Chapter-2 Man Eco

DEMAND, SUPPLY
AND PRICE
Prepared by: Mrs. Judy Ann S. Braza

BASIC ELEMENTS OF DEMAND AND
SUPPLY
The Market
Market
- exist when buyers wishing to exchange
money for a good or service are in contact
with sellers wishing to exchange goods or
services for money
- it is where people are
left alone to make their
own transactions
- it is where the forces of demand and
supply interact
How a Market Functions
• The actions and decisions of buyers
constitute demand for product or services.
• The sellers’ decision and actions
constitute supply.
• The higher the demand is for product and
services, the higher will be the demand for
economic resources.
Market Demand
- refers to the buyers’ willingness and
ability to pay a sum of money for
some amount of a particular goods or
service
• The relationship between price and
quantity demanded is the subject of
the law of demand.
Law of Demand
- indicates that “the quantity of any
good which buyers are ready to
purchase varies inversely with the
price of the good”
Table 1
Demand Schedule For Bicycles
PRICE PER UNIT QUANTITY
DEMANDED
(in pesos) (in units)
5,000 10,000
6,000 9,000
7,000 8,000
8,000 7,000
9,000 6,000
10,000 5,000
• Low Price not only motivate current
buyers to buy more of the commodity
but also attract new buyers to buy.
The Demand Curve
• The price per unit is represented in
the vertical axis.
• The quantity demanded for each price
level is indicated in the horizontal
axis.
Non Price determinants of demands
– Average income of consumers
Persons basically purchase the
necessities with their income.
– Size of the market
The demand curve is affected by the
number of people living in a
given area.
– Price and availability of related goods
Goods that are related tend to
influence each other demand.
Two types of related goods:
a. Substitute goods
- goods that compete with each other
b. Complementary goods
- goods that are used jointly
• Preferences or taste
People of different cultures vary in
taste and preferences.
• Special influences
There are certain developments that
influence demand for certain goods and
services.
• Expectations about the future
economic conditions
When people expect changes in the
economy, their reaction will affect demand
for certain products.
Effect of Changes in Non Price
Determinants of Demand
Shifts in the Demand Curve
• When the adjusted demand schedule
is plotted in a graph, the original
demand (C1) will shift to the left (C2)
when there is a decrease in demand,
and shift to the right (C3) when there
is an increase in demand.
ACTIVITY :
Answer the following:
1.When tomatoes are sold at a price of

P10 per kilo,the quantity demanded is
11,000 kg.
a. Show the Hypothetical Demand

Schedule for tomatoes at a price of P10-
P60.
• b. Illustrate the Hypothetical Market
Demand for tomatoes.
c. Illustrate the Shift on Market Demand

when the Average Income of Consumers
increased and decreased. Provide
Tabular Presentation and use the same
graph on letter b.
(Prepare the adjusted demand schedule
and shift on the demand curve)
Market supply
- defined as the quantity of a good or
service which sellers desire to sell at a
given price
The supply situation may be presented in
two ways:
1. the supply schedule, and
2. the supply curve.
Supply Schedule
- tabular presentation showing the relationship
between a commodity’s market price and the
amount of the commodity that producers are willing
to produce and sell, other things held equal.
Supply Curve
- the graphical illustration of the supply schedule
• As price goes up, the quantity of goods and
services under consideration tends to increase.
Inversely, as the price goes down, the quantity
supplied tends to decrease.
Non Price Determinants of Supply
• Cost of Production
Supply is highly dependent on the cost
of production.
• Number of Suppliers
Supply is also dependent on the number
of sellers.
• Prices of Goods and Services
The prices of some goods and services
affect the supply of other goods and
services.
• Taxes and Subsidies
Payment of taxes is an added
component of the cost of production.
• Subsidies
Money given to firms by the
government to help them maintain their
current or desired output.
• Technology
Improvements in technology make
possible the production of goods at
services at lower costs.
Effects of Changes in the Non Price
Determinants of Supply
Shifts in the Supply Curve
• Plotting the adjusted supply schedule in a

graph will show that the original supply
curve (S1) shifts to the left (S2) when
supply decreased, and to the right (S3)
when supply increased
Market Equilibrium
• When the individual schedules of supply
and demand are put together, there will be
a price where the quantity buyers want to
buy exactly equals the quantity which
sellers are offering for sale.
THANK YOU!!!
Hope you’ve learned from the discussion.

Chapter-2 Man Eco

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DEMAND, SUPPLY

Prepared by: Mrs. Judy Ann S. Braza

1.When tomatoes are sold at a price of

a. Show the Hypothetical Demand

c. Illustrate the Shift on Market Demand

• Plotting the adjusted supply schedule in a

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