Dynamics of Demand

and Supply
Change in Quantity Demanded is the movement along a demand curve
which indicates movement from one point to another point of the same
demand curve. This is brought by change in the price of goods and services.

DEMAND GRAPH
120.00
100.00
80.00 X
60.00
40.00 Y
20.00
-
0 50 100 150
Change in Demand is the shift from one demand curve to another
and is brought by the changes in any of the non-price determinants.

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Change in Quantity Supplied is the movement along the supply curve
which shows the movement from one point to another point on the same
supply curve. This is brought by change in the price of the goods or services.

120.00 SUPPLY CURVE

100.00
80.00 Y
60.00
X
40.00
20.00
-
0 20 40 60 80 100 120
Change in Supply is the shift of one supply curve to another
which is brought by changes in any of the non-price determinants.
A C

B D

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Demand Function is an the algebraic expression of the relationship
between price and quantity demanded.

Holding other things constant, we can express the demand function as:

Qd = a - bP
where:
Qd = quantity demanded
a = intercept
b = slope of the function
P = price
Supply Function is an the algebraic expression of the relationship
between price and quantity supplied.

Holding other things constant, we can express the supply function as:

Qs = m + nP
where:
Qs = quantity supplied
m = the intercept
n = number of firm
P = price
Based on the following functions for demand and supply,
compute the demand and supply schedule:

Qd = 500 – 20P Qs = 50 + 10P

Price Quantity Demanded Quantity Supplied
P5.00 400 100
P10.00
P15.00
P20.00
P25.00
P30.00
Market Equilibrium is the point wherein quantity demanded
is equal to quantity supplied.
Equilibrium price is the price at which quantity demanded
equals the quantity supplied.

Equilibrium quantity is the quantity bought and sold at

equilibrium price.
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A market moves toward its equilibrium because:

Price regulates buying and selling plans

Price adjusts when plans don’t match

Given the demand function and supply function,
the equilibrium price and quantity can be expressed as:

Qd = Qs
a - bP = m + nP
 From the following supply and demand
function, compute for the equilibrium
price and quantity.

1 Qd = 1200 - 200P
Qs = 0 + 200P

Qd = 1800 - 5P
Qs = -400 + 5P
The equilibrium price is P3.00 and the equilibrium quantity is 600.

SOLUTIONS:

Qd= Qs
1200-200P = 0+200P
-200P-200P= -1200+0
-400P = -1200
-400 -400
P =3

1200-200P = 0+200P
1200-200(3) = 0 + 200(3)
600 = 600
18
The equilibrium price is P220.00 and the equilibrium quantity is 700.

SOLUTIONS:
Qd = Qs
1800- 5P = -400 + 5P
-5P-5P = -1800-400
-10P = -2200
-10 -10
P = 220

1800-5P = -400 + 5P
1800- 5(220) = -400 + 5(220
1800- 1100 = -400 + 1100
700 = 700
19
Violations of the Law of Supply and Demand

Government imposition of price ceiling

Government imposes a price floor

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 Price Floors

▪ minimum prices set by the government for certain

commodities and services that it believes are being
sold in an unfair market with too low of a price and
thus their producers deserve some assistance
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 Price C eilings

▪ maximum prices set by the government for particular

goods and services that they believe are being sold
at too high of a price and thus consumers need some
help purchasing them
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Pagoso, C. M., Dinio, R. P., Villasis, G. A.,
Meneses, P. P., & Veloso, P. P. (2014). R eference
Introductory Microeconomics (Fourth
Edition). Manila, Philippines: REX
Bookstore.