Name: Lydia Chan (3)
Jasmine Chui (9)
Class: F.4B
Economic Newspaper Cutting
This newspaper article is about a new share, Shares of Great Wall Automobile
Holding was issued in the stock market. On the 3/12/2003, the first day of the public
offer. 160,000 application forms have been given out. But it was insufficient. More
then 100 retail investors still lined up the next day at the bank in Mong Kok. As the
number of application forms were insufficient. The company pledged to increase the
number of forms to one million. On the other hand, they felt surprised that investors
have such a huge interest in applying it. In this case, there is an excess demand for
application forms. Most of the people expected that the price will rise in future.
Therefore, they queued for the application forms, hoping to earn more money.
When consumers expect price to increase soon, they will buy more immediately.
Their present demand will increase. Unfortunately, the application forms were
insufficient. Although more application forms have been given out the next day. But
it is still insufficient. Quantity demanded for shares is greater than quantity supplied.
(QD>QS) And the market price is less than the equilibrium price, so excess
demand occurs. We can use a supply-demand diagram to explain this situation.
From the above graph, the demand curve (D1) has shifted from left hand side to right
hand side (D2). It is due to the great demand of the public. Since the price remains
unchanged, the new quantity does not touch the equilibrium. Quantity demanded is
greater than quantity supplied. Therefore shortage is resulted. In order to solve this
problem, we need to increase the market price, until it is equal to the equilibrium price
(Pe). Then the problem of shortage can be solved.
Moreover, we can define the application forms as an economic good. Economic good
is a scarce good. The application forms are insufficient to satisfy people’s want. The
company has prepared 160,000 forms on the first day. But it was not enough. They
have to increase the number of application forms to one million. More of it is
preferred. The demand of people was great. Many people would like to have a form
as they expected the price will rise in future. Besides, there is a cost of production.
People have to give up something to get it. Maybe some of them have to go to work
at that time. But they used the time for queuing. They have to give up their time or
money and cannot do other things at that time.