Applied Economics

Please all stand for the opening prayer.

Arrange the words

based on the given
picture.
MDAEDN
Arrange the words
based on the given
picture.

LUPYPS
Arrange the words
based on the given
picture.
IUEMQIBRLIU
LESSON 3:
Market Demand, Market
Supply, and Market
Equilibrium
At the end of this lesson you
are expected to:
1. Determine the concepts of market
demand, supply and equilibrium
2. State the laws of demand and supply
3. Construct and analyze demand, supply
and their curves
4. Solve problems on demand, supply and
equilibrium
Economics helps us solve the problem on excess
supply and excess demand, and lead it to a balanced
supply and demand. In our needs,we do not want
over supply. It means wastage of income. For
entrepreneurs, it is not efficient if their stocks or
supplies are greater than the actual demand. It is a
loss not revenue.
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The amount of good or

service consumers are
willing to purchase at each
price.
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22
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Price
Is what a buyer pays for a

unit of the specific good or
service.
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22
Quantity
The total number of units

purchased at that price.
Law of Supply and Demand
The interaction between the sellers
of a product and the buyers. It
shows the relationship between the
availability of a particular product
and the desire (or demand) for that
product has on its price.
The Law of Demand
Factors Affecting Demand

a) income of buyers
b) number of potential buyers
c) preferences
d) complementary products
The demand curve is always downward

sloping due to the law of diminishing marginal
“the higher the price, the
utility.
lower the quantity demanded”
and vice versa.
The Law of Supply
Factors Affecting Supply
a) Production capacity,
b) production costs such as labor and
materials
c) the number of competitors
d) Ancillary factors such as
e) material availability,
f) weather, and
g) reliability of supply chains
The higher the price, the
higher the quantity supplied When graphing the supply vs. the price, ,
the slope rises.
and vice versa.
How Do Supply and Demand Create an
Equilibrium Price?
Equilibrium price or market-clearing
price. is the price at which the
producer can sell all the units he
wants to produce and the buyer can
buy all the units he wants.
In the Equilibrium point, the

Supply and demand are balanced, or in two slopes will intersect
equilibrium.
Get 1 whole sheet of paper to
answer the activity.
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24
PART I. True or False
Directions: Write TRUE if the statement is correct and FALSE if incorrect. Write
your answer before the number.
________1.The upward slope of the supply curve illustrates the law of demand
higher price leads to a higher quantity supplied, and vice versa.
________2.The downward slope of the demand curve illustrates the law of
supply the inverse relationship between prices and quantity demanded.
________3.Time is important to supply because suppliers must react quickly to a
change in demand or price.
________4.A shift in a demand or supply curve occurs when quantity demanded
or supplied changes even though price remains the same.
________5.The law of supply says that at higher prices, sellers will supply more
of economic goods.
PART II. Multiple Choice Questions
Directions: Read the sentences carefully. Write the letter of the correct answer.
6. An increase in the price of electricity bill will force you to:

a. increase your demand for kerosene heaters and coal.
b. increase your demand for light bulbs and aircon.
c. increase your demand for stereos and videokes.
d. increase your demand for TVs and use of gadgets
7. The market demand curve for apple shows the

a. effect on market supply of a change in the demand for apple
b. quantity of an apple that consumers like to buy at different prices.
c. marginal cost of producing and selling different quantities of an apple.
d. effect of advertising expenditures on the market price of an apple.
8. Economies experience an increased in unemployment and a reduced of
activity during recession. How does recession affect the market demand for
newcars?
a. Demand for new cars shifts to the right.
b. Demand for new cars shifts to the left.
c. Demand for new cars has no shift
d. Demand for new cars either has or no shift
9. The market supply curve for gasoline shows the

a. effect on market demand of a change in the supply of gasoline.
b. quantity of gasoline that firms offer for sale at different prices.
c. quantity of gasoline that consumers are willing to buy at different prices.
d. All of the above are correct.
10. If Toyota firm is producing a car faster than people want to buy,
there is
a. an excess supply of car and price can be expected to decrease.
b. an excess supply of car and price can be expected to increase.
c. an excess demand of car and price can be expected to decrease.
d. an excess demand and price can be expected to increase.
Assignment:
Directions: Read the sentences and fill in the blanks.
1. The ______________________________________ explain the interaction

between the sellers of a resource and the buyers for that resource.
2. The __________________________ states that, higher the price, the higher
the quantity supplied.
3. A movement refers to a change along a _________________.
4. A shift in a demand or supply curve occurs when a good's quantity
demanded or supplied changes even though price remains
__________________________.
5. When Supply and demand are balanced, it is called
____________________.

Applied Economics

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Please all stand for the opening prayer.

Arrange the words

The amount of good or

Is what a buyer pays for a

The total number of units

Factors Affecting Demand

The demand curve is always downward

In the Equilibrium point, the

6. An increase in the price of electricity bill will force you to:

7. The market demand curve for apple shows the

9. The market supply curve for gasoline shows the

1. The ______________________________________ explain the interaction

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