LEARNING ACTIVITY SHEET

APPLIED ECONOMICS
Quarter 3 – LAS 3:
Market Demand, Market Supply and Market Equilibrium
NAME:

I. INTRODUCTORY CONCEPT.
This LAS was designed to help you analyze and propose solution/s to the economic problems using the
principles of applied economics.

II. LEARNING SKILLS FROM MELC’s.

Quarter 3: *Analyze market demand, market supply and market equilibrium. (Week 3)

III. ACTIVITIES.
Let us Review: Direction:From the word/words given below, choose what is being described in the sentence.
Price Supply Surplus
Demand curve Demand Shortage
Demand schedule Increase Equilibrium
Ceteris Paribus Decrease Supply curve
Technology Market Supply schedule
1. _______________ It refers to the number of goods that the consumer is willing to buy.
2. _______________ It happens when the number of goods that the consumer can produce exceeds the equilibrium
quantity.
3. _______________ The amount set for the product.
4. _______________ It refers to amount of goods that the producer is willing to sell.
5. _______________ It is the point where the quantity demanded, and the quantity supplied meets.
6. _______________ This is what happen to the demand when the price decreases.
7. _______________ Happens when the quantity available for sale is lesser than the quantity demanded.
8. _______________ This what happens to the supply when the price decreases.
9. _______________ It is where the buyer and the seller meet.
10._______________ It is a graphical representation showing the relationship of price and demand.
11._______________ It is a graphical representation showing the relationship of price and supply.
12._______________ A table that shows the quantity demanded for a product at a given price.
13._______________ One of the factors for a change in supply other than price.
14._______________ A table that shows the quantity supplied in unit at a given price.
15._______________ It is an assumption that all other things are the same.

Let us Study:
MARKET DEMAND
What’s New?
Let us check the products/services that is previously and currently in your wish list. Categorize the products/services into
different levels. Below is how you can categorize the product/service:
Level 1: I already have it. (for those products/services that you already have but is in your wish list before)
Level 2: Ready to buy it. (for those products/services in your wish list that you are planning to buy within this
year.)
Level 3: I want it, but I can’t afford it now. (for those products/services in your wish list that you are planning
to buy but not within this year)
Level 4: I want it, but how? (for those products/services in your wish list that you don’t know where to buy it or
of it is available in the market)

What is It?
Demand and Supply
If our needs and wants can be backed by our buying power, it becomes demand. It means that we have the ability
and the willingness to buy the product at a given price within a given time period. On other hand, the supply refers to the
quantity of goods and services that firms are ready and willing to sell at a given price within a period (Viray and Avila-
Bato 2018)

THE LAW OF DEMAND AND SUPPLY

The law of demand states that: all other things remain constant (Ceteris Paribus), the higher the price of a good
the lesser the demand for that good and the lesser the price the higher the demand.
The relationship between the price and demand is inversely related. It is because of the substitution effect and income
effect. Substitution effect means that if the price of Product A increases the consumer will look for its substitute and will
cause decrease in quantity demanded for Product A. On the other hand, having the same income, an increase in price of a
product will cause a decrease in quantity demanded because the consumer may not afford to buy all the things just like
before.
The law of supply states that the quantity of products offered to be sold is directly related with the price. It means
that when the price increases the quantity supplied increases too and if the price decreases the quantity supplied decreases
too.

Analyzing Demand
The demand can be analyzed using:
A. Demand Schedule –a table that shows the price of a good and the quantity demanded for that good at a given
price within a given period.
B. Demand Curve – a graphical representation that shows the relationship between the price of a good and the
quantity demanded for that good at a given price. It usually uses the information in the demand schedule.

Changes in Quantity Demanded compared to Changes in Demand

Changes in quantity demanded happened when there is a change in the demand for a product because of the
change in price. For example, the quantity demanded for chicken at ₱120.00 was 10 kilos per month but when the price of
the chicken increased by ₱10.00 the quantity demanded decreased to 8 kilos. Another increase in price of the chicken
happened making it ₱140.00 per kilo because of that the quantity demanded decreased again to 7 kilos.

Figure 1 shows the graphical representation of the demand schedule in Table 1. It is negative slope showing that
the price and quantity demanded are inversely related. Table 1 and Figure 1 shows the change in quantity demanded
because of the change in price.
There is a change in demand when there is a change in quantity demanded because of some factors other than
price. For example, the quantity demanded for chicken at ₱120.00 is 10 kilos per month but because of the issues related
to ASF (African swine flu) the quantity demanded increases to 12 kilos at the same price. When the price the chicken
increases to ₱130.00 the quantity demanded changed to 10 kilos and 8 kilos at ₱140.00

Figure 2 shows the graphical representation of the demand schedule in Table 2. It shows the change in demand
for chicken because of the African swine flu which made the consumer to choose chicken meat compared to pork.
The change in demand is not always positive sometimes it falls. The change in demand may be affected by
several factors such as:
• Taste and preferences
• Income
• Seasonal products
• Population change
• Prices of related good (substitute/complementary goods)
• Expected future prices, income and credit

Analyzing Supply
The supply can be analyzed using:
A. Supply Schedule - table that shows the prices of a good and the quantity supplied at each price at a given
point of time
B. Supply Curve - a graphical representation that shows the relationship between the price of a good and the
quantity supplied at a given point of time.

Change in Quantity Supplied compared to Changes in Supply

Changes in quantity supplied happened when there is change in the quantity of goods produced to be sold
because of the change in price. It happens because businessman or entrepreneurs prepared to sell their goods at a
higher price to yield more profit.
For instance, an online seller of chicken dishes has following supply schedule that shows how many packs of
chicken dishes he prepares at a different price.
 Figure 1 shows the graphical representation of the supply schedule in Table 3. It is positively slope showing that
the price and quantity supplied are inversely related. Table 3 and Figure 3 shows the change in quantity supplied
because of the change in price.
Changes in supply is a shift of supply curve because of some factors other than price. For example, the quantity
supplied in Table 3 changes not because of the change in price but because of the increase in the number of online
sellers offering the same product. The table below shows the new supply schedule

Figure 4 shows the blue line which is the same as supply curve shown in Figure 3 and the orange line which
shows the changes in supply curve. The entire supply curve shifts to the left. It means that at the same price the
quantity of goods supplied by the producer decreases not because of the decrease in price but because of the increase
in the number of sellers.

Factors that can Cause Changes in Supply

• Technology
• Cost of production
• Number of sellers
• Government policies (Taxes and subsidies)
• State of nature (weather)
• Prices of related goods produced
• Future expectations (possible increase in price)
 Market Equilibrium
QUANTITY DEMANDED = QUANTITY SUPPLIED
As stated in the law and supply and demand, market equilibrium happens when there is an equal demand and
supply causing the price to remain the same. When the supply is greater than the demand it causes the price to
decrease but when the demand is greater than the supply the price increases.

Equilibrium market price – price agreed by the buyer and seller.

Figure 5 shows the equilibrium between the quantity demanded and quantity supplied. It is the point of
intersection between the supply and the demand curves. It shows that the Equilibrium price (Pe) is 25 and the
equilibrium quantity (Qe) is 140. It means that if the price and quantity change there will be market disequilibrium
(shortage/surplus).
When the quantity supplied is greater than quantity demanded there will be surplus. On the other hand,
shortage is when the quantity demanded is greater than quantity supplied.

Change in demand or supply may result to the changes in market equilibrium.

To protect the seller or the buyer when there is market disequilibrium the government sets the minimum price
(floor price) or maximum price (ceiling price) for some goods, this is what we called price control.

TASK 1: Direction: Analyze the demand and supply curves and answer the questions that follows.

1. ________________________ How many items does a consumer want to purchase if its price is ₱150.00?
2. ________________________ At what point does the consumer want to purchase 100 units?
3. ________________________ At what price does the consumer want to purchase 80 units?
4. ________________________ Is there an increase in quantity demanded when the price of the good decrease from
₱150.00 to ₱100.00? If yes, how many percent is the increase? If no, how many percent is the decrease?
5. ________________________ What can you say about the quantity demanded as the price increases?
6. ________________________ How many units does the producer wants to sell at a price of 150.00?
7. ________________________From point A to D, quantity demanded increases by how many units?
8. ________________________ How much is the increase in price from point D to point G?
9. ________________________ What happened to the quantity supplied when the price decreases?
10.________________________ Considering the supply and the demand curve, at what price does the number of units
demanded by the consumer is the same with the number of units produced by the supplier?

IV. ASSESSMENT. Direction: Complete the paragraph by filling in the blanks based on what you have learned from
the lesson. Choose your answer from the words below.

I learned additional lessons in Applied Economics. This week I learned about

the law of supply which states that when the __________________________
increases the quantity of products that the producer is willing to sell
____________________________ and the law of demand which states that the higher
the ____________________________ the ___________________________ the
demand.

To be able to analyze the demand and supply I can use the demand and supply
_________________________ and the demand and supply
____________________________, a graphical representation of the relationship of
price and quantity.

I also understand that aside from price, there are other factors that may affect
the supply some of these are _______________________________,
____________________________, and ______________________________. There are
also factors that may affect demand
like______________________________________,
___________________________________,
and________________________________.

I can say that it is better if there is market equilibrium which means that the
quantity supplied and the quantity demanded is the same at a given
_________________________________. Market disequilibrium may also result to
_________________________________ or ______________________________

References
LEAÑO JR., ROMAN D. APPLIED ECONOMICS FOR SENIOR HIGH SCHOOL. MINDSHAPERS
CO., INC., n.d.

Pettinger, Tejvan. "Basic Economic Problem - Economics Help". Economics Help,

2020. https://www.economicshelp.org/blog/glossary/basic-economic-problem/.

"3 Central Problems That Are Faced By Every Economy Of A Country". Your Article Library, 2020.
https://www.yourarticlelibrary.com/problems/3-central-problemsthat-are-faced-by-every-economy-of-a-
country/8812.

"DTI Philippines". Facebook.Com, 2020.

https://www.facebook.com/DTI.Philippines/photos/pcb.10158292118780116/10 158292118165116.
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