ELEMENTS OF

DEMAND AND
SUPPLY
CHAPTER 3
DEMAND
- Refers to the number or amount of goods
and services desired by the consumers.

DETERMINANTS of DEMAND

Price of the Good Itself.

Consumers’ Income.
TWO TYPES OF GOODS
Normal Good
Inferior Goods
Consumers’ Expectation of Future Prices.
Prices Related Commodities/Goods.
Consumers’ Taste and Preferences.

DEMAND SCHEDULE
- is the relationship between the quantity of a
good demand and the price of that good.
DEMAND CURVE
- shows graphically the relationship between
the quantity of a good demanded and its corresponding
price, with other variables held constant.
LAW OF DEMAND
- states that as price increases, quantity
demanded decreases; and as price decreases, quantity
demanded increases.
VALIDITY OF THE LAW OF DEMAND
- the law of demand is only true if the
assumption of ceteris paribus is applied or other
determinants remain constant; that is, there is no
change and movement in income or population.
JUSTIFICATIO FOR THE LAW OF DEMAND
Income Effect
Substitution Effect
CHANGES INVOLVING DEMAND
Change in Quantity Demanded
Change in Demand
DEMAND FUNCTION
SUPPLY
- is defined as the maximum units/quantity
of goods or services producers can offer.

DETERMINANTS OF SUPPLY
Change in Technology.
Cost of Inputs Used.
Expectation of Future Price.
Change in the Price of Related Goods.
 Government Regulation and Taxes.
Government Subsidies.
Number of Firms in the Market.
SUPPLY CURVE
LAW OF SUPPLY
VALIDITY OF THE LAW OF SUPPLY
CHANGES INVOLVING SUPPLY
Change in Quantity Supplied.
Change in Supply
SUPPLY FUNCTION

DETERMINATION OF MARKET
EQUILIBRIUM
MARKET EQUILIBRIUM