SUPPLY • Supply

o Refers to the various quantities offered for sale at various prices

• Quantity Supplied
o Refers to a specific quantity offered for sale at a specific price

• Supply Function
o Indicates the relationship between the quantity of the commodity supplied and the unit price of the commodity

• Law of Supply
o The quantity of a good supplied is directly related to the good’s price, other things constant.

Example of a Supply Curve p p = f(q)

(0, b) 0
• •

q

The slope of a supply curve is usually positive, as price increases, quantity supplied increases and vice-versa. The y-intercept of the supply curve (0, b) represents the lowest price at which an item will be supplied.

Sample Problems: 1. For each 25% increase in the unit price, 200 more calculators are supplied. When the price per calculator is P400, 500 more calculators are supplied. Assuming a linear relationship between price and quantity: a. Setup the supply function b.Find the lowest price at which this product would be supplied. c. How many calculators will be supplied if the unit price is P200? d.Sketch the graph. 2. Halcon’s Furniture will supply 400 lampshades at P250 each. The supply is increased to 600 pieces when the unit price is increased by 10%. a. Setup the supply function b.How many lampshades will be supplied if the unit price is P300? c. Find the lowest price at which this item would be supplied. 3. Eric’s bookshop will supply 500 bookshelves at a price of P3500 each. For each 10% increase in the unit price, 150 more bookshelves will be supplied. a. Setup the supply function. b.Find the lowest price at which each product will be supplied.

DEMAND • Demand
o

Refers to the schedule of quantities of a good that will be bought per unit time at various prices

• Quantity Demanded
o Refers to a specific amount that will be demanded per unit of time at a specific place; it also refers to a point on the demand curve

Demand Function
o

Shows the relationship between the quantity of the commodity demanded and the price per unit of this commodity The quantity of a good demanded is inversely related to the good’s price, other things constant.

Law of Demand
o

Example of a Demand Curve p (0, b) p = f(q)

0
• •

(a,0)

q

The slope of a supply curve is usually negative, as price increases, quantity demanded decreases and vice-versa. The y-intercept of the demand curve (0, b) represents the highest price at which a consumer is willing to pay for the commodity. The x-intercept, (a, 0), represents, the quantity that would be demanded if the good is free.

Sample Problems: 1. For each P4 decrease in the unit price, 100 more of a certain commodity are sold. When the unit price is P30, the company sells 600 units. a. Setup the demand function. b.What is the highest price to be paid for this commodity? c. How many units will be demanded if they were free? d.How many units will be bought if the unit price is P40? e. How much will be paid for each unit if 250 units are demanded? f. Sketch the curve. 2. Volume of sales for Eric’s Plastics, which sells plastic canisters at P60 each is 600 units. When the price per canister decreases by P3, 120 more canisters are sold. a. Setup the demand function. b.What is the highest price to be paid for this item? c. How many canisters would be demanded if they were free?

Sign up to vote on this title
UsefulNot useful