Republic of the Philippines

Department of Education
National Capital Region
DIVISION OF CITY SCHOOLS – MANILA
Manila Education Center Arroceros Forest Park Antonio J.
Villegas St. Ermita, Manila

Applied Economics
Market Demand, Market Supply
and Market Equilibrium

https://www.thoughtco.com/supply-and-demand-practice-questions-1146966

Quarter 1 Week 3 Module 3

Learning Competency:
By the end of this lesson, you will be able to

determine the concepts of market demand, market supply

and market equilibrium ABM_AE12-Ie-h3
 Learning Module for Business

HOW TO USE THIS MODULE

Before starting the module, I want you to set aside other tasks that may disturb you

Follow carefully all the contents and instructions

indicated in every page of this module.
Write on your notebook the concepts about the lessons. Writing enhances learning
Perform all the provided activities in the module.
Let your facilitator/guardian assess your answers using the answer key card.
Analyze conceptually the posttest and apply what you have learned.
Enjoy studying!

PARTS OF THE MODULE

 Expectations - These are what you will be able to know
after completing the lessons in the module.
 Pre-test - This will measure your prior knowledge and the
concepts to be mastered throughout the lesson.
 Looking Back to your Lesson - This section will measure what
learnings and skills did you understand from the previous
lesson.
 Brief Introduction- This section will give you an overview of
the lesson.
 Activities - This is a set of activities you will perform with a partner.
 Remember - This section summarizes the concepts and
applications of the lessons.
 Check your Understanding - It will verify how you learned from
the lesson.
 Post-test - This will measure how much you have learned from the
entire module

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 Learning Module for Business

LESSON
3 Market Demand, Market Supply,
and
Market Equilibrium
EXPECTATIONS

You will represent real-life situations using the market demand, market
supply and market equilibrium. Specifically, this module will help you to:

1. determine the concepts of market demand, supply and equilibrium

2. state the laws of demand and supply
3. construct and analyze demand, supply and their curves
4. solve problems on demand, supply and equilibrium
Let us start your journey in learning more on market demand, supply and equilibrium Are you excit

PRE-TEST

Before you equip yourself with a new set of knowledge, let us

check your understanding about the topic. Enjoy answering!

PART I. GRAPH ANALYSIS

Directions: Please analyze the graph and answer the questions below.

a) Locate the equilibrium point on the demand

and supply graph. Put a point on the

graph
b) If the price is above the equilibrium level,
what could you predict with the demand and
supply?
c) If below the equilibrium point what could you
predict with the demand and
supply? https://www.thoughtco.com/calculating-economic-equilibrium-1147698

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 Learning Module for Business
PART II. FILL IN THE BLANKS

Directions: Analyze the following statements carefulyy. Fill in the blanks.

1. The law of applies during online sales of

shoes; that is when consumers rush to buy products at 50% discounts.

2. The law of _ applies when the producers supply

more pineapple juices at a higher price; selling at higher quantity at a higher
price increases revenue.

Great, you finished answering the questions. You may request your facilitator to check your
work. Congratulations and keep on learning!

LOOKING BACK TO YOUR LESSON

Last module, we discussed the issues on the factors of production and how
these affect the economy, the basic problems facing the local and global
economics, and the roles of economics in solving these problems.

Identification. Identify the following problems that may exist in the local and
global economies during production of goods and services. Choose from the
factors below. Just write the letter.

Questions: If the economic problem is focused on

1. the legalities of the production

2. the nature of goods to produce
3. the allocation of the products among members of the society
4. the method of production of products

A. Whom to produce C. What provision to implement

B. What to produce D. What method or strategy is

effective and efficient

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 Learning Module for Business

BRIEF INTRODUCTION

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. Price 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

If all other factors remain equal, the higher the price of a good, the fewer people will demandth

“the higher
Forthe price, if the price of video game drops, the demand for games may increase as m
example,
the lower the quantity demanded” and vice versa.

The amount of a good that buyers purchase at a higher price is fewer because as the price of goo
Consumers will avoid buying a product.

Factors Affecting Demand

income of buyers
number of potential buyers
preferences
complementary products

The demand curve is always downward sloping

The Law of Supply

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 Learning Module for Business

The law of supply demonstrates the

quantities that will be sold at a given Factors Affecting Supply
price. a) Production capacity,
The higher the price, the higher b) production costs such as
The quantity supplied and labor and materials
vice versa. c) the number of competitors
Producers supply d) Ancillary factors such as
more at a higher price because e) material availability,
selling at higher quantity at a higher f) weather, and
pric g) reliability of supply chains
increases revenue.
The law of supply says ……………….
―as the price of a product increases,
companies will produce more of the
Product‖.

When graphing the supply vs. the price, ,

the slope rises.

https://www.ducksters.com/money/supply_and_demand.php

How Do Supply and Demand Create an Equilibrium Price?

price or market-clearing price. is the price at which the producer can sell all the units he wants
Supply and demand are balanced, or in equilibrium. the demand curve is downward sloping. Thi
due to the law of diminishing marginal utility.

The supply curve is a vertical line; overtime, supply curve slopes upward; the more suppliers ex

In the Equilibrium point, the two slopes will intersect. The market price is sufficient to induce

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 Learning Module for Business
ACTIVITIES

Activity No. 1 “Think, Learn and Challenge Opportunity”

Directions: Let’s analyse 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.Supply, Demand
Under the dowryand Marriage
system in India, a market with more women seeking
By Robert H. Frank
partners, the trade shift favors the men. What law or economic principle
Inissome
applicable?
cultures, romance isn’t nearly as important as cash when it
comes to choosing a marriage partner. And even when money plays no .
explicit role in selecting a mate, courtship customs are governed by
2.the
Invenerable
the same economic
system, men model of supply
with and receive
better jobs demand. Under
larger the dowryWhat
payments.
system in India,
economic for example,
principle parents
is applicable to of this
older brides wouldJustify
situation? typicallyyour
pay more
answer. to prospective grooms. Men with better jobs would receive
larger payments, too. In short, there really is a marriage market in
many countries around the world, and economic principles apply to it.
In markets with a preponderance of women seeking partners, the
3.terms
Stateofthe law shift
trade of demand.
in favor of men. If more men are seeking partners, the
reverse is true.

https://www.nytimes.com/2011/08/07/business/economy/marriage-and-the-law-of-supply-
and- demand.html
4. State the law of supply.

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 Learning Module for Business
Activity 2. The Law of Demand and Supply

Directions: Analyse 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 Quantity Demanded

($ per gallon) (millions of gallons)
1.00 800
1.20 700
1.40 600
1.60 550
1.80 500
2.00 460
2.20 420

Table 1. Price and Quantity Demanded of Gasoline

Price

Qd
Figure 1. Price and Quantity Demanded of Gasoline
Legend: P – Price; D- Demand; Qd –Quantity Demanded

2.2 Analyze data and describe the curve.

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 Learning Module for Business
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.

Price Supply of Gasoline (millions of gallons)

($ per gallon)

1.00 500
1.20 550
1.40 600
1.60 640
1.80 680
2.00 700
2.20 720
Table 2. Price and Supply of Gasoline

Qd

Figure 1. Table 2. Price and Supply of Gasoline

Legend: P – Price; S- Supply; Qd –Quantity Demanded

3. 2 Analyze data and describe the curve. Interpret the results.

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 Learning Module for Business
3.3) Using the data from demand and supply,

a) Determine the equilibrium point of the demand and supply curves.

Qd
Figure 3. The Equilibrium Price

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

Solution:

Answer:

Sources: https://opentextbc.ca/principlesofeconomics/chapter/3-1-demand-supply-and-equilibrium-in-markets-
for- goods-and-services/

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 Learning Module for Business
REMEMBER
What Provison

 A demand curve shows the relationship between quantity demanded and

price in a given market on a graph.
 The law of demand states that a higher price typically leads to a lower
quantity demanded.
 A supply curve shows the relationship between quantity supplied and price
on a graph.
 The law of supply says that a higher price typically leads to a higher
quantity supplied.
 The equilibrium price and equilibrium quantity occur where the supply and
demand curves cross.
 The equilibrium occurs where the quantity demanded is equal to the
quantity supplied.
 If the price is below the equilibrium level, then the quantity demanded will
exceed the quantity supplied.
 Excess demand or a shortage will exist. If the price is above the equilibrium
level, then the quantity supplied will exceed the quantity demanded.

CHECK YOUR UNDERSTANDING

Let us check your understanding on the topic. Have fun!

Fill in the Blanks.

Directions: Read the sentences and fill in the
blanks.
explain the interaction
1. The
between the sellers of a resource and the buyers for that resource.
2. The states that, higher the price, the higher
the quantity supplied.
3. A movement refers to a change along a .
4. A shift in a demand or supply curve occurs when a good's quantity
demanded or supplied changes even though price remains
.
5. When Supply and demand are balanced, it is called .
6. The states that ―the higher the
price, the lower the quantity demanded‖.

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 POST-TEST Learning Module for Business

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‖.
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.

6. 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.

7. 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.

8. 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

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 Learning Module for Business
9. 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.

10. 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.
https://global.oup.com/us/companion.websites/9780199811786/student/chapt2/multiplechoic

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.

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 Learning Module for Business

REFLECTIVE LEARNING SHEET

Our case today can be

compared to our topic. Let us
understand that everything has
limitations in our consumption –our
basic needs like food, shelter and
water. Even our consumption on the
mode of transportation has
limitation.
The challenge to us,
consumers, is how we make use of
our imitative, and utilize our income
to satisfy our demands at the most
affordable prices;
for the sellers to supply the
needs of the consumers while
making profit; for the government to
legislate the economy while helping
all the agents and to protect the
monetary and fiscal transactions.
As a consumer, how can you
sustain your needs (basic
commodities) despite the challenges
in increased price of these items in
the market?

www.kahanasunset.com

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 Learning Module for Business
E-SITES

To further explore the concept learned today and if it possible to connect the internet,
you may visit the following links:
https://www.slideshare.net/lntrullin/supply-and-demand-1184484
https://www.ducksters.com/money/supply_and_demand.php

REFERENCES

Articles
Amadeo, K. (2020) Elastic Demand: Definition, Formula, Curve, Examples. Retrieved on
Jun 03 2020 from https://www.thebalance.com/elastic-demand- definition-formula-
curve-examples-3305836; https://www.thebalance.com/inelastic-demand- definition-
formula-curve-examples-3305935

Buensuceso, N. (2011)Demand Supply and Market Equilibrium. Retrieved on June 3 2020

fromhttps://www.slideshare.net/opaprb/demand-supply-and-market-equilibrium-
8463331

Chappelow, J (2019) Law of Supply and Demand. Retrieved on June 03 2020 from
https://www.investopedia.com/terms/l/law-of-supply-demand.asp

Danabalan, K. (2014) The Price System. Retrieved on Jun 03 2020 from

https://www.slideshare.net/kalaiyarasidanabalan/a-level-economics-chapter-2-core

Patindol J L (2012)The Law of Supply and Demand . Retrieved on Jun3 03 2020 from
https://www.slideshare.net/shufflejoy000/the-law-of- supply-and-demand

Websites
https://opentextbc.ca/principlesofeconomics/chapter/3-1-demand-supply-and-
equilibrium-in-markets-for-goods-and-services/
https://www.investopedia.com/ask/answers/041615/what-are-some-examples-law-
demand-real-markets.asp
https://www.ducksters.com/money/supply_and_demand_examples.php
https://www.thebalance.com/shift-in-demand-curve-when-price-doesn-t-
matter-3305720
https://www.investopedia.com/ask/answers/012915/what-difference-between-
inelasticity-and-elasticity-
https://www.sparknotes.com/economics/micro/elasticity/problems/

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 Learning Module for Business
https://int.search.myway.com/search/AJimage.jhtml
https://global.oup.com/us/companion.websites/9780199811786/student/chapt2/m
ultiplechoice/
https://www.nytimes.com/2011/08/07/business/economy/marriage-and-the-law-of-
supply-and-demand.html
https://www.majortests.com/essay/Supply-And-Demand-571384.html
https://study.com/academy/popular/supply-and-demand-activities-for-kids.html
https://www.slideshare.net/shufflejoy000/the-law-of-supply-and-demand
https://www.thoughtco.com/supply-and-demand-practice-questions-1146966

Acknowledgment

Writer:Ellaine I. Dela Cruz, DBA

Editors: Isabel A. Gumaru, DBA Ellaine I. Dela Cruz, DBA

Validators & Reviewers:

Remylinda T. Soriano, EPS Angelita Z. Modesto, PSDS George B. Borromeo, PSDS

Management Team:
Maria Magdalena M. Lim, Schools Division Superintendent-Manila
Aida H. Rondilla, Chief Education Supervisor Lucky S. Carpio, EPS In Charge of LRMD

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 Learning Module for Business
Name Year/Section Date
Teacher School

Worksheet (Additional Activity)

Problem Solving and Critical Thinking Analysis

Directions: Analyze this diagram below. “In the goods market, no seller would be
willing to sell for less than the equilibrium price.” State and explain the theory
related to this statement. Note: The chart is your reference for your answer.

https://www.slideshare.net/shufflejoy000/the-law-of- supply-and-demand

Please answer here

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 Learning Module for Business

ANSWER KEY

PRETEST
PART I
A
B. Oversupply/surplus – the
quantity supplied is greater
than the quantity demanded
C. Shortage/scarcity -
The quantity supplied is less
than quantity demanded

PART II
1. The law of demand
2. The law of supply

LOOKING BACK TO YOUR LESSON

PART I
1. C 3. A
2. B 4. D

ACTIVITIES:
Activity 1
1. The law of demand - According to the model above, ―Supply, Demand
and Marriage‖ excess demand for grooms should have caused the terms
of courtship to shift in favor of men. Economics teaches us that when
there is excess demand for a good, its price rises.

2. The law of supply - ―Men with better jobs would receive larger payments.
This can be compared to the supply of product at a given price. ―As the
price of a product increases, companies will produce more of the
product‖.

3. The law of demand – ―the higher the price, the lower the quantity demanded‖
and vice versa

4. The law of supply – ―the higher the price, the higher the quantity supplied’
and vice versa.

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 Learning Module for Business
Activity 2.1

2.2 Downward sloping

Activity 3: 1

3.2 Upward sloping

3.3 a

Sources: https://opentextbc.ca/principlesofeconomics/chapter/
3-1-demand-supply-and-equilibrium-in-markets- for- goods-and-services/

3.b. The two curves intersect/meet at a price of 1.40; the

equilibrium point of the two curves

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 Learning Module for Business
CHECK YOUR UNDERSTANDING
1) The laws of supply and demand
4) Constant
2) The Law of supply
5) Equilibrium
3) Curve
6) The law of demand

POST TEST
PART I. True or False

1. False 4. True
2. False 5. True
3. True

PART II Multiple Choice

6. A 9. B
7. B
10.A
8. B

PART III. Answer: No. This is not simply a move along the demand curve. In
December, demand for ―hamon‖ rises, causing the curve to shift to the right.
This allows both the price of ―hamon‖ and the quantity sold of Christmas trees
to rise.

Work Sheet
1. Law of Supply (TRUE)
―a higher price leads to a greater quantity supplied; and a lower price
leads to a lower quantity supplied. Assume that all other variables are
held constant.‖