Applied SENIOR

HIGH
Economics SCHOOL

Self-Learning
Module

Market Equilibrium 9
666
Quarter 3
Applied Economics
Quarter 3 – Self-Learning Module 9: Market Equilibrium
First Edition, 2020

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Applied SENIOR
HIGH
SCHOOL
Economics

Self-Learning
Module

9
Quarter 3

Market Equilibrium
Introductory Message

For the facilitator:

Welcome to the Senior High School – Applied Economics Self Learning

Module on Market Equilibrium!

This Self-Learning Module was collaboratively designed, developed and

reviewed by educators from the Schools Division Office of Pasig City headed by its
Officer-in-Charge Schools Division Superintendent, Ma. Evalou Concepcion A.
Agustin, in partnership with the City Government of Pasig through its mayor,
Honorable Victor Ma. Regis N. Sotto. The writers utilized the standards set by the K
to 12 Curriculum using the Most Essential Learning Competencies (MELC) in
developing this instructional resource.

This learning material hopes to engage the learners in guided and

independent learning activities at their own pace and time. Further, this also aims
to help learners acquire the needed 21st century skills especially the 5 Cs, namely:
Communication, Collaboration, Creativity, Critical Thinking, and Character while
taking into consideration their needs and circumstances.

In addition to the material in the main text, you will also see this box in the
body of the module:

Notes to the Teacher

This contains helpful tips or strategies
that will help you in guiding the learners.

As a facilitator you are expected to orient the learners on how to use this
module. You also need to keep track of the learners' progress while allowing them
to manage their own learning. Moreover, you are expected to encourage and assist
the learners as they do the tasks included in the module.
 For the learner:

Welcome to the Applied Economics Self Learning Module on Market

Equilibrium!

This module was designed to provide you with fun and meaningful
opportunities for guided and independent learning at your own pace and time. You
will be enabled to process the contents of the learning material while being an
active learner.

This module has the following parts and corresponding icons:

Expectations - This points to the set of knowledge and skills

that you will learn after completing the module.

Pretest - This measures your prior knowledge about the lesson

at hand.

Recap - This part of the module provides a review of concepts

and skills that you already know about a previous lesson.

Lesson - This section discusses the topic in the module.

Activities - This is a set of activities that you need to perform.

Wrap-Up - This section summarizes the concepts and

application of the lesson.

Valuing - This part integrates a desirable moral value in the

lesson.

Posttest - This measures how much you have learned from the
entire module.
 EXPECTATIONS

After going through this module, you are expected to:

1. understand the market shortage and surplus;
2. determine the market equilibrium; and
3. explain how equilibrium price and quantity are determined.

PRETEST

Directions: Read each statement carefully. Choose the letter of the best answer and
write it on a separate sheet of paper.

1. It is a situation where demand is equal to supply.

A. Price Stability
B. Fairness and Equity
C. Economic Growth
D. Market Equilibrium
2. It is a situation where demand exceeds supply.
A. Sufficient
B. Scarce
C. Shortage
D. Surplus
3. It is a situation where supply is greater than demand.
A. Shortage
B. Surplus
C. Scarce
D. Sufficient
4. In a graph, all points below the equilibrium point are:

A. Surplus

B. Shortage

C. Sufficient

D. Scarce
 5. In a graph, all points above the equilibrium point are:

A. Surplus

B. Shortage

C. Scarce

D. Sufficient

RECAP

Directions: Explain how non-price determinants affect supply shifts. Give at least
one reason for the shift and write it in the table below.

Non-Price Increase in Supply Decrease in Supply

Determinants
1. Technology

2. Cost of Production

3. Weather Conditions

4. Number of Sellers

5. Prices of Alternative
Goods Produced
 LESSON

Consumers and producers react differently to price changes. Higher prices

tend to reduce demand while encouraging supply, and lower prices increase
demand while discouraging supply. Remember that we have discussed the
economic goals and one of these is price stability – anchored in economic stability.
Economic theory suggests that in a free market there will be a single price that
brings demand and supply into balance. This module will give you an
understanding of how consumers are willing to purchase and how producers are
willing to supply at the agreed price and quantity.

Market Equilibrium
It is a situation in which demand and supply are equal. Equilibrium in a
market happens when the price balances the amount that consumers want to buy
and the amount that sellers want to sell.

Table 1. Market Demand and Supply for Sandwiches

Situation Price per unit Quantity demanded Quantity supplied

(Php) (Units) (Units)

A 10 100 20

B 15 80 40

C 20 60 60

D 25 40 80

E 30 20 100
 Figure 1 shows the combined demand curve and the supply curve for
sandwiches. The price at which the quantity demanded equals the quantity
supplied is called the equilibrium price. It is the price agreed by consumers and
sellers which in the graph is at ₱20. The quantity bought and sold at equilibrium
price is called the equilibrium quantity. It is the number of units that consumers are
willing to buy and sellers are willing to sell their products, which in the graph is 60
sandwiches. What will happen if the consumers and sellers do not agree given the
price and quantity? There will be a disequilibrium that would result in shortage
and surplus.

Market Shortage
The market shortage is one of the causes of disequilibrium. It is a situation
in which the quantity demanded is greater than the quantity supplied. This means
that there is an excess in demand. Let say, the price of a sandwich is ₱15. The
sellers are willing to sell 40 sandwiches at ₱15, referring to point A. Meanwhile,
consumers are willing to buy 80
sandwiches at ₱15, referring to
point B. It is seen that there are
few sellers want to sell at a lower
price while there are many
consumers who want to
purchase at a lower price. This
will result in a shortage. There is
a shortage of 40 units (Qs-Qd:
40-80, a negative sign implies a
shortage). Graphically, a
shortage occurs at any price
below the equilibrium point.

Market Surplus
The market surplus is another cause of disequilibrium. It is a situation in
which the quantity supplied is greater than quantity demanded. This means that
there is an excess in supply. Let
say, the price of the sandwich
increases to ₱25. The sellers are
willing to produce more
sandwiches, 80 units at point B.
At a higher price of ₱25,
consumers plan to buy less at
40 units of sandwiches. At ₱25,
sellers are willing to produce
more while consumers are likely
to buy less, hence it will result in
surplus. There is a surplus of 40
units (Qs-Qd: 80-40, a positive
sign implies surplus).
Graphically, a surplus occurs at any price above the equilibrium point.

Effects of Changes in Demand and Supply

Some factors affect the shifts of the demand and supply curves as we have
mentioned in the previous lessons. The shifts of either demand or supply curve will
have a response to a change in price and quantity. With this shifting, new
equilibrium price and quantity are formed.

1. Change in Demand with No Change in Supply

An increase in demand, for

example, an increase in the
number of buyers, from D1 to D2
raises the equilibrium price from
₱20 to ₱25 and the equilibrium
quantity from 60 to 80 units.

A decrease in demand, for

example, a decrease in the number
of buyers, from D1 to D3 lowers the
equilibrium price from ₱20 to ₱15
and the equilibrium quantity from
60 to 40 units.

2. Change in Supply with No Change in Demand

An increase in supply, for

example, improvement of
technology, from S1 to S3 lowers
the equilibrium price from ₱20 to
₱15 and raises the equilibrium
quantity from 60 to 80 units.
 A decrease in supply, for
example, the number of sellers are
less, from S1 to S3 raises the
equilibrium price from ₱20 to ₱25
and lowers the equilibrium quantity
from 40 to 60 units.

3. Increase in both Demand and Supply

The increase in demand and

supply result in an increase in
equilibrium quantity. The effect on
the equilibrium price is uncertain.
An increase in demand raises the
equilibrium price and an increase
in supply lowers the equilibrium
price. In figure 8, the equilibrium
price falls because the change of
supply is greater than the change
in demand. However, if the change
in demand is greater, the
equilibrium price will increase.

The decrease in both

demand and supply curve result in
a decrease in equilibrium quantity.
The effect on the equilibrium price
depends on the degree of the
changes in demand and supply. In
this case, demand shift is greater
than the supply shift, therefore
equilibrium price decreases.
However, if the supply shifts
greater than demand, the
equilibrium price will increase.
 ACTIVITIES

Activity: Market Condition

Directions: Supply the information needed in the appropriate columns.
A. Compute for the number of units
B. Identify the market if it is shortage, surplus, or equilibrium.
Table 2. Market Demand and Supply of Product EBP

Excess in
Demand/Excess
in Supply Market
Situation Qs Price (Php) Qd (Units) Condition
A 21 150 97
B 46 175 84
C 71 200 71
D 96 225 58
E 121 250 45

WRAP-UP

To summarize what you have learned in the lesson, answer the following
questions:
1. What is a market shortage?
2. What is a market surplus?
3. What is market equilibrium?
4. How to determine equilibrium price and quantity?

VALUING
Reflect on this!

"Live a life that is well balanced; don't do things in excess." - Daniel Smith

POSTTEST

Directions: Read each statement carefully. Write T if the statement is correct,

otherwise write F.

____________1. A decrease in supply shifts the supply curve to the left, which
raises the price but reduces output.

____________2. An increase in supply shifts the supply curve to the right, which
reduces the price and increases output.

____________3. An excess in demand results to surplus.

____________4. A decrease in demand shifts the demand curve to the left and
reduces price and output.

____________5. An excess in supply results to shortage.

 KEY TO CORRECTION

POSTTEST:
1. T
5. 76 – SURPLUS 2. T
3. F
4. 38 – SURPLUS 4. T
5. F
5. A 3. 0 – EQUILIBRIUM
4. B
3. B 2. 38 – SHORTAGE
2. C
1. D 1. 76 - SHORTAGE
PRETEST ACTIVITY 1:

References
Carnaje, Gideon P. Applied Economics. Vibal Group Inc., Quezon City, 2019.

"Inspirational Words of Wisdom." 57 Balance Quotes. Accessed July 17, 2020.

https://www.wow4u.com/balancequotes/.
"Market Equilibrium." Economics Online. January 25, 2020. Accessed July 17,
2020.https://www.economicsonline.co.uk/Competitive_markets/Market_eq
uilibrium.html.