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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
Scope 2 Demand and Supply
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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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New Horizon Economics School-based Assessment Resources Package
Listthemaincontentsintheintroduction,analysisandconclusionofthenewscommentary.
Introduction
Analysis
Conclusion
Step Drafting an outline3Step Drafting an outline3
Basedonthedatacollectedintheabovesteps,writeanewscommentaryonthetopic.
How does a change in demand and supply lead to soaring rice prices?
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
Scope 2 Demand and Supply
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Listthemaincontentsintheintroduction,analysisandconclusionofthenewscommentary.
Introduction
Analysis
Conclusion
Step Drafting an outline3Step Drafting an outline3
Basedonthedatacollectedintheabovesteps,writeanewscommentaryonthetopic.
How does a change in demand and supply lead to soaring rice prices?
I ntroduction
Step Writing a news commentary4Step Writing a news commentary4
�
New Horizon Economics School-based Assessment Resources Package
III. Suggested answer
Solutions and effectiveness
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.
Topic Tools, concepts and theories
How does a change in demand and supply lead to soaring rice prices?
• Demand-supply theory
• Market price determination
Step Setting a topic1Step Setting a topic1
School-based Assessment Guide
How does a change in demand and supply lead to soaring rice prices?
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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Scope 2 Demand and Supply
III. Suggested answer
Solutions and effectiveness
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.
Topic Tools, concepts and theories
How does a change in demand and supply lead to soaring rice prices?
• Demand-supply theory
• Market price determination
Step Setting a topic1Step Setting a topic1
�0
New Horizon Economics School-based Assessment Resources Package
Listthemaincontentsintheintroduction,analysisandconclusionofthenewscommentary.
Introduction
Briefly introduce the phenomenon of soaring rice prices during recent years.
Listthemainpointsofdiscussioninthisnewscommentary.
Analysis
Usethedemand-supplytheorytoanalyzetheimpactofdemandandsupplychangesonriceprices.
Analyzethefactorswhichaffectthedemandforandsupplyofrice.
Deducethereasonsforthesoaringriceprices.
Conclusion
Concludethemainpointsoftheanalysis.
Stateyourcommentsorexpectations.
Step Drafting an outline3Step Drafting an outline3
How does a change in demand and supply lead to soaring rice prices?
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.
Step Writing a news commentary4Step Writing a news commentary4
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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Scope 2 Demand and Supply
Listthemaincontentsintheintroduction,analysisandconclusionofthenewscommentary.
Introduction
Briefly introduce the phenomenon of soaring rice prices during recent years.
Listthemainpointsofdiscussioninthisnewscommentary.
Analysis
Usethedemand-supplytheorytoanalyzetheimpactofdemandandsupplychangesonriceprices.
Analyzethefactorswhichaffectthedemandforandsupplyofrice.
Deducethereasonsforthesoaringriceprices.
Conclusion
Concludethemainpointsoftheanalysis.
Stateyourcommentsorexpectations.
Step Drafting an outline3Step Drafting an outline3
Sta te the area and m a i n p o i n t s o f discussion.
How does a change in demand and supply lead to soaring rice prices?
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.
Step Writing a news commentary4Step Writing a news commentary4
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New Horizon Economics School-based Assessment Resources Package
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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Scope 2 Demand and Supply
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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New Horizon Economics School-based Assessment Resources Package
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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Scope 2 Demand and Supply
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: