Applied Economics

Market Demand, Market Supply

and Market Equilibrium

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Quarter 1 Week 3 Module 3

Learning Competency:
By the end of this lesson, you will be able to

determine the concepts of market demand,

market supply and market equilibrium
ABM_AE12-Ie-h3
 Learning Module for Business Mathematics

HOW TO USE THIS MODULE

Before starting the module, I want you to set aside other t asks
that may disturb you while enjoying the lessons. Read the simple
instructions below to successfully enjoy the objectives of this kit.
Have fun!

Follow carefully all the contents and instructions

indicated in every page of this module.
Write on your notebook the concepts about the
lessons. Writing enhances learning that is important to
develop and keep in mind.
Perform all the provided activities in the module.
Let your facilitator/guardian assess your
answers using the answer key card.
Analyze conceptually the posttest and apply what you
have learned.
Enjoy studying!

PARTS OF THE MODULE

 Expectations - These are what you will be able to know after
completing the lessons in the module.
 Pre-test - This will measure your prior knowledge and the concepts
to be mastered throughout the lesson.
 Looking Back to your Lesson - This section will measure what
learnings and skills did you understand from the previous lesson.
 Brief Introduction- This section will give you an overview of the
lesson.
 Activities - This is a set of activities you will perform with a partner.
 Remember - This section summarizes the concepts and applications
of the lessons.
 Check your Understanding - It will verify how you learned from the
lesson.
 Post-test - This will measure how much you have learned from the
entire module

2
 LESSON
3 Market Demand, Market Supply, and
Market Equilibrium

EXPECTATIONS

You will represent real-life situations using the market demand, market
supply and market equilibrium. Specifically, this module will help you to:

1. determine the concepts of market demand, supply and equilibrium

2. state the laws of demand and supply
3. construct and analyze demand, supply and their curves
4. solve problems on demand, supply and equilibrium
Let us start your journey
in learning more on market
PRE-TEST demand, supply and equilibrium Are
you excited to answer the Pretest. Smile
and Enjoy!

Before you equip yourself with a new set of knowledge, let us

check your understanding about the topic. Enjoy answering!

PART I. GRAPH ANALYSIS

Directions: Please analyze the graph and answer the questions below.

a) Locate the equilibrium point on the demand

and supply graph. Put a point on the graph
b) If the price is above the equilibrium level, what
could you predict with the demand and
supply?
c) If below the equilibrium point what could you
predict with the demand and
supply? https://www.thoughtco.com/calculating-economic-equilibrium-1147698
PART II. FILL IN THE BLANKS

Directions: Analyze the following statements carefulyy. Fill in the blanks.

1. The law of applies during online sales of
shoes; that is when consumers rush to buy products at 50% discounts.

2. The law of _ applies when the producers

supply more pineapple juices at a higher price; selling at higher quantity at a
higher price increases revenue.

Great, you finished answering the questions. You may request your facilitator to check
your work. Congratulations and keep on learning!

LOOKING BACK TO YOUR LESSON

Last module, we discussed the issues on the factors of production and

how these affect the economy, the basic problems facing the local and
global economics, and the roles of economics in solving these problems.

Identification. Identify the following problems that may exist in the local and
global economies during production of goods and services. Choose from
the factors below. Just write the letter.

Questions: If the economic problem is focused on

1. the legalities of the production

2. the nature of goods to produce
3. the allocation of the products among members of the society
4. the method of production of products

A. Whom to produce C. What provision to implement

B. What to produce D. What method or strategy

is
effective and efficient
 BRIEF 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.

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.
The Law of Demand
If all other factors remain equal, the higher
the price of a good, the fewer people will
demand that good. For example, if the price of video
game drops, the demand for
“the higher the price, games may increase as more
the lower the quantity demanded” people want the games.
and vice versa.

The amount of a good Factors Affecting Demand

that buyers purchase a) income of buyers
at a higher price is
b) number of potential buyers
fewer because as the
price of good goes up, c) preferences
the opportunity cost d) complementary products
of buying the good
also is less. The demand curve is always
Consumers will avoid downward sloping due to the law
buying a product. of diminishing marginal utility.

The Law of Supply

The law of supply demonstrates the
quantities that will be sold at a given Factors Affecting Supply
price. a) Production capacity,
The higher the price, the higher b) production costs such as
The quantity supplied and vice labor and materials
versa. c) the number of competitors
Producers supply d) Ancillary factors such as
more at a higher price because selling e) material availability,
at higher quantity at a higher pric f) weather, and
increases revenue. g) reliability of supply chains

The law of supply says ……………….

https://www.ducksters.com/money/supply_and_demand.php

How Do Supply and Demand Create an Equilibrium Price?

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.

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.

https://www.investopedia.com/terms/l/law-of-supply-demand.asp
https://www.thoughtco.com/calculating-economic-equilibrium-1147698
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 ACTIVITIES

Activity No. 1 “Think, Learn and Challenge Opportunity”

Directions: Let’s analyse this passage. This will help you understand our new
topic on demand, supply and equilibrium. Please read carefully the
passage and answer the question below.

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.

https://www.nytimes.com/2011/08/07/business/economy/marriage-and-the-law-of-supply-and-
demand.html

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.

Activity 2. The Law of Demand and Supply

Directions: Analyse this problem. The following data were taken from
an invoice of Company X. The company imports gasoline from other country.

2.1) 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

Price

Qd
Figure 1. Price and Quantity Demanded of Gasoline
Legend: P – Price; D- Demand; Qd –Quantity Demanded

2.2 Analyze data and describe the curve.

.
 Learning Module for Business Mathematics

Activity 3. Problem Solving

Directions: Analyze the
problem. The following are sets
of data taken from the invoice of
Company X. The company
imports gasoline from other
country.

3.1) Plot or graph the

data.

Pric Supply of
e Gasoline
($ per (millions of
gallon) gallons)

1.00
1.20
1.40
1.60
1.80
2.00
2.20
Table
2. Price
and
Supply
of
Gasolin
e

Qd
 g
F e
n
i d
g :
u
P
r
e –

1 P
r
. i
c
T e
a ;
b S
l -
e
S
u
2 p
. p
l
P y
;
r
i Q
c d
e –
Q
a u
n a
n
d t
i
S t
u y
p D
p e
l m
a
y n
d
o e
f d

G 3. 2 Analyze data and

a describe the curve. Interpret
s the results.
o
l
i
n .
e
L
e
 3.3) Using the data from demand and supply,

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

Qd
Figure 3. The Equilibrium Price

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

Solution:

Answer:

Sources: https://opentextbc.ca/principlesofeconomics/chapter/3-1-demand-supply-and-equilibrium-in-markets-
for- goods-and-services/
 REMEMBER
What Provison

 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.

CHECK YOUR UNDERSTANDING

Let us check your understanding on the topic. Have fun!

Fill in the Blanks.
Directions: Read the sentences and fill in the blanks.
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‖.
 POST-TEST

PART I True or False

Directions: Write TRUE if the statement is correct and FALSE if incorrect.

Write your answer before the number.

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‖.

PART II Multiple Choice Questions

Directions: Read the sentences carefully. Encircle the correct answer.

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 aircon.
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 and 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.
https://global.oup.com/us/companion.websites/9780199811786/student/chapt2/multiplechoic

PART III. Solving Problem and Critical Thinking Analysis

Directions: Analyze the problem carefully. 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.
 Learning Module for Business Mathematics

REFLECTIVE LEARNING SHEET

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?

www.kahanasunset.com

.
Learning Module for Business
Mathematics
E-
SITES
To further explore the concept learned today and if it possible to connect the
internet, you may visit the following links:
https://www.slideshare.net/lntrullin/supply-and-demand-
1184484
https://www.ducksters.com/money/supply_and_demand.ph
p

REFERENCES

Articles
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.thebalance.com/inelastic-demand- definition- formula-curve-
examples-3305935

Buensuceso, N. (2011)Demand Supply and Market Equilibrium. Retrieved on June

3 2020 fromhttps://www.slideshare.net/opaprb/demand-supply-and-market-
equilibrium-
8463331

Chappelow, J (2019) Law of Supply and Demand. Retrieved on June 03

2020 from https://www.investopedia.com/terms/l/law-of-supply-
demand.asp

Danabalan, K. (2014) The Price System. Retrieved on Jun 03 2020 from

https://www.slideshare.net/kalaiyarasidanabalan/a-level-economics-
chapter-2-core

Patindol J L (2012)The Law of Supply and Demand . Retrieved on Jun3 03

2020 from https://www.slideshare.net/shufflejoy000/the-law-of- supply-and-
demand

Websites
https://opentextbc.ca/principlesofeconomics/chapter/3-1-demand-
supply-and- equilibrium-in-markets-for-goods-and-services/
https://www.investopedia.com/ask/answers/041615/what-are-some-
examples-law- demand-real-markets.asp
https://www.ducksters.com/money/supply_and_demand_examples.php
https://www.thebalance.com/shift-in-demand-curve-when-price-
doesn-t- matter-3305720
https://www.investopedia.com/ask/answers/012915/what-difference-
between- inelasticity-and-elasticity-
https://www.sparknotes.com/economics/micro/elasticity/problems/
 Learning Module for Business Mathematics
Name
Teacher
 Learning Module for Business Mathematics
Solving and Critical Thinking
Analysis
n Directions: Analyze this diagram below. “In the goods market, no
seller would be willing to sell for less than the equilibrium price.”
Date
State and explain the theory related to this statement. Note: The
School
chart is your reference for your answer.

Workshee
t
(Additional
Activity)

P
r
o
b
l
e
m

https://www.slideshare.net/shufflejoy000/the-law-of- supply-and-demand

Please answer here