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EDITED Applied Economics Q3 Module 3 PDF
EDITED Applied Economics Q3 Module 3 PDF
EDITED Applied Economics Q3 Module 3 PDF
APPLIED
ECONOMICS
Quarter 3 – Module 3
Market Demand, Market Supply
and Market Equilibrium
Applied Economics – Grade 11
Alternative Delivery Mode
Quarter 3 – Module 3: Market Demand, Market Supply, and Market Equilibrium
First Edition, 2020
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Applied
Economics
Quarter 3 – Module 3
Market Demand, Market Supply
and Market Equilibrium
Introductory Message
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. Furthermore, you are expected to encourage and assist the
learners as they do the tasks included in the module.
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For the learner:
Welcome to the Grade 11 Applied Economics Alternative Delivery Mode (ADM)
Module on Market Demand, Market Supply and 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 resource while being an active learner.
This module has the following parts and corresponding icons:
This will give you an idea of the skills or
What I Need to Know competencies you are expected to learn in the
module.
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competency.
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I
In an economy where prices are continuously rising, people have always wondered what
factors cause price to fluctuate. The core of this lesson aims to analyze the demand, supply and market
equilibrium and the factors that affect the shape and position of the demand and supply curves. The
lesson also tries to examine how an industry supply curve and market demand curve interact to
produce a market equilibrium.
LEARNING COMPETENCY:
Analyze market demand, market supply and market equilibrium.
(NO CODE)
OBJECTIVES:
K: Analyze demand, supply and market equilibrium;
S: Graph the demand and supply schedule and market
equilibrium;
A: Appreciate the importance of demand, supply and market
equilibrium
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I
Pre-assessment:
Directions: Identify what is asked in each item. Write the letter of the correct answer in your
notebook.
1. It refers to the quantities of a particular good or service that consumers are willing and able to
buy different possible prices.
A. Demand B. Supply
C. Income D. None of these
’s In
Have you ever asked who decides on the prices of the goods you buy? For many people, the
answer is easy, they think that government decides how high or low prices should be, but this not
always true. For instance, the government may only regulate the prices of rice, gasoline, and
apartment rent, but the prices of most goods are determined by market price.
A market price is the price determined only by demand and supply. It also means that the
government had little say about the price, but what if the government decides on a price higher that
that of the market price? Who would be affected? How will this affect the demand and supply for that
good or service?
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’s New
https://www.google.com/search?q=price+of+rice+in+the+philippines&source
2. What will happen if the prices of basic commodities will keep on increasing?
3. Is there any effective way of keeping the prices of basic commodities at levels that are accessible
to the masses?
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is It
Market Demand
Market demand describes the demand for a given product and who wants to purchase it.
This is determined by how willing consumers are to spend a certain price on a particular good or
service. As market demand increases, so does price. When the demand decreases, price will go down
as well.
What is demand?
Demand is an economic principle referring to a consumer's desire to purchase goods and
services and willingness to pay a price for a specific good or service.
Demand tells us what people want. It also tells us what they can buy at a certain time and
place, because it involves buying and at what price people can buy it or are willing to buy it.
Factors of Demand
1. Price of the Product
There is an inverse relationship between the price of a product and the amount of that product
consumers are willing and able to buy. Consumers want to buy more of a product at a low price and
less of a product at a high price.
2. Changes in Income
The amount of money people earns affects how much or how little they buy. For instance, a
factory worker earns ₱ 15,000.00 every month while a businessman earns ₱ 40,000.00. This means
that a factory worker has less money, in which he can buy less than that of the businessman. However,
when the income of a factory worker goes up, he can buy more, thus he can’t buy as much as the
businessman can.
The change in income leads to a change in the demand for goods and services. Thus, when
income goes up consumers buy more and when income goes down consumers buy less.
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new product it can influence the people to like and want it, thus increasing the demand for a product.
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Graph 1. Demand Curve. (Source:
https://www.google.com/search?q=Law+of+demand+curve&sa)
Quantity Demanded
Is the amount (number of units) of a product that a household would buy in a given time
period if it could buy all it wanted at the current market price.
A demand schedule is a table showing how much of a given product a household would be willing
to buy at different prices. Demand curves are usually derived from demand schedules.
Example:
NINA’S DEMAND SCHEDULE FOR
TELEPHONE CALLS
Price Quantity Demanded
(₱ per call) (Calls per month)
0 30
0.50 25
3.50 7
7.00 3
10.00 1
15.00 0
Table 1. Nina’s Demand Schedule.
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Graph 2. Nina’s Demand Curve.
The demand curve shows that when the price per call increases the demand for calls
decreases.
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B. Demand shifts to the left
A decrease in demand shifts the demand curve to the left and reduces price and output.
Market Supply
When economists talk about supply, they mean the amount of some good or service a producer
is willing to supply at each price. Price is what the producer receives for selling one unit of a good
or service. A rise in price almost always leads to an increase in the quantity supplied.
What is supply?
Supply is the amount of a product that is offered for sale at all possible prices in the market.
In other words, supply is the amount of goods and services available for sale at a given prices in a
given period of time and place. Supply implies the ability and willingness of sellers to sell.
Factors of Supply
1. Technology
This refers to the method of production or how something is produced. Having modern
technology means being able to produce more. Manufacturing is the reason that you’re able to use
many of the products as well as enjoy the services that you do today. However, the introduction of
technology into the manufacturing industry has helped take it to an entirely new level. Not only has
it made it more interesting in terms of innovation, but it has also enabled quicker and more efficient
ways in operating. Better technology means more supply produced and less cost of producing theses
goods.
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2. Cost of production
. This refers to the things a producer has to spend on to keep making goods and services. These
are: raw materials, labor and factory overhead. An increase in production cost makes it harder for
the producer because he/she has to pay more to keep producing. This is why when the cost of
producing goes up, the supply of goods most likely goes down.
When cost of production cost goes up the supply goes down and when production cost goes
down the supply goes up.
3. Number of sellers
More sellers or more factories in a market means an increase in supply and fewer sellers in a
market decreases supply.
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Why is the Supply Curve Upward Sloping?
The Supply Curve
Quantity Supplied
It represents the number of units of a product that a firm would be willing and able to
offer for sale at a particular price during a given time period.
A supply schedule is a table showing how much of a product firms will supply at different prices.
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Example
JOY’S SUPPLY SCHEDULE FOR BEANS
Price Quantity Supplied
(per kilo, ₱) (Kilos per month)
30 0
26.25 150
33.75 300
45 450
60 675
75 690
Table 2. Joy’s Supply Schedule.
As the price of beans per kilo increases the supply increases and as the price of
beans per kilo decreases the supply also decreases.
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Graph 7. Supply Shifts to the Right (Source:
https://www.economicsonline.co.uk/Competitive_markets/Market_equilibrium.html)
Market Equilibrium
Economists use the term equilibrium to describe the balance between supply and demand in
the marketplace. Under ideal market conditions, price tends to settle within a stable range when output
satisfies customer demand for that good or service.
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the buyer and the seller in the exchange of goods and services at a particular quantity.
At equilibrium point, there are always two sides of the story, the side of buyer and that
of the seller. On the other hand, when buyers and sellers transact in a market they agree on
the price of the commodity and the amount to be sold and bought, this agreed price is called
equilibrium price.
For instance, given the price of ₱ 30.00 the buyer is willing to purchase 150
units. On the other hand, the seller is willing to sell the quantity of 150 units at a price
of ₱ 30.00. This simple illustration simply shows that the buyer and seller agree at a
particular price and quantity that is ₱ 30.00 and 150 units. This is the main concept of
equilibrium, that there is a balance between price and quantity of goods bought by
consumers and sold by sellers in the market.
Surplus
Shortage
The equilibrium price and quantity in a market are located at the intersection of
the market supply curve and the market demand curve. In the example above the equilibrium
price is P 30.00 with quantity demanded and supplied of 150 units.
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What happens when there is market disequilibrium?
Surplus is a condition in the market where the quantity supplied is more than
the quantity demanded, when there is surplus, the tendency is for sellers to lower market
prices in order for the goods and services to be easily disposed from the market.
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Using the previous example let us find the price and quantity equilibrium in the
market.
From Table 3: Demand and Supply Schedule
Steps Demand Supply
Find the equation of a line (250,10) and (200,20) (50,10) and (100,20)
through points.
1. Calculate the slope (m) from 2 𝑌2 − 𝑌1 𝑌2 − 𝑌1
points 𝑆𝑙𝑜𝑝𝑒 = 𝑆𝑙𝑜𝑝𝑒 =
𝑋2 − 𝑋1 𝑋2 − 𝑋1
20 − 10 20 − 10
𝑆𝑙𝑜𝑝𝑒 = 𝑆𝑙𝑜𝑝𝑒 =
200 − 250 100 − 50
1 1
𝑆𝑙𝑜𝑝𝑒 = − 𝑆𝑙𝑜𝑝𝑒 =
5 5
2. Substitute the slope for “m” in Y = mx + b Y = mx + b
the slope intercept form of the Y = - 1/5 x + b Y = 1/5x + b
equation
3. Substitute either of the points Y = - 1/5 x + b Y = 1/5x + b
into the equation in solving b 10 = - 1/5 x + b 10 = 1/5(50) + b
10 + 1/5 (250) = b 10 – 1/5(50) = b
10 + 50 = b 10 – 10 = b
or or
b = 60 b=0
4. Substitute b, into the equation Y = -1/5 x + 60 Y = 1/5 x
from step 2
5. Change the equation into P = -1/5Qd + 60 P = 1/5 Qs
market equilibrium format where 1/5Qd = 60 – P 1/5Qs = P
Y is the price and x as quantity. Qd = 5(60) – 5P Qs = 5P
Qd = 300 – 5P
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’s More
Directions: Plot the following demand schedule of pork and supply schedule of
bangus in the market in your notebook and analyze each graph.
A.
Price of Pork Quantity Demanded
(Per Kilo) (In Kilos)
230.00 5
210.00 10
200.00 15
190.00 20
180.00 25
B.
Price of Bangus Quantity Supplied (In
(Per Kilo) kilos)
180.00 7
170.00 6.5
160.00 6
150.00 5
140.00 4
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I Have Learned
Now that we are finished in our lesson, let us review the topics we have learned.
I Can Do
Task 3
Direction: Determine the price and quantity equilibrium in the market of the given equation:
Qd = 68 – 6P
Qs = 33 + 10P
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I. Directions: Identify what is asked in each item. Write the letter of the correct answer in your
notebook.
1. It is an economic principle referring to a consumer's desire to purchase goods and services and
willingness to pay a price for a specific good or service.
A. Demand B. Supply
C. Income D. Expenditure
2. It is the amount of a product that is offered for sale at all possible prices in the market.
A. Demand B. Supply
C. Income D. Expenditure
3. What curve does a demand illustrates?
A. Downward sloping B. Upward sloping
C. straight line D. None of these
4. What curve does a supply illustrates?
A. Downward sloping B. Upward sloping
C. straight line D. All of these
5. What is it when buyers and sellers transact in a market when they agreed on the price of the
commodity and the amount to be sold and bought.
A. Law of Supply B. Law of Demand
C. Equilibrium Price D. Price Disequilibrium
6. It is when there are disagreements among buyers and sellers on the price and quantity.
A. Law of Supply B. Law of Demand
C. Equilibrium Price D. Price Disequilibrium
7. The law of demand states that the quantity of a good demanded varies .
A. inversely with its price. B. directly with population.
C. directly with income. D. inversely with the price of substitute goods.
8. The following are factors of demand EXCEPT for .
A. Changes in income B. Technology
C. Price of the product D. Changes in number of buyers
9. What is your analysis?
Statement I: More sellers in a market – decrease supply.
Statement II: Fewer sellers in a market – increase supply
A. Both Statements are true B. Only statement 1 is true
C. Only Statement II is true D. Both statements are false
10. A decrease in supply shifts the supply curve to the left, which raises price but reduces output.
A. shifts the demand curve to the left
B. shifts the demand curve to the right
C. shifts the supply curve to the left
D. shifts the supply curve to the right
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II. Problem:
The schedule below shows the demand and supply data of a commodity.
Do the following:
A. Graph and analyze the demand, supply schedule (Price in the y- axis and quantity demanded and
quantity supplied in the x-axis)
B. Find the equations of the supply and demand curves.
C. Find the market equilibrium using the equations. (P and Qs,Qd)
Demand and Supply Schedule (per month)
Price Quantity Quantity
(₱) Demanded Supplied
3 7,000 1,000
6 5,000 2,000
9 3,000 3,000
12 2,000 4,000
15 1,000 5,000
Complete the following statements. Write your statements in your activity notebook.
3. Using the knowledge I have learned in this lesson, I will be able to...
.
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Glossary
Demand curve - a graphic representation of the relationship between price and quantity demanded
of a certain good or service, with quantity on the horizontal axis and the price on the vertical axis.
Demand schedule - a table that shows a range of prices for a certain good or service and the
quantity demanded at each price
Demand - the relationship between price and the quantity demanded of a certain good or service
Equilibrium price - the price where quantity demanded is equal to quantity supplied
Equilibrium quantity - the quantity at which quantity demanded and quantity supplied are equal for
a certain price level
Equilibrium - the situation where quantity demanded is equal to the quantity supplied; the
combination of price and quantity where there is no economic pressure from surpluses or shortages
that would cause price or quantity to change
Excess demand - at the existing price, the quantity demanded exceeds the quantity supplied; also
called a shortage
Excess supply - at the existing price, quantity supplied exceeds the quantity demanded; also called a
surplus
Law of demand - the common relationship that a higher price leads to a lower quantity demanded of
a certain good or service and a lower price leads to a higher quantity demanded, while all other
variables are held constant
Law of supply - the common relationship that a higher price leads to a greater quantity supplied
and a lower price leads to a lower quantity supplied, while all other variables are held constant
Price - what a buyer pays for a unit of the specific good or service
Quantity demanded - the total number of units of a good or service consumers are willing to
purchase at a given price
Quantity supplied - the total number of units of a good or service producers are willing to sell at a
given price
Shortage - at the existing price, the quantity demanded exceeds the quantity supplied; also called
excess demand
Supply curve - a line that shows the relationship between price and quantity supplied on a graph,
with quantity supplied on the horizontal axis and price on the vertical axis
Supply schedule - a table that shows a range of prices for a good or service and the quantity
supplied at each price
Supply - the relationship between price and the quantity supplied of a certain good or service
Surplus - at the existing price, quantity supplied exceeds the quantity demanded; also called excess
supply
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References
Book:
Tereso, Tullao S. Applied Economics for Progressive Philippines
(Quezon City, The Phoenix Publishing House Inc., 2016), 48-49.
Online Sources:
Demand, Supply and Market Equilibrium in Markets for Goods and Services. Accessed: January
31, 2021
https://opentextbc.ca/principlesofeconomics2eopenstax/chapter/demand-supply-and-equilibrium-in-
markets-for-goods-and-services/
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