Term: 1^st Term

Week: 4

Class: Senior Secondary School 2

Age: 16 years

Duration: 40 minutes of 2 periods each

Date:

Subject: Economics

Topic:- Concept of demand and supply II

SPECIFIC OBJECTIVES: At the end of the lesson, pupils should be able to

Distinguish between factors that cause shift in demand and supply curves
State and explain the types of demand and supply

INSTRUCTIONAL TECHNIQUES: Identification, explanation, questions and answers, demonstration, videos from source

INSTRUCTIONAL MATERIALS: Videos, loud speaker, textbook, pictures

INSTRUCTIONAL PROCEDURES

PERIOD 1-2

PRESENTATION	TEACHER’S ACTIVITY	STUDENT’S ACTIVITY
STEP 1 INTRODUCTION	The teacher reviews the previous lesson on the concept of demand and supply	Students pay attention
STEP 2 EXPLANATION	She distinguishes between factors that cause shift in demand and supply curves.	Students pay attention and participates
STEP 3 DEMONSTRATION	She also states and explains the types of demand and supply	Students pay attention and participate
STEP 4 NOTE TAKING	The teacher writes a summarized note on the board	The students copy the note in their books

NOTE

FACTORS AFFECTING DEMAND

We can look at either an individual demand curve or the total demand in the economy.

The individual demand curve illustrates the price people are willing to pay for a particular quantity of a good.
The market demand curve will be the sum of all individual demand curves. It shows the quantity of a good consumers plan to buy at different prices.

Change in price

A change in price causes a movement along the Demand Curve.

For example, if there is an increase in price from $12 to £16 then there will be a fall in demand from 80 to 60.

How important is price?

Some goods are more affected by price than others.

If petrol increases in price, because it is a necessity, there is only a small fall in demand (we say it is inelastic demand).
If Volvic water increases in price, there will be a significant fall in demand because people buy cheaper substitutes (demand is elastic)

SHIFTS IN THE DEMAND CURVE

This occurs when, even at the same price, consumers are willing to buy a higher (or lower) quantity of goods. This will occur if there is a shift in the conditions of demand.

Even at the same price of $12, more is demanded.

FACTORS WHICH CAN SHIFT THE DEMAND CURVE

A shift to the right in the demand curve can occur for a number of reasons:

Income. An increase in disposable income enabling consumers to be able to afford more goods. Higher income could occur for a variety of reasons, such as higher wages and lower taxes.
Credit facilities. If it is easier and cheaper to borrow, this may encourage consumers to buy expensive items on credit, for example, cars and foreign holidays.
Quality. An increase in the quality of the good e.g. better quality digital cameras encourages people to buy one.
Advertisingcan increase brand loyalty to goods and increase demand. For example, higher spending on advertising by Coca Cola has increased global sales.
Substitutes. An increase in the price of substitutes, e.g. if the price of Samsung mobile phones increases, this will increase the demand for Apple iPhones – a major substitute for the Samsung.
A fall in the price of complements will increase demand. E.g. a lower price of Play Station 2 will increase the demand for compatible Play Station games.
Weather: In cold weather, there will be increased demand for fuel and warm weather clothes.
Expectationsof future price increases. A commodity like gold may be bought due to speculative reasons; if you think it might go up in the future, you will buy now.
Change in circumstances. The Covid lockdown of 2020/21 led to a significant fall in demand for leisure and going out to the cinema, but it led to a boom in demand for electrical goods, like TVs and Netflix subscriptions.
Economic cycle. In a recession, people will cut back on spending, even if their income remains steady. This is because they fear the possibility of losing job, so they will take risk averse approach and reduce spending. Similarly in an economic boom, confidence will be high and incomes rising – causing more demand
Wealth-effect. If households experience an increase in their wealth (e.g. house prices rise), then they will be more willing to spend. This is because they can re-mortgage their house to get equity withdrawal and/or they will feel more confidence because they own more assets.

FALL IN DEMAND

A fall in demand could occur due to lower disposable income or decline in the popularity of the good.

MOVEMENT ALONG THE SUPPLY CURVE

As price increases firms have an incentive to supply more because they get extra revenue (income) from selling the goods.
If price changes, there is a movement along the supply curve, e.g. a higher price causes a higher amount to be supplied.

This occurs when firms supply more goods – even at the same price. For example, a new machine which enables more of the good to be produced for the same cost.

FACTORS AFFECTING THE SUPPLY CURVE

A decrease in costs of production. This means business can supply more at each price. Lower costs could be due to lower wages, lower raw material costs
More firms. An increase in the number of producers will cause an increase in supply.
Investment in capacity. Expansion in the capacity of existing firms, e.g. building a new factory
The profitability of alternative products. If a farmer sees the price of biofeuls increase, he may switch to growing crops for biofuels on all his fields and this will lead to a fall in the supply of food, such as wheat.
Related supply. If there is an increase in the supply of beef (from cows) then there will also be an increase in the supply of leather.
Weather. Climatic conditions are very important for agricultural products
Productivity of workers. If workers become more motivated and work hard, then there will be a significant increase in output and supply.
Technological improvements. Improvements in technology, e.g. computers or automation, reducing firms costs.
Lower taxes. Lower direct taxes (e.g. tobacco tax, VAT) reduce the cost of goods.
Government subsidies. Increase in government subsidies will also reduce the cost of goods, e.g. train subsidies reduce the price of train tickets.
Objectives of firms. If firms are profit maximisers and collude with other firms, we may see a fall in supply as they try to maximise profits. However, if they switch to targetting sales or revenue maximisation, then we will see an increase in supply.

SHIFT IN SUPPLY TO THE LEFT

In this case, there is a fall in supply. The supply curve shifts to the left. This causes a higher price. The supply can shift to the left because

Fewer firms in the market
Bad weather (agriculture)
Higher taxes
Decline in productivity (workers work less hard.)

Factors that cause a shift in supply to the right

More firms entering the market
Improved technology, reducing the cost of production
Increased size of output leading to economies of scale and effective mass production.
Lower tax rates
Higher government subsidies

TYPES OF DEMAND

i. Derived Demand:

This is when a commodity is demanded not for its sake but for what it can help to produce. It is demand for factors of production e.g demand for cassava may be a derived when cassava is needed to produce Gari and Fufu e.t.c.

ii. Joint or Complementary Demand:

This is when it requires two or more commodities to meet a particular need e.g car and petroleum are to consume together.

iii. Competitive Demand

This is when a commodity is wanted to satisfy a want which another similar commodity can satisfy. These commodities are called substitutes e.g Ovaltine and Milo, Close-Up and Oral B Toothpastes e.t.c.

iv. Composite Demand:

This is the demand for a commodity because it can be put to different uses e.g the demand for timber is to make furniture, for building construction e.t.c.

v. Exceptional Demand

An exceptional demand is also called an abnormal demand curve and it refers to the situation where the demand curve does not follow the law of demand an exceptional demand curve slopes upward from left to right showing that more commodities will be bought at a higher price than a lower price. Inferior goods such as necessary food stuff like; salt, garri, sugar and bread are demanded even at higher prices

TYPES OF SUPPLY

i. Joint or Complementary Supply

This is the supply of two or more products which results from the same production process or from one source. e.g Palm oil and Palm karnel, Hides and Beef e.t.c.

ii. Competitive Supply

The supply of a commodity is said to be competitive when the commodity is capable of being put to alternative or different uses e.g Land for farming, Building of house etc.

iii. Composite Supply

This is supply of many commodities which can be used to satisfy the same want or purpose e.g electricity, candle, Lanterns, Gas-lamp etc can be used to satisfy the need for light.

iv. EXCEPTIONAL OR ABNORMAL SUPPLY

This is a negative situation in which a fall in the price of the commodity leads to an expansion of its supply. The curve is downward sloping from left to the right.

EVALUATION: 1. Distinguish between factors that cause a shift in the demand and supply curves using graphs

List and explain three types of demand citing examples to buttress your points
List and explain three types of supply citing examples to buttress your points

CLASSWORK: As in evaluation

CONCLUSION: The teacher commends the students positively

Lesson Notes By Weeks and Term - Senior Secondary 2