☰ Contents · Economics

Supply and the law of supply

Lessons 22 · 1 lessons · E. Sariqov, B. Khaydarov. Foundations of Economics, Grade 8. “Huquq va Jamiyat” Publishing House, Tashkent, 2019
22

Supply and the law of supply

Textbook: pp. 96–99
GoalTells supply from quantity supplied, builds a supply schedule and a supply curve (S), explains the law of supply and describes Adam Smith’s “invisible hand” idea in simple terms.
New words
supply: the relation between a good’s price and the quantities sellers are willing and able to sell · taklifquantity supplied: how much sellers can sell at one given price in a given period · taklif miqdorilaw of supply: the higher the price, the greater the quantity supplied, other things equal · taklif qonuniinvisible hand: Adam Smith’s image of how self-interested market participants are guided by supply and demand · ko‘rinmas qo‘l
Explanation

Supply is the relation showing how much sellers are willing and able to sell at different prices. Quantity supplied is that amount at one specific price. The law of supply: other things equal, the higher the price, the greater the quantity supplied, and the lower the price, the smaller it is. The reason is that a high price raises profit and encourages the producer to produce more; in addition, new sellers enter the market. Joining the points of the schedule gives an S line rising to the right (English supply). In the 18th century Adam Smith called it the “invisible hand” when everyone works in his own interest but supply and demand guide them and also bring benefit to society. In other words, even without a central order the market brings the needed goods to market.

Worked examples
Beekeepers bring 30 kg of honey to market at 60 000 so‘m per kg, 50 kg at 80 000 so‘m and 80 kg at 100 000 so‘m. The quantity supplied rises with the price. Total revenue at 80 000 so‘m: 80 000 · 50 = 4 000 000 so‘m.
Two city markets have the same carrots. At market A 1 kg costs 6 000 so‘m, at market B 4 500 so‘m. If some profit remains after the transport cost, the farmer takes the produce to market A. In this way a price difference directs goods to where they are needed, and nobody has to order it.
Class activity

“Be a seller”: each pupil writes how many of his or her own handmade items (for example, paper stars) he or she would sell at 2 000, 4 000 and 6 000 so‘m; the class supply schedule is added up and the S curve drawn.

Practice
1
State the difference between supply and quantity supplied.
2
A baker is willing to bake 200 loaves at 3 000 so‘m and 340 at 4 000 so‘m. By how many did the quantity supplied rise when the price rose?
3
If 340 loaves are sold at 4 000 so‘m, what is the revenue in so‘m?
4
Why do sellers offer more goods when the price rises?