# Economics SS 2 Curriculum Guides – Principles of Economics – Concepts of Demand and Supply | The Production Possibility Curve | Cost and Revenue Concepts | Tools of Economic Analysis

THEME – PRINCIPLES OF ECONOMICS

Graph

### LEARNING OBJECTIVES

By the end of the lesson, students should be able to:

1. explain the meaning of demand and supply and market equilibrium.

2. explain the factors affecting demand and supply.

3. distinguish between factors causing shift in demand and supply curves.

4. draw the schedules and curves to explain the changes.

5. distinguish between various types of demand.

### INTRODUCTIONTO DEMAND AND SUPPLY

Demand is the amount or quantity of goods and services that a consumer is willing to buy and pay at given price and at a particular time. While a supply the amount or quantity of goods and services that a manufacturer is willing to supply at a given price and at a particular time.

In economics, demand and supply is the relationship between the amount of goods and services that a consumer is willing to buy from the supplier at different prices.

The price of goods and services are determined by the interaction of supply and demand in a market which is known as equilibrium price.

Equilibrium price is the agreement between manufacturers and consumers of the good. In equilibrium, the quantity of goods supplied by manufacturers equals the quantity demanded by consumers.

### DEMAND SCHEDULE AND DEMAND CURVE

Demand schedule is a table that shown the relationship between the amount or quantity of goods and services that a consumer is willing to buy at a given price.

In this case, demand is high as the price get decreases.

For example, the demand for a bag of pure water.

Price per Bag (₦)                      Quantity Demanded

200                                                                5

190                                                                7

180                                                                10

170                                                                13

160                                                                15

150                                                                 20

Demand curve is the graphic representation that shown the relationship between price and demand for goods and services.

### LAWS OF DEMAND

There are two (2) fundamental economic principles that describe how price determined and affect the demand for goods and services.

1. Normal Demand Law

In normal demand law, demand increases as the price decreases and vice versa.

2. Abnormal Demand Law

In Abnormal demand law, demand increases as the price increases and vice versa.

### TYPES OF DEMAND

1. Direct Demand

Direct demand is the demand for final goods and services that are independent.

It is also known as autonomous demand.

2. Derived Demand

Derived demand is the for goods that are not independent.

Demand for these goods is as a result of another goods. For example, the demand for kerosene as a result of stove.

3. Joint or Composite Demand

Joint or composite demand is the demand for goods and services that compliment one another. For example, shirt and trouser, etc.

4. Competitive Demand

Competitive demand is the demand for goods and services that gives the consumers options to choose from. For example, milo and bourvita, fanta and merinda, maggi star and knor chicken, etc.

5. Short-run and Long-run Demand

Short run demand is the demand with its immediate reaction to change in price, income, etc. While long run demand is the demand that allows consumers to adjust with time.

6. Income Demand

Income demand is the demand for more goods and services as a result of increase in income and vice versa.

7. Price Demand

Price demand is the demand for goods and services with the ability to pay at a given price.

### FACTOR AFFECTING DEMAND

1. Price

2. Price of related goods or services

3. Consumer income

4. Taste

5. Population

6. Age

7. Weather

8. Tax

9. Festival or season

### SUPPLY SCHEDULE AND DEMAND CURVE

Supply schedule is a table that shown the relationship between the amount or quantity of goods and services that a producer is willing to offer for sales at a given price.

In this case, supply is high as the price get decreases.

For example, the demand for a bag of pure water.

Price per Bag (₦)                      Quantity Supplied

200                                                                20

190                                                                15

180                                                                13

170                                                                10

160                                                                 7

150                                                                 5

Supply curve is the graphic representation that shown the relationship between price and supply of goods and services.

### LAWS OF SUPPLY

The law of supply states that, as the price of goods and services increases, the quantity of goods and services that suppliers offer for sales increases, and vice versa.

The main purpose of increasing supply as the price increased is to increase the profits from the sale goods and services offered at the market price.

### TYPES OF SUPPLY

1. Composite Supply

Composite supply is the supply of goods that serve more one purpose. For example, timber. Timber is used for building, furniture, canoe, firewood, etc.

The supply of timber for a particular product will affect other products.

2. Joint or Complementary Supply

Joint or complementary supply is the supply of goods that automatically increases the supply of other goods especially when the goods are produced from the source. For example, palm oils, brooms, black oil (commonly known as adin dudu in Yoruba) or kernels.

3. Competitive Supply

Competitive supply is the supply of different goods that serve the same purpose. For example, milo and bourvita, pepsi and coke, merinda and fanta, etc.

4. Market supply

Market supply is the supply that is determined by the market prices.

The producers want to supply more goods at a higher price.

### FACTOR AFFECTING SUPPLY

1. Price

2. Price of related goods or services

3. Consumer income

4. Festivals

5. Population

6. Cost of production

7. Weather

8. Tax

9. Number of producers

10. Government policy

### LESSON PRESENTATION

TEACHER’S ACTIVITIES

The teacher,

1. emphasizes the role of the price system in resource allocation in economics.

2. leads a discussion on demand and supply schedule and curve.

3. guides students to discuss and differentiate between law of demand and supply.

4. states and explains different types of demand and supply using appropriate examples.

5. guides students to identify, state and discuss factors affecting demand and supply.

STUDENT’S ACTIVITIES

The students,

1. state the role of the price system in resource allocation in economics.

2. plot the demand and supply schedules in graph to obtain the curves.

3. discuss and differentiate between law of demand and supply.

4. state and explain different types of demand and supply using appropriate examples.

5. identify, state and discuss factors affecting demand and supply.

### LESSON EVALUATION

1. explain demand and supply of commodity.

2. distinguish between change in demand and change in quantity demanded.

3. draw demand and supply curves.

4. explain the meaning of demand, supply and market equilibrium.

5. explain five factors affecting demand and five factors affecting supply.

6. distinguish between factors causing shift in demand and supply curves.

7. draw the schedules and curves to explain the changes.

8. distinguish between various types of demand.

THEME – PRINCIPLES OF ECONOMICS

Graph sheet

### LEARNING OBJECTIVES

By the end of the lesson, students should be able to define the PPC, show how to plot the curve from possible data.

### PRODUCTION POSSIBILITY CURVE (PPC)

Production possibility curve is a graph that shown the best possibility of producing two commodities within a given available resources and level of technology.

#### CONCEPT OF TOTAL, AVERAGE AND MARGINAL PRODUCTIVITY

TOTAL PRODUCT (TP)

Total product is the total quantities of goods produced at a given inputs in a given period of time.

TP = AP x Labour

AVERAGE PRODUCT (AP)

Average product is the total product divided by the input of labour.

AP = TP/Labour

MARGINAL PRODUCT (MP)

Marginal product is the additional product produced as a result of additional input.

MP = (Change in TP)/(Changes in Labour)

### LAWS OF VARIABLE PROPORTION

The Law of Variable Proportions states that as the quantity of a factor is increased while keeping other factors constant, the Total Product (TP) first rises at an incremental rate, then at a decremental rate and lastly the total production begins to fall.

### LESSON PRESENTATION

TEACHER’S ACTIVITIES

The teacher, gives hypothetical production data and figures to plot the PPC and to calculate marginal product (MP) and average product (AP).

STUDENT’S ACTIVITIES

The students,

1. draw the PPC on graph sheets.

2. calculate the AP and MP.

### LESSON EVALUATION

1. define the PPC.

2. pilot the PPC from given data.

THEME – PRINCIPLES OF ECONOMICS

Graph sheet

### LEARNING OBJECTIVES

By the end of the lesson, students should be able to:

1. define revenue.

2. distinguish between the different revenue concepts (total, average, marginal).

3. draw different revenue curves.

4. explain the relationship between revenue and production.

### CONCEPT OF REVENUE, TOTAL REVENUE AND MARGINAL REVENUE

1. REVENUE

Revenue is the amount of money realized from the sales of goods or service rendered. Example of revenues – tax, excise duties, customs, salaries, profits, etc.

2. TOTAL REVENUE (TR)

Total revenue is the amount of money realize from the sales of goods or service rendered at a given period of time.

TR = P x Q

3. AVERAGE REVENUE (AR)

Average revenue is the revenue per unit of sale.

This is obtained by dividing the total revenue divided by the quantities or number of goods sold.

AR = TR/Q

4. MARGINAL REVENUE (MR)

MR = (Change in TR)/(Change in Quantities)

### REVENUE SCHEDULE AND CURVE

Revenue schedule is a table that shows the amount of revenue earned by a producers at various prices.

Unit Sold       Price (₦)        TR         AR         MR

5                           8                   40           8              0

10                         4                   40            4             0

20                         2                    40            2            0

40                         1                    40            1            0

REVENUE CURVE

Revenue curve is the graphic presentation of revenue schedule.

### LESSON PRESENTATION

TEACHER’S ACTIVITIES

The teacher,

1. explain the concepts of total, average and marginal revenue.

2. draw relevant revenue schedules and curves.

STUDENT’S ACTIVITIES

The students draw revenue schedules and curves from hypothetical figures provided by the teacher.

### LESSON EVALUATION

1. define revenue and differentiate the various revenue curves.

2. distinguish among the systems.

THEME – PRINCIPLES OF ECONOMICS

### LEARNING OBJECTIVES

By the end of the lesson, students should be able to:

1. distinguish between the different cost concepts (variable, fixed, total, average, marginal, short-run, long-run).

2. draw different cost curves.

3. explains the relationship between costs and production.

### FOCUS LESSONS

CONCEPTS OF COST, TOTAL COST, AVERAGE COST, FIXED COST, VARIABLE COST, SHORT RUN AND LONG RUN COST

1. Cost

Cost is the amount of getting a product or producing a particular product.

2. Total Cost

Total cost is the total amount of producing a particular product.

TC (total cost) = TFC (total fixed cost) + TVC (total variable cost)

3. Average Cost

Average cost is the cost per unit product.

AC = Total Cost/Q

4. Fixed Cost

Fixed cost is the cost that is not change with increase or decrease in production of particular good. For example, machinery, building, land, etc.

5. Variable Cost

Variable cost is the cost that change with increase or decrease in production. For example, raw materials, labour, etc.

6. Marginal Cost

Marginal cost is the cost of producing additional products.

MC = (Change in TC)/(Change in Quantities)

7. Short Run and Long Run Costs

Short run cost is the production cost that has fixed factors (such as machinery, building, etc.) of production. While long run costs have no fixed factors of production. That’s, all factors of production can be vary.

DISTINCTION BETWEEN ECONOMISTS AND ACCOUNTANTS VIEW OF COST

The economists view cost as alternative forgone (or opportunity cost). They considered the cost of goods and services left unsatisfied rather the cost of goods and services that are satisfied. The cost of goods and services that are left unsatisfied are known as alternative forgone or opportunity cost.

On the other hand, the accountants view cost differently from the economists point of view. They view cost as the actual cost or money cost. That’s, the cost of producing goods and services.

### LESSON PRESENTATION

TEACHER’S ACTIVITIES

The teacher,

1. asks students to state what they consider as cost.

2. highlight the distinctions between costs to the individual, the business enterprise, and to the nation.

3. leads a discussion on the economists and accountants view of cost.

STUDENT’S ACTIVITIES

The students,

1. identify costs incurred in the running of the school.

2. draw cost curves.

3. go on excursion to local factories to identify cost items.

### LESSON EVALUATION

1. distinguish among the different cost concepts taught.

2. draw the different cost curves.

3. explain the relationship between costs and production.

THEME – PRINCIPLES OF ECONOMICS

### INSTRUCTIONAL MATERIALS

Graph paper and other relevant materials.

### LEARNING OBJECTIVES

By the end of the lesson, students should be able to show simple economic relationship with tables, (graphs and charts).

### FOCUS LESSONS

Simple Linear Equations, Measures of Dispersion

• Pie chart
• Bar chart
• Histograms
• Polygons
• Calculation of charts

### LESSON PRESENTATION

TEACHER’S ACTIVITIES

The teacher,

1. tests previous knowledge of basic tools taught in year 1.

2. gives relevant exercises on the new topic.

STUDENT’S ACTIVITIES

The students draw tables, graphs and calculate given data.