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 oversupply. 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.

In economics, there are terms that you must learn to understand the better
market situations. A demand or the amount of good or service consumers are willing to
purchase at each price. If customers cannot pay for it, there is no effective demand. s is
what a buyer pays for a unit of the specific good or service. The total number of units
purchased at that price is called the quantity demanded.

Law of Supply and Demand

The law of supply and demand explains 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

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The Law of Supply

How Do Supply and Demand Create an Equilibrium Price?

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Activity 1
“Think, Learn and Challenge Opportunity”
Directions: Let’s analyze this passage. This will help you understand our new topic
on demand, supply, and equilibrium. Please read carefully the passage and answer
the question below.

1. Under the dowry system in India, a market with more women seeking partners,
the trade shift favors the men. What law or economic principle is applicable?
_____________________________________________________________________________
_____________________________________________________________________________
2. In the same system, men with better jobs receive larger payments. What
economic principle is applicable to this situation? Justify your answer.
_____________________________________________________________________________
_____________________________________________________________________________
3. State the law of demand ad supply.
_____________________________________________________________________________
_____________________________________________________________________________

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Activity 2
The Law of Demand and Supply
Directions: Analyze this problem. The following data were taken from an invoice of
Company X. The company imports gasoline from other country.

2.1) Plot or graph the data. Interpret the results.

Price

2.2) Analyze data and describe the curve.

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

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Activity 3
Problem Solving
Directions: Analyze the problem. The following are sets of data taken from the invoice
of Company X. The company imports gasoline from other country.

3.1) Plot or graph the data.

3.2) Analyze data and describe the curve. Interpret the results.
_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

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 3.3) Using the data from demand and supply,
a) Determine the equilibrium point of the demand and supply curves.

b) How much is the price in the equilibrium point? Present your solution
here.

Activity 4
Assessment

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”.

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 ________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. Encircle the correct answer.

1. 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.

2. 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.

3. Economies experience an increased in unemployment and a reduced of activity

during recession. How does recession affect the market demand for new cars?
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

4. 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.

5. 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.

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PART III. Solving Problem and Critical Thinking Analysis
Directions: Analyze the problem carefully. In December, the price of “hamon” rises and
the number of “hamon” sold also rises. Is this a violation of the law of demand? Justify
your answer.