Demand and supply

by: HRC
SLIDESMANIA.COM
The quantity that buyers are willing to buy.

Shows the quantity of the product demanded by a consumer

or an aggregate of consumers at any given price.

Shows how the quantity demanded of a particular good

responds to price change.

Is a graphical presentation of the demand schedule.

Hypothetical Market Demand Schedule for
Good X per Week

Price of X Quantity Demanded

(per kilo) (in kilo)
P45 100
P40 150
P35 200
P30 250
P25 300
P20 350
Hypothetical Market Demand Curve for One Week

50

45

40

35

30
Axis Title

25

20

15

10

0
100 150 200 250 300 350
Axis Title
The movement from one point to another point
along the demand curve.

None of the independent variables changes.

 other
factors
Hypothetical Shift in the Demand Curve
50

45

40 •
Price of X (per kilo in peso)

35 •
30

25
•
•
20

15
•
10
•
5

0 •
100 150 200 250 300 350 400 450 500
Quantity Demanded (in kilo)
•
d1 d2 Column1
 Hypothetical Increase in Demand

Price of X Quantity Demanded Increase in Demand

(per kilo) (d1) (d2)

P45 100 150

P40 150 200
P35 200 250
P30 250 300
P25 300 350
P20 350 400
Is defined as the quantity that sellers are willing to sell

Shows the quantities that are offered for sale at various prices
• Individual Supply Schedule and
• Market Supply Schedule

Contains the exact prices and quantities in the supply schedule.

It is the graphical representation of the supply schedule.
Hypothetical Market Supply Schedule for
One Week
Price of X Quantity Supplied
(per kilo) (in kilo)

P 45 180
40 150
35 120
30 90
25 60
20 30
Hypothetical Market Supply Curve for One Week
50

45 F

40 E

35 D
PRICE OF X ( PER KILO)

30 C

25 B

20 A

15

10

0
0 30 60 90 120 150 180 210
QUANTITY SUPPLIED (IN KILO)
States that as price increases, the quantity
supplied of a product tends to increase; and as price
decreases, quantity supplied decreases.
The movement from one point to another point
along the supply curve and is caused by a change
in the price of the good.
 other
factors
“Other things assumed as constant, price and
quantity supplied are directly proportional.”
 Hypothetical Shift in the Supply Curve
50

45
S1
F
S2 •
40 E
•
35 D
Price of X ( per Kilo)

30 C
•
25 B

20 A

15

10

0
0 30 60 90 120 150 180 210 240
Quantity Supplied (in kilo)
• Demand and supply should eventually analyzed as one since the market
operates within the forces of demand and supply.
• Alfred Marshall – British economist that combined the Law of Demand
and the Law of Supply into one law.
Hypothetical Market Demand and Supply Curves for One Week

Excess Supply

Equilibrium point

Excess Demand
Hypothetical Shift in the Market Supply Curve with Demand Curve
Kept Constant
Chart Title
4.5

4 Excess supply
3.5

3
Price per kio

2.5

1.5

0.5

0
D0 D1 D2 D3
d1 s1 s2
 100

90

80
Price of X (per kilo in peso)
70

60

50

40

30

20

10

0
500 1000 1500 2000 2500 3000
Quantity Demanded (in kilo)

d1 d2 s1
 Elasticity- refers to the measure of the sensitivity or responsiveness of Quantity
demanded or quantity supplied to changes in price

PRICE ELASTICITY – ration of the percentage change in quantity demanded to the

percentage change in price
Demand elasticity refers to the reaction or response of the buyers to changes
in price of goods and services.

TYPES OF DEMAND ELASTICITY:

1. ELASTIC DEMAND- a change in price results to a greater change in

quantity demanded.

2. INELASTIC DEMAND- a change in price results to a lesser change in

quantity demanded.

3. UNITARY DEMAND- a change in price results to an equal change in

quantity demanded.
1. NUMBER OF GOOD SUBSTITUTE- Demand is elastic for product
with many good substitutes.

2. PRICE INCREASE IN PROPORTION TO INCOME- If the price

increase has very little effect in income or budget of the buyers,
demand is elastic.

3. IMPORTANCE OF THE PRODUCT TO THE CONSUMERS

Luxury goods are not very important to many Filipinos, so these
are elastic.
PRICE ELASTICITY – ration of the percentage change in quantity
demanded to the percentage change in price

 Han Ji Peong odered 200 kilos of rice when the price was still
P25/kilo but when the price was raised to P30/kilo the quantity
orderd was change to 150 kilos. Compute the price elasticity of
demand
 Given Qd2 = 150 (change in quantity demanded)
 Qd = 200 ( riginal quantity demanded)
 P2 = P30 (change in price)
 P= P 25 (original price)
 Pe = Percentage change in Qty demanded
Percentage change in Price
= Qd2 –Qd
_____Qd____
P2 – P____
P
Solution:
150-200 = 50 = 0.25
200 200 0.25 = 1.25
30-25 = 5_ = 0.2 0,2
25 25
1. WAGE DETERMINATION- If the product has an elastic demand, a
reduction in its price increases quantity demand.

2. FARM PRODUCTION GUIDE- Most agricultural product like rice,

coconut and sugar are inelastic.

3. MAXIMIZE PROFITS- A reduction in price causes more quantity

demanded.

4. IMPOSITIONS OF SALES TAXES- Government planners should

exercise prudence in taxing goods and services.
 Supply elasticity refers to the reaction or response of the sellers
/producers to price change of goods.

TYPES OF SUPPLY ELASTICITY:

1. ELASTIC SUPPLY- a change in price results to a greater change

in quantity supplied.

2. INELASTIC SUPPLY- a change in price results to a lesser

change in quantity supplied.

3. UNITARY SUPPLY- a change in price results to an equal change

in quantity supplied.
Demand elasticity refers to the reaction or response of the buyers to changes in price of goods
and services.
TYPES OF DEMAND ELASTICITY:
1. ELASTIC DEMAND- a change in price results to a greater change in quantity demanded.
2. INELASTIC DEMAND- a change in price results to a lesser change in quantity
demanded.
3. UNITARY DEMAND- a change in price results to an equal change in quantity demanded.
1. NUMBER OF GOOD SUBSTITUTE- Demand is elastic for product with many good
substitutes.

2. PRICE INCREASE IN PROPORTION TO INCOME- If the price increase has very little
effect in income or budget of the buyers, demand is elastic.

3. IMPORTANCE OF THE PRODUCT TO THE CONSUMERS

Luxury goods are not very important to many Filipinos, so these are elastic.