APPLICATION OF SUPPLY

AND DEMAND

Joan S. Pangilinan, LPT

 LEARNING OBJECTIVES
• Explain the law of demand and
supply.
• Discuss and explain factors affecting
demand and supply.
• Explain how equilibrium price and
quantity are determined.
 DEMAND
• the desire for a particular good backed up
by sufficient purchasing power
• willingness of a consumer to buy a
commodity at a given point of time

Potential Effective
demand demand
 SUPPLY
• the quantity of a commodity that is in the
market and available for purchase at
particular price
• willingness of sellers to sell
 DEMAND AND SUPPLY
SCHEDULE
Market
- a place where
buyers and sellers
interact with each other
and that exchange takes
place among them
 DEMAND SCHEDULE
Price of Beef QD
(per kilo) (in kilos) • shows the various
quantities the
Php 300 20 consumer is
250 40
willing to buy at
200 60
various prices
150 80
100 100
50 120
 SUPPLY SCHEDULE
Price of Rice QS
(per sack) (Php50/sack) • shows the different
quantities that are
Php 600 300
offered for sale at
500 250 various prices
400 200
300 150
200 100
100 50
 LAW OF DEMAND
• states that there is an inverse
relationship between the price of the
good and the quantity demanded

Quantity
Price
demanded
INCOME EFFECT SUBSTITUTION EFFECT

change in the price change in the price

of a good changes of a good changes
consumer’s real demand due to
income or alternative
purchasing power consumption of
substitute goods
 LAW OF SUPPLY
•states that there is a direct
relationship between the price of the
good and the quantity supplied

Quantity
Price
supplied
DEMAND AND SUPPLY
CURVE
 DEMAND AND SUPPLY
SCHEDULE
Price per Quantity Quantity
slice ($) Demanded Supplied
0.50 12 2
1.00 10 5
1.50 8 8
2.00 6 11
2.50 4 14
 DETERMINANTS OF
DEMAND
• Income
• Population
• Taste and Preferences
• Price Expectations
• Prices of Related Goods
 DETERMINANTS OF
SUPPLY
• Technology
• Cost of Production
• Numbers of Sellers
• Taxes and Subsidies
• Weather
 SAMPLE DEMAND SCHEDULE

Price (Php) Quantity

Demanded
300 10
250 20
200 30
150 40
100 50
 SAMPLE SUPPLY SCHEDULE

Price (Php) Quantity

Supplied
300 50
250 40
200 30
150 20
100 10
 EQUILIBRIUM
• a state of balance
when demand is
equal to supply
 HOW EQUILIBRIUM PRICE AND
QUANTITY ARE DETERMINED?
• Market equilibrium
• a condition where a market price is
established through competition such
that the amount of goods or services
purchased by the buyers is equal to the
amount of goods or services produced
by the sellers
Qd = Qs
 DEMAND & SUPPLY SCHEDULE
Quantity Price Quantity
Demanded (Php) Supplied
50 100 10
40 150 20
30 200 30
20 250 40
10 300 50
THANK YOU
