How shifts in demand and supply change the market price. Chapter IV review
Lessons 26–27 · 2 lessons · E. Sariqov, B. Khaydarov. Foundations of Economics, Grade 8. “Huquq va Jamiyat” Publishing House, Tashkent, 2019
27
Review of Chapter IV
Textbook: pp. 113–114
GoalReviews the main concepts of Chapter IV (demand, supply, equilibrium price, shortage and surplus markets) and applies them together to analyse market situations.
New words
demand: how much buyers can buy at different prices · talabsupply: how much sellers will sell at different prices · taklifequilibrium price: where quantity demanded equals quantity supplied · muvozanat narxfixed price: a price set above or below the market price by decision · qat’iy narx
Explanation
In Chapter IV we studied how a market price comes about. The laws of demand and supply give the link between price and quantity: if the price rises, the quantity demanded falls and the quantity supplied rises. Factors other than price shift the whole curve: for demand, taste, income, number of buyers, prices of related goods and expectations; for supply, resource prices, technology, taxes and the number of sellers. Where the curves cross is the equilibrium point, and its price is the market price. At a lower price there is a shortage, at a higher price a surplus. A useful order for review: first find which curve shifted, then its direction, then the change in price and quantity.
Worked examples
Question: in winter demand for warm clothes rose, and new fabric technology also raised supply. The quantity certainly rises (both shifts raise it). The price depends on which shift is stronger: it rises if demand is stronger and falls if supply is stronger.
Table: price 5 000 – demand 60, supply 20; 6 000 – 50 and 30; 7 000 – 40 and 40. Equilibrium is at 7 000 so‘m, quantity 40. At 5 000 so‘m the shortage is 60 – 20 = 40; if the price is fixed at 9 000 so‘m, supply exceeds demand and a surplus appears.
Class activity
“Chapter map”: a group draws a mini concept map on paper linking demand, supply, factors, equilibrium and fixed price with arrows and explains it to the class.