APPLIED

ECONOMICS
LESSON 3 – THE CONCEPT OF
DEMAND AND SUPPLY
JEZREEL L. ALBARAN, MBA
Objectives:
At the end of the lesson, students will be able to:
1. Define Demand and Supply;
2. Explain the law of demand and supply and how
equilibrium price and quantity are determined; and
3. Discuss and explain factors affecting supply and
demand.
Pre-
assessment
Define Demand
DEMAND
The power to purchase a goods or services along
with the willingness and able to purchase it.
DEMAND
The quantity of a good that a potential purchaser
would buy at a certain price.
ACTIVITY # 1
With your existing groups:
1. Search the internet, who can demand?
2. You are given 5 minutes to finish the activity.
3. Select one presenter in the group to present your output.
Presenter has 2 minutes.
4. Write your output in windows word to be submitted after
the presentation.
Who can demand?
DEMAND
The power to purchase a goods or services along
with the willingness and able to purchase it.
That power is backed up with MONEY.
Therefore, the only ones who can demand are the
people who have money.
DEMAND
The quantity of a good that a potential purchaser
would buy at a certain price.
That quantity is also backed up with MONEY.
The more money a person has, the more he can
buy that good.
THE LAW OF DEMAND
The inverse/indirect or negative relationship
between price and quantity demanded.
Meaning, as price increases, quantity
demanded decreases and as price decreases,
quantity demanded increases.
THE LAW OF DEMAND

It says that at higher prices, buyers will

demand less of economic goods.
THE LAW OF DEMAND
It says that at higher prices, buyers will
demand less of economic goods.

WHY?
THE LAW OF DEMAND

For everyone, money is a scarce

resource. we can demand only
goods that we can afford.
DEMAND CURVE
Graphically shows the relationship between
the price of a good and the quantity
demanded, holding a constant all other
variables that influence demand (ceteris
paribus).
DEMAND CURVE
DEMAND CURVE
The inverse/indirect or negative
relationship between price and
quantity demanded.
“Downward sloping”
DETERMINANTS OF DEMAND
1. Price of the goods or services.
2. Price of the related goods.
3. The size of household income.
4. Taste and fashion
5. Expectation
6. Distribution on income among households
7. Number of Buyers.
SUPPLY

Quantity of output brought for sale in the

market at a certain price.
SUPPLY

The amount of good producers would want

to produce and sell at a specific price.
THE LAW OF SUPPLY

Positive or direct relationship between the

quantity supplied and the price.
THE LAW OF SUPPLY
“As price rises the quantity supplied rises, as
price fall the quantity supplied falls.”
THE LAW OF SUPPLY
“As price rises the quantity supplied rises, as
price fall the quantity supplied falls.”

WHY?
THE LAW OF SUPPLY
For everyone, money is a scarce resource. we
can buy only goods that we can afford. And so if
price is high, we cannot afford buying the goods
and so supply remains high. On the other hand, if
the price is low, we can afford buying the goods
and so supply gets low.
SUPPLY CURVE
SUPPLY CURVE

Positive or direct relationship between

the quantity supplied and the price.

“Upward sloping”
DETERMINANTS OF SUPPLY
1. Price of the good
2. Resource prices
3. Technology
4. Taxes and subsidies
5. Price of other goods
6. Expectation
7. Number of seller
EQUILIBRIUM
Both price of good and quantity
brought and sold have settled into a state
of rest.
EQUILIBRIUM
EQUILIBRIUM
The equilibrium occurs where the quantity
demanded is equal to the quantity supplied
and as a result of the equilibrium, prices
become stable.
Objectives:
At this time, you are able to:
1. Define Demand and Supply;
2. Explain the law of demand and supply and how
equilibrium price and quantity are determined; and
3. Discuss and explain factors affecting supply and
demand.
Research and Read in
advance “Elasticity”