scope 2 demand and supply - hkep · scope 2 demand and supply new horizon economics assignment:...

Scope 2 Demand and Supply

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New Horizon Economics

Assignment: News commentary

— ‘Howdoesachangeindemandandsupplyleadto

soaringriceprices?’

Demand and SupplyScope 2：

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New Horizon Economics School-based Assessment Resources Package

Assignment: News commentary

How does a change in demand and supply lead to soaring rice prices?

The ricepriceskeep risingduring recentyears.According to thedata releasedby theFoodandAgricultureOrganizationof theUnitedNations, theglobalricepriceshadrisenbynearly70%between2003and2007.Thefollowingmindmapcanhelpyouthinkabouthowtochooseasuitabletopicfromourdailylivesonthe‘soaringriceprices’.Completethemindmapbelowandgiveotherexamples.

Solutions and effectiveness

Effects

Reasons

Derived problems

Soaring rice prices

Step Setting a topic1Step Setting a topic1


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Thefollowingreportsareaboutthesoaringriceprices.Readcarefullyandanswerthequestions.

Soaring import rice prices prompted panic buying at supermarkets

Due to the short supply of rice in the international market, the prices of rice imported to Hong Kong have soared nearly 30%, while some retail prices have risen about 10%. As a result, shoppers stripped supermarket shelves for rice, leaving most of the shelves empty. People in the trade said rice exporters of Thailand, Hong Kong’s main rice supplier, stocked up rice, leading to the soaring rice prices.

Riceatsupermarketswassoldout.

A01 Local News DAILY NEWS 1 April 2008

Rice rations introduced in the UK and the US In view of lower rice supply and soaring prices, the giant US-based retailer Wal-Mart announced its stores will limit bulk purchases of rice. Each shopper can only buy 4 bags at most each time. Similarly in the UK, some shops limit the purchase to 2 bags.

C01 World News DAILY NEWS 25 April 2008

Rapid rise in biofuel production leads to deforestation and soaring rice prices

Last Friday, a group of European scientists urged the European Union (EU) to suspend its goal of having 10 percent of transportation fuel made from biofuel by 2020. They claimed that the EU’s goal had created various harmful effects, including deforestation in Southeast Asia and soaring prices for grain, including rice. While farmers clear forests to gain land to grow corn for biofuel production, it releases large amounts of greenhouse gases, leading to global warming. Meanwhile, the Food and Agriculture Organization of the United Nations argued that the growing biofuel output would ‘compete with food crops for water, land and capital and thereby increase food prices’.

C01 World News DAILY NEWS 15 April 2008

Fromthemindmaponthepreviouspageandthenewsreportsabove,whatissuedoyouthinkisderivedfromthesoaringricepricesduringrecentyears?

Basedonthemindmaponthepreviouspage,wewillfocusonthereasonsforthesoaringriceprices.Nowusethetopic‘Howdoesachangeindemandandsupplyleadtosoaringriceprices?’andwriteanewscommentary.Listthetools,economicconceptsandtheoriesinvolved.

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Listthemaincontentsintheintroduction,analysisandconclusionofthenewscommentary.

Introduction

Analysis

Conclusion

Step Drafting an outline3Step Drafting an outline3

Basedonthedatacollectedintheabovesteps,writeanewscommentaryonthetopic.


I ntroduction

Step Writing a news commentary4Step Writing a news commentary4

Topic Tools, concepts and theories

How does a change in demand and supply lead to soaring rice prices? •

•

Whatdoyouthinkshouldbeincludedwhencollectingdatarelatedtotheabovetopic?Listtwoofthem.

1.

2.

Wheredoyouthinkyoucancollecttheabovedata?Listtwoofthem.

1.

2.

Whatare the reasons for the soaring ricepricesduring recentyears?According to thedatacollected,giveapreliminaryanalysisbycompletingthefollowingmindmap:

Changes in the use of farmland

Economic development

Growing population

Other factors

Why do rice prices soar

during recent years?

Step Data collection and analysis2Step Data collection and analysis2


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Introduction

Analysis

Conclusion


Basedonthedatacollectedintheabovesteps,writeanewscommentaryonthetopic.


I ntroduction


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A nalysis


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C onclusion

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III. Suggested answer


Effects

Reasons

Derived problems

Soaring rice prices

Government policies

Market mechanism

International cooperation

Poverty in low-income countries worsens.

Inflation

Social instability, which affects world peace

A rapid rise in population and economic development lead to a rise in global demand for food.

Biofuel development, global warming, international speculative activities, urbanization and industrialization lead to a fall in global food supply.

The income gap between developing and developed countries widens.

Global economic growth slows down.

Trade protectionism hinders the development of free trade.

Thetopicderivedfromthenewsreports:Howdoesachangeindemandandsupplyleadtosoaringriceprices?

Writeanewscommentaryonthefollowingtopic,andlistthetools,economicconceptsandtheoriesinvolved.



• Demand-supply theory

• Market price determination


School-based Assessment Guide


I. Background informationStudentsshouldbe familiarwith the followingknowledgeandconceptsbefore theystartworkingon thenewscommentary:

Knowledge required Concept required

• Factors which affect market demand (4B: Ch.8)

• Factors which affect market supply (4B: Ch.9)

• Changes in demand and supply (4B: Ch.8 – 9)

• Demand-supply theory (4B: Ch.9)

• Market price determination (4B: Ch.9)

II. Suggested teaching procedure

1.Teachersmaygothroughsomeimportanteconomicknowledgewithstudentswhentheyaredoingstep1,suchasthefactorswhichaffectmarketdemandandsupply.Then,askstudentstothinkofsomeeconomictheoriesthatcanbeusedtoanalyzethereasonsforthesoaringricepricesduringrecentyears.

3.Ask students topayattention to thecoreandbranchesof themindmap.Then, refer to theframeworkandlisttherespectiveimpactsofdemandandsupplychangesonriceprices.

4.Askstudentstoorganizethedatainstep3,concludethemainpoints,andlisttheminintroduction,analysisandconclusion.

2.Whenstudentsaredoingstep2,teachersmaypointoutthattheinformationanddataofricepricescanbeobtainedfromthewebsiteoftheFoodandAgricultureOrganizationoftheUnitedNations.Studentsshouldalsopayattentiontorecentnewsreportsonthesubject.

5.Whendoingstep4,guide students touse theeconomicknowledgealongwith thepreliminaryanalysisinstep2.Theyshouldstatetheirpointsandimplicationssystematically,tellthesignificance,givecommentsandmakeinformedjudgements.

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III. Suggested answer


Effects

Reasons

Derived problems

Soaring rice prices

Government policies

Market mechanism

International cooperation

Poverty in low-income countries worsens.

Inflation

Social instability, which affects world peace

A rapid rise in population and economic development lead to a rise in global demand for food.

Biofuel development, global warming, international speculative activities, urbanization and industrialization lead to a fall in global food supply.

The income gap between developing and developed countries widens.

Global economic growth slows down.

Trade protectionism hinders the development of free trade.

Thetopicderivedfromthenewsreports:Howdoesachangeindemandandsupplyleadtosoaringriceprices?

Writeanewscommentaryonthefollowingtopic,andlistthetools,economicconceptsandtheoriesinvolved.



• Demand-supply theory

• Market price determination


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Introduction

Briefly introduce the phenomenon of soaring rice prices during recent years.

Listthemainpointsofdiscussioninthisnewscommentary.

Analysis

Usethedemand-supplytheorytoanalyzetheimpactofdemandandsupplychangesonriceprices.

Analyzethefactorswhichaffectthedemandforandsupplyofrice.

Deducethereasonsforthesoaringriceprices.

Conclusion

Concludethemainpointsoftheanalysis.

Stateyourcommentsorexpectations.



I ntroduction

Theglobalricepriceshavebeensoaringduringrecentyears.Ricemerchants

of somecountries even stockedup rice and suspended rice exports in an

attempt tofurtherpushupitsprice.Theresultwastemporary‘riceshortage’

worldwide.InHongKong,ricewassoldoutinsupermarketssincepeoplewere

worriedthatricepriceswouldkeepsoaring.IntheUKandtheUS,someshops

even imposedricerations.Thisnewscommentarywillexamine thereasons

for thesoaringricepricesfromtheperspectivesofricesupplyanddemand.


Whatdoyouthinkshouldbeincludedwhencollectingdatarelatedtotheabovetopic?Listtwoofthem.

1. Informationanddataofthericeprices

2. Thedemandforandsupplyofrice

Wheredoyouthinkyoucancollecttheabovedata?Listtwoofthem.

1. ThewebsiteoftheFoodandAgricultureOrganizationoftheUnitedNations(http://www.fao.org/)

2. Newsreportsonthesoaringriceprices

Whatare the reasons for the soaring ricepricesduring recentyears?According to thedatacollected,giveapreliminaryanalysisbycompletingthefollowingmindmap:

Changes in the use of farmland

Economic development

Growing population

Other factors

Why do rice prices soar

during recent years?

China grows corn as a fodder, leading to less farmland for growing staple crops.

The soaring oil prices prompt countries to actively develop oil substitutes (e.g., ethanol) and a lot of farmland is used for growing corn. The amount of farmland for growing staple crops falls.

Climate: Global warming, drought, floods and storms

International speculative activities: Countries that grow rice stock up rice and suspends rice exports.

The continual growth in global population increases the demand for staple crops.

The amount of farmland decreases due to industrialization and urbanization. Emerging countries face economic restructuring, and actively engage in infrastructure and housing developments, leading to competitive supply.

Poor countries become ‘wealthier’, and increase their demand for food (normal goods).

With economic development and improved living standard, developing countries such as China and India increase their demand for rice and non-staple food.

Step Data collection and analysis2Step Data collection and analysis2

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Introduction

Briefly introduce the phenomenon of soaring rice prices during recent years.

Listthemainpointsofdiscussioninthisnewscommentary.

Analysis

Usethedemand-supplytheorytoanalyzetheimpactofdemandandsupplychangesonriceprices.

Analyzethefactorswhichaffectthedemandforandsupplyofrice.

Deducethereasonsforthesoaringriceprices.

Conclusion

Concludethemainpointsoftheanalysis.

Stateyourcommentsorexpectations.


Sta te the area and m a i n p o i n t s o f discussion.


I ntroduction

Theglobalricepriceshavebeensoaringduringrecentyears.Ricemerchants

of somecountries even stockedup rice and suspended rice exports in an

attempt tofurtherpushupitsprice.Theresultwastemporary‘riceshortage’

worldwide.InHongKong,ricewassoldoutinsupermarketssincepeoplewere

worriedthatricepriceswouldkeepsoaring.IntheUKandtheUS,someshops

even imposedricerations.Thisnewscommentarywillexamine thereasons

for thesoaringricepricesfromtheperspectivesofricesupplyanddemand.


��


A nalysis

A fall in the supply of farmland

Global prosperous economic development and growing population

have sped up industrialization and urbanization worldwide. Many

emergingcountries face economic restructuring, andactively engage in

industrial, manufacturing and housing developments. Huge resources

are invested in the construction of houses, hotels and infrastructure.

Since industrialandcommercialactivitiesandagriculturalproductionare

in competitive supply, active infrastructural development means less

land isavailable foragriculturaluse,and thus less farmland forgrowing

rice. Inaddition, firms’greaterdemand for timbermeansmoreextensive

deforestation. This gives rise to frequent natural disasters and desertification,

leading toa further reduction in the landavailable for farming.Referring

to thediagrambelow,with less farmland insupply, itssupplycurveshifts

leftward fromS1 toS2, itsquantity reduces fromQ1 toQ2, and theprice

oflandrisesfromP1toP2.

A fall in the supply of rice

Thefall inglobal ricesupply ismainlyaffectedby inputprices,abnormal

climate,pricesofgoodsincompetitivesupplyandthenumberofproducers.

Firstly,higherinputpriceswill increaseproductioncosts.Landisneededfor

ricecultivation.Higherlandpriceswill leadtoahighermarginalcostinrice

cultivation,andafallinthesupplyofrice.

State the reasons for the fal l in farmland supply and deduce i t s i m p a c t o n r i c e production. Explain with the aid of a demand-s u p p l y d i a g r a m how land prices are affected.

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State the reasons for the fall in global rice supply.

State the reasons for t h e g r e a t e r g l o b a l demand for rice.

Explain with the aid of a demand-supply diagram that a greater demand and a smaller supply are the reasons for the soar ing r ice prices.

Besides,globalwarminggives rise toabnormalclimate includingextreme

weather,making it hard for farmers togrow rice. In addition, thehigh

internationaloilpricespromptcountries todevelopotherenergiesasoil

substitutes,suchasbiofuel–ethanol.

Sinceethanol ismainlyextracted fromcorn, farmland is switched from

growing staple crops togrowingcorn indevelopedcountries. InChina,

a large rice producer, corn is grown as a fodder.With the number of

riceproducersdecreasing,thesupplyofricefalls.

A rise in the demand for rice

Thedemandfor rice increasesas theglobalpopulationgrows. Inaddition,

as the livingstandardofpoorcountries improves, theybecome‘wealthier’

thaninthepast,andtheirdemandforricealsoincreases.

Soaring rice prices

Globally,thefallinthesupplyofriceandtheriseindemandleadtosoaringrice

prices.Whether thequantityof ricewill increasedependson theextentof

changes indemandandsupply.Suppose the increase indemand isgreater

than thedecrease insupply, theequilibriumquantityof ricewill increase

eventually.Referringtothediagram,thesupplycurveofriceshifts leftward

fromS1toS2,thedemandcurveshiftsrightwardfromD1toD2,thepricerises

fromP1toP2,andtheequilibriumquantityrisesfromQ1toQ2.

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C onclusion

Inconclusion,bothafallinsupplyandariseindemandwillleadtohigherrice

prices.Yet, theglobalriceoutput iscurrentlyfarbelowthelimitofcapacity.

Thus,theelasticityofricesupplywillbehigherinthelongrun.Withtime,the

supplyofrisewillbemoreelastic.It isbelievedthat thericepriceswill fall

andtheoutputwillrise.

Restate your points and give your comments.

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IV. School-based Assessment Form

News commentaryTopic: How does a change in demand and supply lead to soaring rice prices?School’sname:

Student’sname: Class:

Date:

Assessthestudent’sperformancebasedonthefollowingcriteriaandgivecomments.

Assessment dimensions

CriteriaMarks

Comments5 4 3 2 1 0

Introduction

Able to state themainpoints andareaofdiscussion

Suitablelengthandabletostimulatereaders’interest

Analysis

Integrate news reports and makeanalysis

Able to use relevant economictheoriesandmodelsforanalysis

Abletomakeobjectiveanalysisandreasonabledeductions

Clear arguments with proof andevidence

Correct use of grammar and nowrongspelling

Abletoleadreaderstodevelopdeepreflections

Conclusion

Abletosummarizethewholeessayandrespondtotheinitialquestion

Abletoshowone’sownopinion

Overallcomments: Totalmarks:

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