Name Janille Ann A.
Valdez Course & Year BSA 1-1 SCORE______
Lecture Time__________________ Date Performed 02-24-2022
Topic: Demand and Supply
1. Define the following concepts. (Although all of the definitions can be found in the Lecture Handout,
you may use other references which you may find more understandable for you. If you did, please
cite the reference material and the author of the book including the chapter and the page where
you got your answer.
Concept Definition/Statement Concept Definition/Statement
Demand The amount of goods and services Supply A quantity of goods or services that
that customers are willing and able producers are willing to offer for a
to purchase for a given price. specific price.
Law of Price and amount demanded have Law of Supply Price and amount of a good
Demand a negative relationship: when supplied have a positive
prices rise, quantity demanded relationship: a rise in market price
declines; when prices fall, quantity leads to an increase in quantity
demanded grows. supplied, and a fall in market price
leads to a decrease in quantity
supplied.
Change in The shift of the demand curve to Change in A shift in the supply curve and a
demand the right (indicating increased supply change in supply entails a
demand) or to the left (indicating movement in the entire supply
decreased demand) indicates a schedule. When supply increases,
change in demand (to indicate a the supply curve shifts to the right;
decrease in demand). when supply decreases, the supply
curve shifts to the left. A change in
one or more of the supply
determinants is the cause of a
change in supply.
Change in On a fixed demand curve, a change Change in A movement from one point on a
quantity in quantity sought is a movement quantity fixed supply curve to another is
demanded from one point to another, from supplied referred to as a change in quantity
one price-quantity combination to supplied. A change in the price of
another. An increase or decrease the goods under evaluation is the
in the price of the goods under reason for such a shift.
examination is the reason of such a
shift.
2. Determinant is a factor which decisively affects the nature or outcome of something. Given the
following determinants of demand and supply, under what situation will there be an increase or
decrease in demand? increase or decrease in supply?
Determinants of Determinants of
Demand Supply
Number of The total or net Number of The total or net supply is
buyers/consumers demand is heavily sellers/producers heavily influenced by the
influenced by the number of sellers/producers.
quantity of As the population grows, so
buyers/consumers. As does the supply.
the population grows,
so does the demand.
Tastes and preferences The tastes and Prices of resources When the price of a vital
preferences of the resource rises, the supply of
consumers are a that resource decreases.
significant component
in determining demand
for a commodity. A
good whose demand
increases as a result of
increased consumer
tastes and preferences
would have a higher
demand curve.
Money Income: As earnings rise, so Technology When production becomes
Normal good does demand for more efficient, technology is
normal goods, while said to increase. Take the
Inferior good desire for inferior case of firms that can
products declines. produce more output from
the same quantity of input
than they could previously.
Prices of related goods: Substitute Goods– Prices of other A drop in supply is caused by
Substitutes Increased demand for a goods an increase in the price of
substitute product will other commodities,
Complements result from an increase especially if the goods are
in the price of one complementary.
product. A rise in the
price of tea, for
example, will increase
demand for coffee
while decreasing
demand for tea.
Complementary Goods -
A drop in the quantity
demanded of a
complementary product
will result from an
increase in the price of
one product. For
instance, as the price of
bread rises, so will the
demand for butter. This
is due to the
complementary nature
of the items.
Expectation on future Expecting a higher Expectation on If producers anticipate a
prices and income income or an increase future prices price increase, they would
in the price of items will likely reduce the quantity
result in an increase in supplied and wait for the
the quantity requested. price to rise before selling
Similarly, the quantity the product at a higher price.
demanded will be
reduced if people
foresee a lower income
or lower costs for
commodities.
Taxes and subsidies Because the cost of
production rises as taxes
rise, the quantity supplied
drops. Because the cost of
production falls as subsidies
rise, the quantity supplied
rises.
3. Assume that a consumer (the one who purchases or buys a good or a service) named Mrs. Valdez owns a car
that he uses regularly for the needs (necessity) and wants (luxury) of his family. Choose one among the
determinants of demand mentioned above and in your own words, discuss how this factor affected Mrs.
Valdez for gasoline.
● Number of buyers/consumers - Mrs. Valdez would most likely buy gasoline from a company that
has a larger number of purchasers or consumers.
4. Consider the perception of a fuel (gasoline) company like Shell, Petron or Caltex. Choose one determinant
of supply mentioned above and in your own words, discuss how this factor will affect the company’s supply
for gasoline.
● Expectation on future prices - If a corporation anticipates a price increase for a product, it is
likely to reduce the quantity supplied and wait for the price to climb before selling the
product at a higher price.
Note: you may click the following link for your reference.
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