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Market Demand, Market Supply, Market

Equilibrium

Learning Competency: Analyze market demand,

market supply and market equilibrium.

This module will help our learner to represent real-life situations using
the market demand, market supply, and market equilibrium. They will
determine the concepts of market demand, supply, and equilibrium. They will
be able to state the laws of demand and supply, construct and analyze
demand, supply and their curves, and they will be able also to explain the
factors that affect demand and supply.

Experiential Activity 1: (Record this in your journal notebook)

Arrange the scrabbled words below. Then write your own definition of
these words. Write this in your journal notebook.

Grade 11
MENDAD = ____________
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PULPSY = _____________

Activity Sheets
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ARMTEK = ____________
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Quarter 1 Week 3
CITAPEONEXT = ______________
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BUSTIONTITUS = ______________
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Schools Division of Digos City only. Copies are not for sale.

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 At a price of P40 per apple, the buyer is willing to buy 5 nos. of apple.

Basic Principles of Demand As price goes down to P35, the quantity the buyer is willing to buy goes up to
10 nos. of apples. At a price of P15, the buyer is will buy 22 nos. of apples.
A market is an interaction between buyers
And at a price of P5, the buyer will buy 30 nos. of apples. This shows a
and sellers of trading or exchange. It is where the
negative relationship or inverse relationship between the price of a good and
consumer buys and the seller sells.
the quantity demanded for that good. A lower price allows the consumer to
It is important because it is where a person who
buy more, but as the price increases, the amount the consumer can afford to
has excess goods can dispose of them to those who
buy tends to go down.
need them.
● Demand Curve is a graphical illustration of the demand schedule, with
the price measured on vertical axis (Y) and the quantity demanded
● The Goods Market is the most common type of market because it is
measured on the horizontal axis (X). The demand curve slope downward
where we buy consumer goods.
indicating the negative or inverse relationship between the two variables
● The Labor Market is where workers offer services and look for jobs,
which are price and the quantity demanded.
and where employers look for workers to hire.
Example of Demand Curve: Demand for Apples
● Financial Market which includes the stock market where securities of
corporations are traded.
DEMAND
Demand is the willingness of a consumer to buy a commodity at a given
price.
● Demand Function shows how the quantity demanded of a good
depends on its determinants, the most important of which is the price
of the good itself, thus, the equation: Qd = f (P)
● Demand Schedule shows the various quantities the consumer is
willing to buy at various prices.
Example of Demand Schedule: Demand for Apples

The downward slope of the curve indicates that as the price of apple
increases, the demand for these goods decreases.

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Schools Division of Digos City only. Copies are not for sale. Schools Division of Digos City only. Copies are not for sale.

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Experiential Activity 2:
Direction: Graph and illustrate the demand curve of the given below
Demand Schedule of Romeo for Vinegar (in bottles). Write this in your journal
notebook.
Demand Schedule of Romeo for Vinegar (in bottle)
Price per bottle Number of bottles
0 6
2 5
4 4
6 3
8 2
10 1 affect demand are now allowed to influence demand. These non-price factors
Demand Curve of Romeo for Vinegar (in bottle)
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5 6
The Law of Demand
After observing the behavior of price and quantity demanded in the
above schedule, we can now state the Law of Demand. Using the assumption
“ceteris paribus”, which means all other related variables except those that
are being studied at the moment and are
held constant, there is an inverse
relationship between the price of a good
and the quantity demanded for that good.
As price increases, the quantity demanded
for that product decreases.
Non-Price Factors Affecting Demand
If the ceteris paribus assumption is dropped, non-price variables that also
include changes in income, prices of related goods or substitutes, prices of
complementary goods, changes in the number of buyers, and changes in taste
or preferences. These non-price determinants can cause an upward or
downward change in the entire demand for the product and this change is
referred to as a shift of the demand curve.
1. Changes in Income – if consumer income
decreases, the capacity to buy decreases and
the demand will also decrease even when
price does remain the same. The opposite
will happen when income increases.
2. Substitutes – these goods are those that are
used in place of each other, like butter and
margarine, sugar and artificial sweeteners.
In the case of substitute goods, an increase
in demand for one good leads to decrease in
the demand for the other good. So, if the
price of goods increases, the demand for that
good decreases while the demand for its substitute goods increases.
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Schools Division of Digos City only. Copies are not for sale.
 3. Complementary Goods – Movement along the demand curve
complementary goods are goods that are A change in price causes a movement along the demand curve.
used together, such as cell phone and sim Example Below: An increase in price from $12 to $16 causes a movement
card, a car and tires, and coffee and along the demand curve, and quantity demand falls from 80 to 60.
creamer. Sometimes, a good will not work without the
complementary good. For complementary goods, an
increase in demand for a good will lead to an increase
in the demand for the complement since they are NOTE: A change in price doesn’t
used together. Thus, if the price of a good increases, the demand for it shift the demand curve – we
will decrease and the demand for its complement will likewise decrease. merely move from one point of
4. Changes in the Number of Buyers – is also an important determinant the demand curve to another.
that will affect market demand for a good. The population makes up the
group of consumers who will buy the
product. The higher the population,
the more consumers and the higher
Shift in the Demand Curve
will be the demand for the good. The
Example Below: An increase in income would mean people can afford
effect of an increase in the number
to buy more even at the same price.
of consumers is a rightward shift of
the demand curve.
5. Changes in Taste or Preferences –
improved taste or preferences for a
NOTE: A shift in the
product will cause a consumer to buy
demand curve occurs when
more of that good even if its price
the whole demand curve
does not change.
moves to the right or left.
6. Seasonal Factors - including the weather and the holidays. Example,
in cold weather, there will be increased demand for fuel and warm
weather clothes. During holidays, like Christmas, demand for
Christmas decorations will increase. Module 3: Worksheet 1
Shift in Demand and Movement along Demand Curve Direction: Identify which non-price factors affecting demand are being
described in each sentence. Write this in your journal notebook.
A shift in demand means at the same price, consumers wish to buy
1. The higher the population, the more consumers and the higher will be
more. A movement along the demand curve occurs following a change in
the demand for the good.
price.

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Schools Division of Digos City only. Copies are not for sale. Schools Division of Digos City only. Copies are not for sale.

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 2. These goods are those that are used in place of each other. ● Supply Schedule shows the different quantities the seller is willing to
3. These goods are goods that are used together, one might not work sell at various prices.
without the existence of the other good. Example: Supply Schedule of Romeo for Fish in One Week
4. If consumer income increases, the capacity to buy increases and the Price of Fish (per Kilo) Supply (in kilos)
demand will also increase even when price does remain the same. 20 200
5. This includes the weather and the holidays. 40 300
Module 3: Worksheet 2 60 400

(NOTE: Record this in your journal notebook) 80 500

Direction: Using the following demand function, solve for the demand 100 600

schedule of consumer Julia given the following prices for bottled water: Qd = NOTE: As can be seen in the above table, the relationship between the
60 – P/2 ; where P is the Price. price of fish and the quantity that Romeo is willing to sell is direct. The higher
Example: Qd = 60 – P/2 Qd = 60 – 0/2 Qd = 60 the price, the higher the quantity supplied.
Prices Qd ● Supply Curve is a graphical illustration of the supply schedule, with
0 60 the price measured on vertical axis (Y) and the quantity supplied
2 measured on the horizontal axis (X). The supply curve is upward
4 sloping, indicating the direct relationship between the price of the good
6 and the quantity supplied of that good.
8 Experiential Activity 3:
10 Direction: Graph and illustrate the supply curve of the given above Supply
12 Schedule of Romeo for Fish in One Week. Write this in your journal notebook.
14 Supply Curve of Romeo for Fish in One Week
16
18

After solving for the demand schedule, construct a demand curve for Julia.
(10pts.)

Basic Principles of Supply The Law of Supply

Supply refers to the quantity of goods that a seller is willing to offer for sale. After observing the behavior of price and quantity demanded in the

● Supply Function shows the dependence of supply on the various above schedule, we can now state the Law of Supply. Using the assumption

determinants that affect it. “ceteris paribus”, which means all other related variables except those that
are being studied at the moment and are held constant, there is a direct

Learning Materials are for nonprofit educational purposes which are exclusively used for the Learning Materials are for nonprofit educational purposes which are exclusively used for the
Schools Division of Digos City only. Copies are not for sale. Schools Division of Digos City only. Copies are not for sale.

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relationship between the price of a good and the quantity supplied for that Shift in Supply and Movement along Supply Curve
good. As price increases, the quantity supplied for that product increases. If price changes, there is a movement along the supply curve, e.g. a
Non-Price Factors Affecting Supply higher price causes a higher amount to be supplied.
If the ceteris paribus assumption is dropped, Movement along the demand curve
non-price variables that also affect supply are now As price increases firms have an incentive to supply more because they
allowed to influence supply. These non-price get extra revenue (income) from selling the goods.
factors include cost of production, technology, the Example below: An increase in the price from 80 to 116 causes an increase in
number of sellers in the market, and expectation. quantity supplied from 60 to 70.
These non-price determinants can cause an upward or downward change in
the entire supply of the product, and this change is referred to as a shift of
the supply curve.
1. Cost of Production – factors of production,
resources, or inputs are what is used in the
production process to produce output—that
is, finished goods and services. This
includes land, labor, capital and
entrepreneurship.
Shift in the Demand Curve
2. Technology – it will help increase
This occurs when firms supply more goods – even at the same price.
productivity. Technological advances that
For example, a new machine which enables more of the good to be produced
improve production efficiency will shift a
for the same cost.
supply curve to the right.
3. The Number of Sellers in the Market – it
will have an effect on the market supply,
since the market supply is simply the sum
of the supply of each individual seller —
more sellers entering the market increases
supplies while departing sellers decrease supply.
4. Expectations – expected prices can also change the present supply,
because if suppliers believe that prices will decline in the near future,
they may try to sell all that they have presently. Likewise, if prices are
expected to rise in the future, then suppliers may hold onto their supply
until prices rise.

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Schools Division of Digos City only. Copies are not for sale. Schools Division of Digos City only. Copies are not for sale.

11 12
Market Equilibrium Module 3: Worksheet 3
Equilibrium is a state of balance when demand is equal to supply. (NOTE: Record this in your journal notebook)
The equality means that the quantity that sellers are willing to sell is also Direction: Solve the demand function for Julia, a seller of bottled water
the quantity that buyers are willing to buy for a price. in the market, the supply function is given as: Qs = 5 + 5P ; where P is the
Equilibrium Price is the price at Price. Example: Qs = 5 + 5(0) Qs = 5 + 0 Qs = 5
which demand and supply are equal.
Prices Qs
In the Equilibrium point, the two
0 5
slopes will intersect. The market price is
2
sufficient to induce suppliers to bring to
4
market that same quantity of goods that
6
consumers will be willing to pay for at
8
that price.
10
12
Why Study Demand and Supply?
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Supply and demand are both very important to economic activity.
16
Supply is the total amount of a particular good or service available at a given
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time to consumers. Demand is a representation of a consumer's desire to
After solving the demand function, construct and graph the supply curve for
purchase goods and services; it acts as a measurement of a consumer's
Julia. (10pts)
willingness to pay a price for a specific good or service. These two economic
forces influence each other; they are both important for the economy because
they impact the prices of consumer goods and services within an economy.
Supply and demand have an important relationship because together they
determine the prices of most goods and services.
● Supply and demand are both important for the economy because they
impact the prices of consumer goods and services within an economy.
● According to market economy theory, the relationship between supply
and demand balances out at a point in the future; this point is called
the equilibrium price.
● Economists and companies analyze the relationship between supply
and demand when making strategic product decisions.

Learning Materials are for nonprofit educational purposes which are exclusively used for the Learning Materials are for nonprofit educational purposes which are exclusively used for the
Schools Division of Digos City only. Copies are not for sale. Schools Division of Digos City only. Copies are not for sale.

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