WHOLE BRAIN LEARNING SYSTEM

OUTCOME-BASED EDUCATION

SENIOR HIGH SCHOOL GRADE

Applied Economics
11/12

LEARNING QUARTER I

MODULE WEEK
3

WBLS-OBE MELC-Aligned Self-Learning Module Applied Economics 11/12 0

 MODULE IN

APPLIED ECONOMICS

QUARTER I
WEEK 3

Market Demand, Market

Supply and Market
Equilibrium

Development Team
Writer: Mary Grace L. Santos

Editors/Reviewers: Florendo Damaso Jr. Rhonel S. Bandiola

Illustrator: Clifford B. Hernaez

Layout Artist: Mary Grace L. Santos

Management Team:

Vilma D. Eda Lourdes B. Arucan

Juanito V. Labao Imelda Fatima G. Hernaez

WBLS-OBE MELC-Aligned Self-Learning Module Applied Economics 11/12 1

 WHAT I NEED TO KNOW
This module is a SELF-PACED learning material for you to continue your studies in
the comfort and safety of your home.
In the previous lessons, we have investigated the various components of economics
as a social science and have analyzed economic decisions from the perspective of benefits
and costs. The framework developed has shown its usefulness in understanding various
contemporary social, economic, and business issues.
In this module, the analysis of supply and demand, which is a simplified version of the
analysis of benefits and costs, will be developed. This simple model of demand and supply
analysis is also a persuasive in understanding economic and business realities, issues, and
problems. Activities are found in every lesson to test your understanding and to help you retain
better what you have learned.

Most Essential Learning Competencies (MELC):

Analyze market demand, market supply and market equilibrium.

What you are expected to learn?

At the end of this module, you are expected to:
 Determine the concepts of market demand, supply, and equilibrium;
 State the laws of demand and supply;
 Construct and analyze demand, supply and their curves;
 Solve problems on demand, supply and equilibrium; and

Important Reminder
DO NOT WRITE ANYTHING IN THIS MODULE. This module is a government
property and other learners will use it again. You may use any clean sheet of paper that is
available in your home for your answers in the given activities. The rubrics and answer key
for the activities are found in the latter page of this module for you to self-check your answers.
This module will be retrieved by the end of the week.

At the end of this module:

Direction: You are to represent real-life situations using the market demand, market supply
and market equilibrium. Provide a situation analysis in the scenario found in ASSESSMENT.
This serves as your Week 3 output. The rubrics for this output is found at the latter part of this
module.

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 WHAT I KNOW

This is to test your prior knowledge on the given lesson. Copy the graph below. Analyze the
graph and answer the questions below. Write it in any clean sheet of paper and label it as
WHAT I KNOW.

GRAPH ANALYSIS

source:https://www.google.com/search?q=equilibrium+graph&tbm=isch&ved=2ahUKEwiF_snyro3rAhW5yIsBHbqlDYMQ2-
cCegQIABAA&oq=equilibrium+graph&gs

a. Locate the equilibrium point on the demand and supply. Put a point on the graph.

b. If the price is above the equilibrium point what could you predict with the demand and
supply?

c. If below the equilibrium point what could you predict with the demand and supply?

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Lesson
THE LAW OF SUPPLY AND DEMAND
1

WHAT’S IN

Activity 1.1. Complete the Sentence

Direction: Analyze the following statements carefully. Fill in the blanks. Write the complete
sentence in any clean sheet of paper and label it as Activity 1.1.

1. The law of ______________________________ applies during online sales of

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

2. The law of _______________________ applies when the producers supply

more Bottled Atchara at a higher price; selling at higher quantity at a higher
price increases revenue.

WHAT IS IT

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.

1. The 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.

A. The Law of Demand

If all other factors remain equal, the higher the price of a good, the fewer people will
demand that good. “the higher the price, the lower the quantity demanded” and vice
versa.

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 Source: https://www.investopedia.com/terms/d/demand-curve.asp

The amount of a good that buyers purchase at a higher price is fewer because as the
price of good goes up, the opportunity cost of buying the good also is less. Consumers will
avoid buying a product.

For example, if the price of video game drops, the demand for games may increase as
more people want the games.

Factors Affecting Demand

a) income of buyers
b) number of potential buyers
c) preferences
d) complementary products

The demand curve is always downward sloping due to the law of diminishing
marginal utility.

B. The Law of Supply

The law of supply demonstrates the quantities that will be sold at a given price.

The higher the price, the higher the quantity supplied and vice versa. Producers supply more
at a higher price because selling at higher quantity at a higher price increases revenue.

Factors Affecting Supply

a) Production capacity,
b) production costs such as labor and materials,
c) the number of competitors,
Ancillary factors such as
d) material availability,
e) weather, and
f) reliability of supply chains

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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.

Source: https://www.investopedia.com/terms/d/supply-curve.asp

How Do Supply and Demand Create an Equilibrium Price?

Source:https://fee.org/articles/the-law-of-supply-and demand/

Equilibrium price or market-clearing price. is the price at which the producer can
sell all the units he wants to produce and the buyer can buy all the units he wants.

Supply and demand are balanced, or in equilibrium. The demand curve is

downward sloping. This is due to the law of diminishing marginal utility. The supply curve is
a vertical line; overtime, supply curve slopes upward; the more suppliers expect to be able
to charge, the more they will be willing to produce and bring to market.

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

sufficient to induce suppliers to bring to market that same quantity of goods that

consumers will be willing to pay for at that price.

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?

WHAT’S MORE

Activity 1.2. “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 questions
in any clean sheet of paper and label it as Activity 1.2.

Supply, Demand and Marriage

By Robert H. Frank
In some 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 the venerable
economic model of supply and demand. Under the dowry system in India, for
example, parents of older brides would typically pay more 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 terms of trade shift in favor of men. If more men are seeking
partners, the reverse is true.
Source: https://www.nytimes.com/2011/08/07/business/economy/marriage and-the-law-of-supply-
anddemand.htm

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.
4. State the law of supply.

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Activity 1.3. The Law of Supply and Demand
Directions: Analyze this problem. The following data were taken from an invoice of Company
X. The company imports gasoline from other country. Provide what is being asked. Write your
answer in any clean sheet of paper and label it as Activity 1.3.

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

P

Qd

Figure 1. Price and Quantity Demand of Gasoline

Legend: P - Price; D- Demand; Qd- Quantity Demanded

2.) Analyze data and describe the curve.

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Activity 1.4. Problem Solving
Directions: Analyze this problem. The following are sets of data taken from the invoice of
Company X. The company imports gasoline from other country. Write your answer in any
clean sheet of paper and label it as Activity 1.4.

1.) Plot or graph the data.

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
P

Table 1. Price and Quantity Demanded of Gasoline

Qd

Figure 1. Table 2. Price and Supply of Gasoline

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

1.2) Analyze data and describe the curve. Interpret the results.

1.3) Using the data from demand and supply,

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

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 P

Qd

Figure 3. The Equuilibrium Price

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

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

WHAT I HAVE LEARNED

 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

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 WHAT I CAN DO

Activity 1.5: Fill in the Blanks.

Directions: Read the sentences and fill in the blanks. Write the complete sentence in any clean
sheet of paper and label it as Activity 1.5.

1. The ______________________________________ explain the interaction

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‖.

ASSESSMENT

PART 1. True or False

Direction: Copy each statement in any clean sheet of paper. Label this as ASSESSMENT
PART 1. Write TRUE before the number if the statement is correct and FALSE if incorrect.

________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‖

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PART 2. Multiple
Direction: Copy each statement in any clean sheet of paper. Label this as ASSESSMENT
PART 2. Write the letter of the correct answer before the number.

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 air-con.
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 & 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

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.

PART 3. Situation Analysis (Week 3 Output)

Directions: Analyze the problem carefully. Create a situation analysis and write it in any
clean sheet of paper. This serves as your Week 3 Output. Elaborate your answer.
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.

Congratulations! You are done with Module 3.

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 ANSWER KEY

WHAT I KNOW

B. Oversupply/surpuls- the
quantity supplied is greater
A.
that the quantity demanded.

C. Shortage/scarcity- the
quantity supplied is less that
the quantity demanded.

WHAT’S IN
1. The Law of Demand
2. The Law of Supply

WHAT’S MORE
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 & vice
versa.

4. The law of supply – the higher the price, the higher the quantity supplied” & vice versa.

Activity 2.1 Activity 2.2

Downward sloping

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 Activity 3.1 Activity 3.2
Upward sloping.

Activity 3.3a 3.3b

The two curves intersect/meet
at a price of 1.40; the
equilibrium point of the two
curves.

Sources: https://opentextbc.ca/principlesofeconomics/chapter/

3-1-demand-supply-and-equilibrium-in-markets- for- goods-and-services/

WHAT I CAN DO
1. The Laws of Supply and Demand
2. The Law of Supply
3. Curve
4. Constant
5. Equilibrium
6. The Law of Demand

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POST TEST
Part I. True or False Part II. Multiple Choice
1. False 6. A
2. False 7. B
3. True 8. B
4. True 9. B
5. True 10. A

Part III. Essay

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.

REFERENCES:

 Tullao, Tereso Jr. S. (2016). Applied Economics for a progressive

Philippines.Quezon City: PHOENIX Publishing House, Inc.
 Mankiw, Gregory N. (2009). Ten Principles of Economics: Principles of
Microeconomics. South Western: Cengage Learning
 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.adb.org/news/philippine-gdp-growth-slide-2020-due-covid-19-
strong-rebound-seen-2021-adb
 https://saylordotorg.github.io/text_economics-theory-through-applications/s04-
preface.html
 https://opentextbc.ca/principlesofeconomics/chapter/3-1-demand-supply-
andequilibrium-in-markets-for-goods-and-services/
 https://www.investopedia.com/ask/answers/041615/what-are-some-
examples-lawdemand-real-markets.asp
 https://www.ducksters.com/money/supply_and_demand_examples.php
 https://www.thebalance.com/shift-in-demand-curve-when-price-doesn-
tmatter-3305720
 https://www.investopedia.com/ask/answers/012915/what-difference-
betweeninelasticity-and-elasticity
 https://www.sparknotes.com/economics/micro/elasticity/problems/

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 For inquiries or feedback, please write or call:

Department of Education – Schools Division of Laoag City

Curriculum Implementation Division
Brgy. 23 San Matias, Laoag City, 2900
Contact Number: (077)-771-3678
Email Address: laoag.city@deped.gov.ph

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