Applied Economics

Governor Pack Road, Baguio City, Philippines 2600

Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: ABM 11
Email: email@uc-bcf.edu.ph; Website: www.uc-bcf.edu.ph

MODULE 4- Economics Subject Teacher:

CONCEPTS OF DEMAND
Learning Objectives:
At the end of the module, the students must be able to:
a. explain the concept of demand and supply.
b. explain various factors that determine the demand and supply.
c. solve problems on quantity demanded.

CONTENTS:
Demand refers to the behavior of people with regard to their willingness and ability to buy
products at given prices. Without the willingness or their ability to buy (called purchasing
power), the needs and wants of consumers cannot be considered their demand. The
amount of goods and services people are willing to buy and consume refer to the quantity
demanded Qd. The tabular quantity demanded at given prices P is called the demand
schedule. The graphical presentation of a demand schedule is termed as the demand curve.

The Law of Demand is simply understood to be that “when prices of products increase, the
tendency of consumers is to buy less of the product, and when the prices of the products
decrease, the tendency of the consumers is to buy more of the product.” This law, like other
laws, only applies when all other things are held constant (ceteris paribus).

Demand schedule is where the data regarding the level of demand for a particular
good or service is identified. Assuming Mang Tomas sells pandesal and he notice the
demand whenever there are changes in prices,
Demand Schedule
Quantity Price per piece
demanded
15 10
30 8
45 6
60 4
Demand curve is the graph then manifests the Law of demand and the relationship of Price
and quantity demanded.

Demand Curve
12
10
8
Price

6
4
2
0
0 10 20 30 40 50 60 70
Quantity Demanded

Applied Economics Page 1 of 3

 Applied Economics
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: ABM 11
Email: email@uc-bcf.edu.ph; Website: www.uc-bcf.edu.ph

MODULE 4- Economics Subject Teacher:

THE DEMAND FUNCTION

The Demand Function is an equation showing that for each value of price, there corresponds
one value of quantity demanded. Demand function is normally written using the slope-intercept
formula same with the one discussed for supply function.

Demand Function:
Initially, demand function starts with Qd = a+bP. However, due to the inverse relationship
between the price and demand, the inverse slope “b” is always negative. Thus, the demand
function eventually becomes Qd=a-bP

Where :
Qd = dependent variable; quantity demand
P = independent variable; price
b = inverse slope
a = y-intercept; Qd if the price is 0

Using the demand schedule for cotton, derive the demand function.
DEMAND FOR COTTON
Price per Unit (₱) Quantity Demanded (Qd)
4 10
2 15

Step 1: Determine the dependent and independent variables.

DEMAND FOR COTTON

P (x-independent) Qd (y-dependent)
4 10
2 15

Step 2: Compute for “b”

b= b= b= b= -2.5

Note: The computed inverse slope is negative because of the inverse relationship between the
price and quantity demanded- if the price decreases, the demand decreases or vice versa,
ceteris paribus

Interpretation : For every 1-peso change (increase or decrease) in price, there is a

corresponding change (increase or decrease) of 2.5 units in quantity demanded.

Step 3: Derive the y-intercept “a”

Write down the formula in slope-intercept form:

Thus, if b= 2.5 , then: Qd= a-2.5P

Choose one point from the demand schedule and substitute it in the formula

Applied Economics Page 2 of 3

 Applied Economics
Governor Pack Road, Baguio City, Philippines 2600
Tel. Nos.: (+6374) 442-3316, 442-8220; 444-2786;
442-2564; 442-8219; 442-8256; Fax No.: 442-6268 Grade Level/Section: ABM 11
Email: email@uc-bcf.edu.ph; Website: www.uc-bcf.edu.ph

MODULE 4- Economics Subject Teacher:

(P1,Q1); (4,10) (P2,Q2); (2,15)

Qd = a-2.5P Qd = a-2.5P
10 = a-2.5(4) 15 = a-2.5(2)
10 = a-10 15 = a- 5
10+10 =a 15+5 =a
20 =a 20 =a

Note: The y-intercept is the value of QS if P=0. This is the same value of y in the graph when the line
intersects with the y-axis (take note of this because there is a different way to graph demand and
supply curves in the Cartesian plane).

Step 4: Substitute the computed value of the y-intercept to the demand function:
Qd= a-bP
Qs=20-2.5P

Note: The importance of deriving the demand function is to aid in analyzing and answering more
problems and questions.

References:
1. BAL 330 B6301 2017. Boado, Sherry Amour. Applied Economics. Diwa Learning Systems Inc.
2. BAL 330 T6355 2017. Nestor Torrefranca, Uriel J. Ancheta . Applied Economics. Fastbooks
Educational Supply, Inc.

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