Name of Group Members: CALUMNO, RODCRIS

CARLOS, JOMEL
LINGAD, JOSHUA
LIBAO, EVERLYN AECO0413
DATE: November 15, 2021

Activity 3: Demand, Supply, Market Equilibrium and Elasticity Concepts

I. Introduction

The law of supply and demand is the core of economics according to Sicat(2005).
Understanding its essential elements require knowledge of what makes a market function, how
market equilibrium is formed, and why there are cases of surplus and shortage. It can also be
noted that buyers behave based on the changes in price on how much they are willing and able
to purchase at a specified period of time. The responsiveness of the buyers to a change in price
can be measured in terms of price elasticity of demand and supply, further its cross and income
effect. In such cases, it is important to determine the nature of the product if it is essential or
less essential goods.
Using the demand and supply analysis tool, its applications can be noted in wide-ranging
applications on human economic experiences.

II. Objectives
After the activity, students are expected to:
1. Assess the interaction of demand and supply in the market, the formation of market
equilibrium, and measure the responsiveness of consumers to change in price.
2. Compute and graph the given set of information.
3. Realize the application of the basic concepts in real-life situations.

III. Methodology
1. The readiness lies in the understanding and skills emphasized during the discussion of
the different concepts in demand, supply, market equilibrium, and elasticity.
2. There is also a need to compute and apply graphical presentation of data sets, skills in
tabular and graphical will be performed.

IV. Activity Proper

1. Use the table to answer the follow-up questions:

a. From the given demand schedule, sketch the demand curve for rice in the month
of June, July, and August. Do not forget to affix a variable to name the demand
curves to the right of the table.
For b and c, underline the appropriate phrase.
b. Between the months of July and August, there was a change in the (demand for,
quantity demanded of) rice.
 c. An increase in demand for rice indicates that the quantity demanded at each
given price has (decreased, increased), while a decrease in demand for rice
means that the quantity demanded at each given price has (increased,
decreased).
Demand for Rice (months in 2002)

Price Quantity demanded

per kilo

Per kilo Jun July Augu

e st

22.00 200 150 100

21.00 300 250 200

20.00 400 350 300

19.00 500 450 400

18.00 600 550 500

17.00 700 650 600

16.00 800 750 700

Hypothetically, given in the above demand schedule for rice for the 3 months in 2002:
d. Between June and July, there was (an increase, a decrease) in the demand for
rice.
e. Between July and August, there was (an increase, a decrease) in the demand for
rice.
f. Between June and August, there was (an increase, a decrease) in the demand
for rice.

Analyzing your plotted demand schedule:

g. The July demand curve for rice is to the (right, left) of the August demand curve
for rice.
h. The June demand curve for rice is to the (right, left) of the July demand curve for
rice.
i. In the month of June, the Qd= 400 to Qd=500 could be brought about by (a
decrease in price for rice, an increase in consumer income).
j. A change in demand between the months of June and August could be brought
about by (an increase in price for rice, a decrease in consumer income).
2.

Supplyfor Rice (months in 2002)

Price Quantity demanded per

kilo

Per June July August

kilo

22.00 800 750 700

21.00 700 650 600

20.00 600 550 500

19.00 500 450 400

18.00 400 350 300

17.00 300 250 200

16.00 200 150 100

a. From the given supply schedule, sketch the supply curve for rice in the month of
June, July, and August. Do not forget to affix a variable to name the supply
curves to the right of the table.
For b and c, underline the appropriate phrase.
b. Between the months of July and August, there was a change in the (supply for,
quantity supplied of) rice.
c. An increase in supply for rice indicates that the quantity supplied at each given
price has (decreased, increased), while a decrease in supply for rice means that
the quantity supplied at each given price has (increased, decreased).

Hypothetically, given in the above supply schedule for rice for the 3 months in 2002:
d. Between June and July, there was (an increase, a decrease) in the supply of
rice.
e. Between July and August, there was (an increase, a decrease) in the supply of
rice.
f. Between June and August, there was (an increase, a decrease) in the supply of
rice.

Analyzing your plotted supply schedule:

 k. The July supply curve for rice is to the (right, left) of the August supply curve for
rice.
l. The June supply curve for rice is to the (right, left) of the July supply curve for
rice.
m. In the month of June, the Qs= 400 to Qs=500 could be brought about by (a
decrease in price for rice, an increase in the number of sellers.
.
n. A change in supply between the months of June and August could be brought
about by (an increase in the price for rice, a decrease in the number of sellers).

2. Analyze and graph

Given the following conditions, sketch the graph on the right with the proper label of
variables. Determine the movement of the market equilibrium price and equilibrium quantity.
Explain the effects on demand and supply. We assume that the changes in demand and supply
will be proportionate.

Situation Graph Analysis

(whether Pe has increased or
decreased likewise if
Qe has increased or
decreased)

a.Buyers are expecting a Pe -

decrease in the price of
imported cars while sellers’
Qe-
tax burden increases.

Effect on demand-

Effect on supply-
b.Palay farmers were Pe-
inundated due to heavy rains
coupled with consumers’
decrease in income. Qe-

Effect on demand-

Effect on supply-

c.Cellular phone companies Pe -

utilized high technology in
production while online
classes and work from home Qe-
schemes were adapted

Effect on demand-

Effect on supply-

D. Increase in the number of Pe -

BTS concert enthusiasts is
coupled with an increase in
the artists’ talent fees Qe-

Effect on demand-

Effect on supply-
 e. Huge entry of college Pe -
freshmen enrollees while
there is no increase in the
number of schools open for Qe-
enrollment for face-to-face
modality.
Effect on demand-

Effect on supply-

3. Given the description of demand elasticity:

Price elasticity of demand ,Pe When the Pe is

=%change in Qd/ %change in price

a. Perfectly elastic Infinity (i.e. when %change in price is zero)

b. Elastic Greater than 1 but less than infinity

c. Inelastic Greater than 0 but less than 1

d. Unitary or Unit elastic Equal to 1

e. Perfectly inelastic Zero (i.e. when the % change in Qd is zero)

Income elasticity of demand,Ye When the Ye is

Ye will determine if good is normal or inferior

a. Normal luxury good, normal necessity Positive greater than 1, positive less than 1,
respectively

b. Inferior good negative

Cross-elasticity of demand,Exy When Exy is

Determine if the good substitute,
complementary or independent

Perfect substitute infinity

Complementary negative

Independent zero

Substitute positive

Price elasticity of supply has also the same

indicators:
3.1
What are the factors affecting the price elasticity of demand and price elasticity of supply? State
and explain two factors for each of them.
Price elasticity of demand
 Nature or type of good- The Elasticity of Demand for a good is affected
by its environment. There is one more thing that is a single good can be a
necessity for one person, a comfort for the second person, and a luxury
for a third person. So, we can say that a good’s nature is relative. Some
example of inelastic demand are vegetable, medicine or drugs, this are
necessity. Refrigerator, washing machines and electric fan are example
of elastic demand because it is a comfort good for us. And lastly the
luxury goods are like cars and diamonds that is not really necessary in
our daily lives.
 Time Period- The price elasticity of demand is directly proportional to the
time period. This means the elasticity for a shorter time period is always
low or it can be even inelastic. The reason stated for this is the redundant
human nature to change habits. We generally stick to a commodity and
respond very late to the price changes.

Price elasticity of supply

 The Level of Price- it is most likely to vary in different price, if the
price of the commodity is relatively high therefore the supplier supply
their stock near on their limits. And when the price are relatively low
therefore the producers and suppliers have their stock surplus.

 Factor Mobility- the higher mobility of the services the greater will be
elastic. The elasticity of supply may be affect if the production can
easily move from one use to another.

3.2 . Identifying concepts

Read each statement below and write the concept that the statement is identifying.
1. Price elasticity of demand is said to be _ decreasing____________ when the %change
in price exceeds the %change in quantity demanded.
2. If the cross-elasticity of demand is _ zero_________ the commodity is described as
independent good.
3. When the price of commodity A increases, the quantity demanded of the desired
commodity B also rises then the commodity A is a _same product___________ of
commodity B.
4. Income elasticity of demand is _price elastic______ when the % decrease in quantity
demanded is greater than the % decrease in income.
5. When the quantity demanded is the same at all prices, the price elasticity of demand is
_also the same_______.
6. Unit elastic exists when the increase in the quantity demanded _equal___________ the
percentage decrease in the price.
 7. A good is said to be _substitutes____________________ when the cross elasticity of
demand is positive and less than infinity.
8. Goods whose income elasticities of demand are negative are known as
_complementary_______ goods.
9. A relationship is described as ____________ when the quantity demanded of one good
remains constant regardless of the price of the other good.
10. The measurement of responsiveness between the quantities of the good supplied to the
change in price is known as _price elastic of supply_____________________.

3.3 Street snacks in FoodPark

In a food park especially during the Christmas season, snack shops can be found selling
similar food and drinks.
1. Do you agree that snack shops sell similar food items? Give evidence for your answer.
It’s ok to sell same products and goods especially if the place is wide but it
is very important to know that a unique product demands more customers. And if
they sell same product in one place the competition is there, that is why they
lower their price to make a lot of costumer.

2. If the number of snack shops keeps increasing, what will happen to the price elasticity of
demand for food provided by these shops? Explain your answer.
The price elasticity of demand will decrease because there is a competition
to each other.

3. If Judelee loves wearing Adidas sports shoes and considers this brand to be
irreplaceable. Does Judelee ‘s demand for Adidas sports shoes tend to be inelastic or
elastic?
It is elastic because it has a relatively effect on the quantity of the good
demanded. And she can used it for longer years.

3.4 The Valuable Masks

Study the following information carefully and answer the questions.

An outbreak of Covid 19 in early 2019 resulted in a Pandemic and has caused a dramatic
shortage in the supply of face masks, which is mainly explained by a surge in demand. Surgical
masks and N95 respirators are used to prevent the spread of respiratory infections. They are
part of the personal protective equipment (PPE) used by health workers and are different from
other types of masks used to protect from pollution or dust. (OECD.org)

There was a sharp price in price. It was only after few months that the quantity supplied of
surgical masks became sufficient in number.

1. With the aid of a diagram, explain how the price of surgical masks was affected by a
sharp increase in their demand in early 2019.
  In the year 2019 the whole world suffering a pandemic which is the covid-
19 pandemic. The world have sufficient supply of the surgical mask can
cause of increase of the price. Base on the diagram if the price increase
the production and supply decreased and the demand increase also. So
basically the surgical mask have an increase in demand can cause
increase of the price because the surgical mask is very importan and it
necessary of a must to wear outside our house to protect our self to the
virus and also one of the parts of a PPE for our health workers.

2. How would the price elasticity of the supply of surgical masks change one month after
the Covid 19 Outbreak? Why?

 The price increased because of the demand increase, the reason

why they increased the price selling is because there is a limited
stock on their manufacturing. They limited their supply to meet
their supply for the whole month or their said dates of restocking.
This is a simple way to prevent hauling of facemask.

Conclusion
Therefore, we conclude that we need to
 Assess the interaction of demand and supply in the market , the
formation of market,
 Compute and graph the given set of information, and
 Realize the application of the basic concepts in real-life situations.

Lesson learned on its Application to real-life situations.

Supply is about how much of a product you have, and demand is how much a product
people want. If there is more demand than supply, prices will go up. If there’s more supply than
demand, price is supposed to go down. They have inverse relationship to each other, so we
need to balance our basic necessities for our daily lives. Some business minded people tend to
grab the opportunity in a specific product to sell when the demand on it increases because it will
surely be of a good business to deal with. And for an ordinary person like us, the consumers,
we should wisely pick-up products that will makes us save more by finding quality yet affordable
goods and services especially during this pandemic because it is our hard-earned money.

References:

Nagi et al.,(2005) Economics and You. Manhattan Press. Lmtd.

OECD Policy Responses to Coronavirus (COVID-19). The face mask global value chain in
the COVID-19 outbreak: Evidence and policy lessons.04 May 2020
https://www.oecd.org/coronavirus/policy-responses/the-face-mask-global-value-chain-in-the-
covid-19-outbreak-evidence-and-policy-lessons-a4df866d/