APPLIED ECONOMICS

Quarter 3 week 3 & 4

Market Demand, Market Supply and Market
Equilibrium

LEARNING ACTIVITY
SHEET
Applied Economics

Learning Area

Name of Learner: ____________________________Grade Level:_____ Section:______

School: ______________________________ Date:___________

Quarter 3 Week 1: Market Demand, Market Supply and Market Equilibrium

I. Introduction:

This module was designed to help you analyze and propose solution/s to the
economic problems using the principles of applied economics.
II. MELC:
Analyze market demand, market supply and market equilibrium.

A. A. Explore:
Multiple Choice: Write only the letter of the correct answer.
1. It refers to the quantities of a particular good or service that consumers are willing
and able to buy different possible prices.
A. Demand B. Supply C. Income D. None of these

2. What curve does a demand illustrate?

A. Downward Sloping B. Upward Sloping
C. Straight Line D. All of these

3. What is your analysis?

Statement I: More sellers in a market – decrease supply.
Statement II: Fewer sellers in a market – increase in supply.
A. Both statements are true B. Only statement I is true
C. Only statement II is true D. Both statements are false

4. What is your analysis?

Statement I: When the price goes up the supply goes up.
Statement II: When the price goes down the supply goes down.
A. Both statements are true B. Only statement I is true
C. Only statement II is true D. Both statements are false

5. Buyers and sellers transact in a market when they agreed on the price of the
commodity and the amount to be sold and bought. What basic principles in economics
does the statement express?
A. Law of Supply B. Law of Demand
C. Equilibrium Price D. Price Disequilibrium
B. Learn

Market Demand, Market Supply and Market Equilibrium

Market Demand
The demand for a product and who wants to buy it is referred to as market
demand. This is determined by how eager customers are to pay a specific price for a
product or service. Price rises in tandem with market demand. When demand falls, the
price will fall as well.
What is demand?
Demand is an economic principle referring to a consumer’s desire to purchase
goods and services and willingness to pay a price for a specific good or service (The
Investopedia Team, 2021).
Demand tells us what people want. It also tells us what they can buy at a
certain time and place because it involves buying and at what price people can buy it
or are willing to buy it.
Factors of Affecting Demand
According to Econport n.d., “Even though the focus in economics is on the
relationship between the price of a product and how much consumers are willing and
able to buy, it is important to examine all of the factors that affect the demand for a
good or service.”
These factors include:
1. Price of the Product
The price of a product and the amount of product that consumers are
willing and able to buy have an inverse relationship. Consumers prefer to buy
more of a low-cost goods and less of a high-cost product.

2. Changes in Income
People’s earnings have an impact on how much or how little they buy. A
factory worker, for example, makes ₱15,000.00 per month, while a
businessman earns ₱40,000.00. This means that a factory worker has less
money and can only buy a fraction of what a businessman can. When a factory
worker’s pay rises, he can afford to buy more. The demand for goods and
services changes in response to changes in income. As a result, as income rises,
consumers buy more, and as income falls, consumers buy less.

3. Changes in the Number of Buyers

More people equals more demand for products and services, while fewer
people equals less demand. For example, during the school year, a pizza
restaurant near a university will have increased demand and consequently
higher sales during class days. However during the summer, when fewer
students are in school, the demand for pizza reduces as the number of
customers in the vicinity decreases.

4. Tastes and Preferences

When individuals enjoy or prefer a product or service, demand rises.
Advertisement and fashion have a big influence on these interests and
inclinations. There are numerous factors that might alter one's tastes and
inclinations, causing people to purchase. For instance, if a celebrity supports a
new product it might influence the people to like and want it, thereby increasing
the demand for a product.

5. Price of Related Goods

People tend to buy substitute products, when the price of a certain good
increases. Ayungon rice 128 and Masipag, for example, are substitute products
for some people. If the price of Masipag rises, Ayungon rice 128 may become
more appealing. When two items are replacements, the price of one good and
the demand for the other good have a positive connection.
The Law of Demand
When a product's price falls, consumers buy more of it, and when it
rises, they buy less. According to the law of demand, as the price of a
commodity rises, demand falls, and when the price of a commodity falls,
demand rises.
The demand curve shows that when the price per call increases the demand for calls
decreases.

Changes in Demand Curve

A. Demand shifts to the right

An increase in demand shifts the demand curve to the right, and raises
price and output.
Market Supply
When economists discuss supply, they are referring to the number of goods or
services that a producer is willing to provide at a price. The price is the amount
received by the producer for selling one unit of a good or service. Almost often, a price
increase leads to an increase in the quantity given, while a decrease in price will
decrease the quantity supplied.
What is supply?
Supply is the number of quantities of the product and services that is offered
for sale at all possible prices in the market in a given period of time and place. Supply
implies the ability and willingness of sellers to sell.
Factors of Affecting Supply
According to Gabas (2020), the factors affecting supplies are:
1. Technology

This refers to the method of production or how something is produced. Having

modern technology means being able to produce more. Manufacturing is the reason
that you’re able to use many of the products as well as enjoy the services that you do
today. However, the introduction of technology into the manufacturing industry has
helped take it to an entirely new level. Not only has it made it more interesting in
terms of innovation, but it has also enabled quicker and more efficient ways in
operating. Better technology means more supply produced and less cost of producing
theses goods.

2. Cost of production

This refers to the things a producer has to spend on to keep making goods and
services. These are: raw materials, labor and factory overhead. An increase in
production cost makes it harder for the producer because he/she has to pay more to
keep producing. This is why when the cost of producing goes up, the supply of goods
most likely goes down. When cost of production cost goes up the supply goes down
and when production cost goes down the supply goes up.

3. Number of sellers
More sellers or more factories in a market means an increase in supply and fewer
sellers in a market decreases supply.
4. Taxes and subsidies
Certain taxes increase the cost of production. Higher taxes discourage production
because it reduces the earnings of businessmen, thus government extends tax
exemptions to some new and necessary industries to stimulate their growth. Similarly,
tax incentives are granted to foreign investors in order to increase foreign investment
in the Philippines, thus resulting more goods.
Subsidies offered by the government reduces the cost of production, which induces
businessmen to produce more.
The supply curve is a graph that depicts a direct or positive relationship
between the price of a commodity and the amount of output that a seller is willing to
supply at a given point in time, all other factors being equal. The supply curve depicts
a positive or direct link between the commodity's price and the quantity available in
the market.

Quantity Supplied
It denotes the number of units of a product that a company is willing and able
to sell at a specific price during a specific time period. A supply schedule is a table
that shows how much of a product will be supplied at various prices by different firms.
Market Equilibrium
Economists use the term equilibrium to describe the balance between
supply and demand in the marketplace. Under ideal market conditions, price
tends to settle within a stable range when output satisfies customer demand for
that good or service.
The term “market equilibrium” refers to a state of equilibrium in which
the amount demanded equals the quantity supplied. The general agreement of
the buyer and seller in the exchange of goods and services at a specific quantity
is known as market equilibrium. At the point of equilibrium, there are always
two sides to the narrative, the buyer's and the seller’s. On the other hand, when
buyers and sellers transact in a market they agree on the price of the
commodity and the amount to be sold and bought, this agreed price is called
equilibrium price.
For instance, given the price of ₱ 30.00 the buyer is willing to purchase
150 units. On the other hand, the seller is willing to sell the quantity of 150
units at a price of ₱ 30.00. This simple illustration simply shows that the buyer
and seller agree at a particular price and quantity that is ₱ 30.00 and 150
units. This is the main concept of equilibrium, that there is a balance between
price and quantity of goods bought by consumers and sold by sellers in the
market.
What happens when there is market disequilibrium?
When there is market disequilibrium, two conditions may happen: there a
surplus or a either a shortage as shown in Graph 9.
Surplus is a market condition in which the quantity supplied exceeds the
amount required; when there is surplus, sellers are more likely to cut market prices in
order to quickly dispose of products and services.
Shortage is a market condition in which the quantity requested exceeds the
quantity available at a given price. A shortage occurs when the quantity required is
greater than the quantity available.

C. Engage:
LABAN o BAWI
Directions: In the given situation below, analyze what will happen to the demand,
supply or price, whether it increase or decrease. Write the word LABAN for increase
and BAWI for decrease. If there is no change do not write anything on the space
provided.
1. ________________________ It is the season where there is abundant supply of
mangoes in the market and because of this what will happen to the price of the
mango?
2. ________________________ The demand for surgical mask increased but the supply is
limited. What will happen to the price of the surgical mask?
3. ________________________ Because the increase in demand for face mask lots of
entrepreneurs produced different kinds of mask (washable, disposable, one ply, double
ply, with turban, different designs, etc. ). what will happen to the price of the face
mask?
4. ________________________ The milk tea shop in our barangay has lots of customers.
Most of them buy the product because of its taste and its affordable price. Then one
day, another milk tea shop opens near our house offering the same price. What will
happen to the demand for milktea in the first store?
5. ________________________ There are different brands of coffee in the market, but I
always prefer to buy my favorite brand until its price increase by 10 %. What will
happen to the demand for my favorite brand?

D. Apply:
References

Books Dinio, R. & Villasis, G. (2017). Applied Economics (1st ed.). Sampaloc, Manila: Rex Bookstore, Inc.
Online Sources Marker Business News. Applied economics – definition and meaning. MBN Marker business new, n.d. Accessed December 14,
2021 https://marketbusinessnews.com/financialglossary/applied.
Enrique, H. Economics as an Applied Science. September 8, 2017. Accessed December 14, 2021.
https://www.slideshare.net/HannahCullen/lesson-2-economics-as-an-appliedscience Cullen, H. Revisiting Economics as a social science,
September 8, 2017, Accessed December 14, 2021. https://www.slideshare.net/HannahCullen/revisiting-economics-as-a-social-science.

Prepared by:
Explore: ENGAGE: Firlyne Y. Rompal
Teacher 1
1. B 1. BAWI
2. D 2. LABAN
3. D 3. BAWI
Checked by:
4. A 4. BAWI
5. D 5. BAWI LEIZEL I. ANDILAB
Department Head, Social Science

Noted by:

APPLY: SHIRLY M. SOLIOT

SHS Senior High School Assistant Principal

Approved by:

ELSA V. RIPALDA, PhD

School Principal IV