Examination Tips

HKCEE F 4 Economics

Topic 3: Demand and Supply

In this chapter, we starts with demand and shows how it

is different from quantity demanded and then, we

consider supply and show how it is different from

quantity supplied. After that, putting demand and

supply together aims at determining the market

price. The chapter is closed with a discussion

of the relationship between quantity demand,

quantity supplied and quantity transacted.

The chapter is less important than other chapters in

section B: Demand, supply and price. Students should

be able to point out the difference between demand and

quantity demanded and the difference between

supply and quantity supplied. Moreover, they should

understand how the relationship between quantity

demanded, quantity supplied and quantity transacted

changes, when the market is under surplus, shortage

and in equilibrium with aids of diagram.

3.1. Individual demand?***

It is all quantities a person is willing to buy

and able to buy at all prices in a period of

time, ceteris paribus.

Remarks:

1. Demand Vs Wants

文字方塊: 需求不同於慾望◦ 前者代表具備購買意慾和購買能力; 後者則代表購買意慾, 但不代表
擁有購買能力◦ Demand is not wants. This is because if a person

Has wants to buy clothes, this means he/she is willing to

buy goods but he/she may not have money to buy.

However, demand means his/her wants consisting

of the purchasing power.

2. 文字方塊: 需求不是成交量, 因為需求代表每一價格下, 他/她願意而有能力購買貨品的數量, 但不是成交量◦ Demand is not the actual quantity transacted

At any given price, a person’s demand refers

to the quantity he/she tends to buy, at any

given price but not the quantity actual bought.

3. 文字方塊: 為需求下定義時, 必須指出時限◦ 原因是, 即使不同價格下, 同一需求量會因時限長短不同而有所不同◦ We should indicate the period of time

The reason for indicating that condition

is that the same quantity demanded at all

prices in a shorter period means a larger

demand than those quantity demanded in a

longer period.

4. The importance of Ceteris paribus

文字方塊: Ceteris paribus其他因素不變:
為了顯示價格和需求量的關係, 我們應採用其他因素不變的假設, 忽略需求的誘因, 簡化分析◦ In order to examine the relationship between

the price and quantity demanded, we should

ignore the factors affecting demand such as income,

price of the related good by putting the ceteris paribus

assumption.

3.2. Quantity Demanded?***(95)

文字方塊: Quantity Demanded 需求量:
需求量是指在某一價格下, 消費者願意及有能力購買某貨品的數量◦ Quantity Demanded is the quantity a person

is willing and able to buy at one

particular price.

Remarks:

1. Demand vs Quantity Demanded

The difference between Demand and Quantity

文字方塊: 需求量是指在某一價格下, 消費者願意及有能力購買某貨品的數量◦ 而需求是指消費者在某段時間下, 對某貨品的不同價格的需求量◦ demanded is that demand refers to the entire

price-quantity demanded relation; quantity

demanded is a person is willing and able

to buy the goods at a particular price.

3.3. Law of Demand *(95)**

It states that an decrease in price of

a good leads to a increase in its quantity

demanded, ceteris paribus.

Examination Tips on 3.1, 3.2 & 3.3:

1.Examination Records:

In HKCE, the definition of Law of Demand

and the difference between quantity demanded

and quantity bought were examined.

2. Student’s weakness in CE

They performed very poor in defining law of

demand and hardly showed the difference

between quantity demanded and quantity bought.

3. Study Guide

It is possible that the difference between quantity

demanded, demand and wants will be examined

together in CE. Pay attention to their respective

definitions and their differences.

Pay attention also to the definition of Law of Demand.

3.4. Individual Demand Vs Market Demand*

文字方塊: Individual Demand 個人需求:
基於需求定律, 個人需求是由上而下- 由左至右傾斜的◦ Based on law of Demand, individual demand is then,

downward sloping, which shows the inverse relationship

between price and quantity demanded, other things

being equal ( Figure 1).

Price($) D

0 Quantity Demanded

Figure 1 An Individual Demand Curve

文字方塊: Market demand 市場需求:
市場需求是將市場上所有個人需求橫向地加在一起而成的◦ Market demand is the horizontal sum of the demand

curve of all individuals in the market (Figure2). The

method is to add together the quantities demanded

by all individuals on the market at a particular

price and repeat the process for each price.

P P P

A’s demand B’s demand Market demand( A+B)

0 Quantity 0 Quantity 0 Quantity

Figure 2 A Market Demand Curve: A horizontal sum of demand curves of all individuals in the market

Examination Tips on 3.3

1. Examination Records

There is no question set on this section in paper 1 and

Paper 2.

2. Study Guide

You should understand that market demand is a horizontal summation

of individual demand curves and should know how to derive the market

demand with aids of diagrams.

3.4. Individual Supply?*

Individual supply is all quantity a person is

willing and able to sell at all prices over a

period of time, ceteris paribus.

Remarks:

1. Supply means the producer’s willingness

and ability to sell, according to the definition of

that concept.

2. 文字方塊: 供應不同於供應量◦ 供應量是指在某一價格下, 供應者願意及有能力購買某貨品的數量◦ 而供應是指供應者在某段時間下, 對某貨品的不同價格的供應量◦ Supply Vs Quantity Supplied

Supply means all quantities at all given

price; while quantity supplied means the

quantity a seller is willing and able to

sell at a particular price.

3. 文字方塊: 供應只是供應者, 在不同價格下, 願意供應的數量◦ Supply indicates a person’s quantity he or

she tends to sell, at any given price.

4. 文字方塊: 為供應下定義時, 必須指出時限◦ 原因是, 即使不同價格下, 同一供應量會因時限長短不同而有所不同◦ Supply is defined with the specified time

period. It is because the same quantities

at all prices in shorter period refer to a

larger supply than those quantities supplied

in a longer period.

5. The importance of Ceteris paribus

文字方塊: Ceteris paribus其他因素不變:
為了顯示價格和供應量的關係, 我們應採用其他因素不變的假設, 忽略供應的誘因, 簡化分析◦ In order to examine the relationship between

the price and quantity supplied, we should

ignore the factors of change in supply such as

cost of production, expectation of future price

by using ceteris paribus assumption.

文字方塊: Law of Supply 供應定律:
供應定律指出, 假設其他因素不變下, 價格愈低, 供應量愈多◦ 3.5. Law of Supply*

It states that, an decrease in the price of a good

will result in increase in its quantity supplied,

other things being equal.

Examination Tips on 3.4 & 3.5:

1. Examination Records:

No question for these sections in CE.

2. Study Guide

You should show the difference between

the quantity supplies and supply.

You should know the definition of Law of

Supply.

3.6. Individual Supply Curve VS Market Supply Curve*

Base on the law of supply, individual supply curve

is upward sloping which shows the positive

relationship between the price and quantity

supplied (Figure 3), other things being equal.

Price($) s

0 Quantity supplied

Figure 3 An individual supply curve

Market supply is the horizontal sum of the supply

文字方塊: Market supply 市場供應:
市場供應是將市場上所有個人供應橫向地加在一起而成的◦ curve of all producers in the market The

method is to add together the quantities supplied

by all producers on the market at a particular

price and repeat the process for each price.

Examination Tips on 3.6:

1.Examination Records:

In CE, there is no question involving how the

market demand or market supply is constructed

through individual demand or supply curves.

2.Study Guide:

But it is possible to ask students to

construct the market demand and market

market supply curves in CE.

You should know how to construct the market

demand or supply curves graphically when

given the individual demand or supply curves.

3.7. The determination of equilibrium market price**

Price($)

D s

S D

0 Quantity

Figure 4 Equilibrium price in the market

文字方塊: Equilibrium market price均衡價格:
均衡價格(Po)是由市場需求和市場供應所決定的◦ 但何以這價格(Po)被視為均衡價格? 因為價格沒有上升或下降的傾向◦ The equilibrium price (Po) of a good is determined by the

interaction of market demand and market supply.

(Figure 4).

The reason why the price (Po) is in equilibrium is because,

quantity demanded is equal to quantity supplied and thus,

consumers and producers are satisfied what they want.

Both of them have no incentive to change their production

and consumption and therefore, there is no tendency for price

to change.

Remarks:

How the equilibrium price is determined when there

is shortage or surplus?

1. How equilibrium price is determined under shortage

Price($) D S

S D

0 Qs Qd Quantity

Shortage

Figure 5 Shortage: It will cause the price to rise

文字方塊: Shortage短缺:
短缺是指在某一特定價格(Po), 需求量大於供應量◦
在這情況下, 價格會有向上升(由Po到 P1)的壓力◦ Shortage is at a particular price (Po), quantity

Demanded(Qd) is greater than quantity supplied.

(Qs)(Figure 5) There will be a tendency for the

price to rise (from Po to P1). Then the quantity

demanded will decrease and the quantity supplied

will increase.

2. How the equilibrium price is determined under Surplus

Price($) Surplus S

P0 D

0 Qd Qs Quantity

Figure 6 Surplus: It will cause the price to fall

Surplus is at a particular price, quantity

文字方塊: Surplus 盈餘:
盈餘是指在某一特定價格(Po), 供應量大於需求量◦
在這情況下, 價格會有向下調(由Po到 P1)的壓力◦ Demanded(Qd) is less than quantity supplied(Qs)

(figure 6). There will be a tendency for

the price to fall (from P0 to P1). Then

the quantity demanded will increase

and the quantity supplied will decrease.

Examination Tips on 3.7:

1. Examination Records:

No Question examining this section.

2. Study Guide

You should know how the price and the

the quantity transacted will tend to change

when there is shortage or surplus. This is

the implications of shortage and surplus.

3.8. Relationship between the quantity demanded, quantity

supplied & quantity transacted*****(95)

market equilibrium

Price($) D S P($) D S P($) D S

O Qa Qb 0 Qc Qd 0 Qe

Shortage Surplus

Figure 7 Shortage Figure 8 surplus Figure 9 market equilibrium

As mentioned earlier, the quantity demanded is the planned

quantity which buyer intends to buy. It is not the actual

quantity brought.

When there is shortage( Figure 7), quantity demanded

(Qb) is greater than quantity supplied (Qa). However,

quantity transacted is the same as quantity supplied

Qa because seller will only sell that quantity(Qa).

When there is surplus (Figure 8), quantity demanded

(Qc) is lower than quantity supplied (Qd). But quantity

transacted is the same as quantity demanded (Qc)

because buyer will only buy that quantity(Qc).

When the market is in equilibrium( Figure 9), quantity

demanded, quantity supplied and quantity transacted

is the same, that is Qe. This is because the buyers

and sellers can buy and sell respectively what they

want.

Examination Tips on 3.8:

1. Examination Records:

Students were examined to show the difference

between the quantity demanded and quantity

bought.

2. Student’s weakness in CE

The performance was poor. Many students

wrongly stated that only quantity demanded,

but not the quantity bought was affected by the

price.

3. Study Guide

You should know the difference between

the quantity demanded, the quantity supplied

and quantity transacted.

You should also know that how the

relationship between them changes

when the market is in shortage, or

surplus or in equilibrium.

Topic 3: Demand and Supply

3.1. Individual demand?***

3.2. Quantity Demanded?***(95)

3.3. Law of Demand ***(95)

It states that an decrease in price of

a good leads to a increase in its quantity

demanded, ceteris paribus.

3.4. Individual Demand Vs Market Demand*

3.4. Individual Supply?*

Individual supply is all quantity a person is

Remarks:

3.6. Individual Supply Curve VS Market Supply Curve*

Base on the law of supply, individual supply curve

is upward sloping which shows the positive

relationship between the price and quantity

supplied (Figure 3), other things being equal.

2.Study Guide:

But it is possible to ask students to

construct the market demand and market

3.3. Law of Demand *(95)**