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
goods price, other things constant.

Example of a Supply Curve

p
p = f(q)

(0, b)
0

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. Halcons 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. Erics 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

Law of Demand
o The quantity of a good demanded is inversely related to
the goods price, other things constant.

Example of a Demand Curve

p
(0, b)
p = f(q)

(a,0)

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 Erics 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?