same. The law of demand: other things equal, the lower the price, the greater the quantity demanded, and the higher the price, the smaller it is. There are two reasons. The income effect: if the price falls, the same money buys more. The substitution effect: when a good gets dearer, people switch to a cheaper substitute. On a graph the price goes on the vertical axis (p) and the quantity on the horizontal axis (q); joining the points gives a D line sloping downward to the right.

Worked examples
Fruit ice-cream cups: at 8 000 so‘m a neighbourhood buys 40 a day, at 6 000 so‘m it buys 70, at 4 000 so‘m it buys 100. These three pairs form a demand schedule. At 6 000 so‘m the quantity demanded is 70; total revenue: 6 000 · 70 = 420 000 so‘m.
Dilnoza likes two fruits. When bananas cost 28 000 so‘m and apples 14 000 so‘m, she buys 1 kg of bananas and 2 kg of apples a week. If bananas rise to 40 000 so‘m, she buys more apples: that is the substitution effect. Since her money stays the same while bananas cost more, she can no longer afford everything she bought before – as if her income had fallen: that is the income effect.
Class activity

“Class market”: the class announces the price of a “chocolate bar” as 3 000, 5 000, 7 000 and 9 000 so‘m; each pupil writes how many he or she would buy at each price. The results are added up and a demand schedule and curve are drawn.

Practice
1
Why is a wish by itself not counted as demand?
2
The quantity demanded is 90 at a price of 5 000 so‘m and 50 at 9 000 so‘m. By how many units did it fall when the price rose from 5 000 to 9 000 so‘m?
3
The price is 6 000 so‘m and the quantity demanded is 55. How much money do the buyers spend in total, in so‘m?
4
Why do people buy more when the price of a good falls? Name both effects.