Lessons 25 · 1 lessons · E. Sariqov, B. Khaydarov. Foundations of Economics, Grade 8. “Huquq va Jamiyat” Publishing House, Tashkent, 2019
25
Practical lesson on the laws of demand and supply
Textbook: pp. 108–109
GoalFinds the equilibrium price in three ways – from a table, from a graph and from a demand–supply equation – and calculates the shortage or surplus at a fixed price.
New words
demand function: a formula giving quantity demanded from the price, for example qD = 120 – 2p · talab funksiyasisupply function: a formula giving quantity supplied from the price, for example qS = 3p + 20 · taklif funksiyasiequation: here qD = qS, from which the equilibrium price is found · tenglamacoordinate point (q; p): a point on the graph, with the quantity first and the price second · koordinata nuqtasi
Explanation
The equilibrium price can be found in three ways. In the table method we look for the row where the quantities demanded and supplied are equal. In the graph method each pair in the table is marked as a point (q; p) on the coordinate plane, the demand and supply curves are drawn, and the abscissa of their crossing point gives the equilibrium quantity and the ordinate gives the equilibrium price. In the formula method the demand and supply functions are set equal: qD = qS. For example, if qD = 120 – 2p and qS = 3p + 20, then 120 – 2p = 3p + 20, so 5p = 100 and p = 20. To find the quantity we put p into one of the functions: qD = 120 – 2 · 20 = 80. To check, put it into supply too: qS = 3 · 20 + 20 = 80. If both are equal, the answer is correct.
Worked examples
Table: price 2 000 so‘m – demand 50, supply 10; 3 000 – 40 and 20; 4 000 – 30 and 30; 5 000 – 20 and 40. The equal row is at 4 000 so‘m: equilibrium price 4 000 so‘m, quantity 30 units. If the price is fixed at 2 000 so‘m, the shortage is 50 – 10 = 40 units.
Functions: qD = 180 – 5p, qS = 3p + 20 (p in thousand so‘m, q in units). Set them equal: 180 – 5p = 3p + 20, 160 = 8p, p = 20. So the equilibrium price is 20 000 so‘m. Quantity: qS = 3 · 20 + 20 = 80 units; check: qD = 180 – 5 · 20 = 80. If the price is fixed at 10 000 so‘m (p = 10), qD = 130, qS = 50, and the shortage is 130 – 50 = 80 units.
Class activity
“Three ways, one answer”: three members of a group solve the same demand–supply data by table, graph and formula respectively, then compare results.
Practice
1
If qD = 100 – 3p and qS = 2p + 40, find the equilibrium price p (thousand so‘m).
12
2
What is the equilibrium quantity q in this problem? (qD = 100 – 3p, p = 12)
64
3
Table: price 6 000 – demand 70, supply 20. How many units is the shortage or surplus?
50
4
Why is it useful to substitute the equilibrium price into both functions after finding it?
If both results are equal the calculation is right; if not, there is a mistake.