Market Lesson 3

Demand,
Market Supply
and Market
Equilibrium
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 Objectives:
At the end of this lesson, you are expected to:

Determine the concepts Construct and analyze

01 of market demand,
supply and equilibrium
03 demand, supply and
their curves

State the laws of Solve problems on

02 demand and supply 04 demand, supply and
equilibrium
 Demand
the amount of good or
service consumers are
willing to purchase at
each price.
 Supply
is the quantity of a
commodity made available to
the buyers or the consumers
by the producers at a specific
price
 Price
is what a buyer pays
for a unit of a specific
good or service.
The total number of units
purchased at that price is
called the quantity
demanded.
 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
(demand) for that product has on
its price.
 The law of Demand

“the higher the price,

the lower the quantity
demanded” and vice
versa
Opportunity cost
refers to the value of what
you have to give up in order
to choose something else.
Factors affecting Demand

a.) Income of the buyer

b.) number of potential buyers
c.) preferences
d.) complementary products
The demand curve is always
downward sloping due to the
law of diminishing marginal
utility.
 The law of Supply

“the higher the price,

the higher the quantity
supplied and vice
versa”
Producers supply more at a
higher price because selling at
a higher quantity at a higher
price increases revenue.
Factors affecting supply
a. Production capacity
b. Production costs such as labor
and materials
c. The number of competitors
d. Ancillary factors such as
material availability, weather,
and reliability of supply chains
When graphing the
supply vs. the price,
the slope rises.
Equilibrium price
or market-clearing price

It 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 vertical line; overtime, supply

curve slopes upward; the more suppliers expect
to be able to change, 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.
Plotting
demand and
supply curve
graph
Price Quantity
10 0
8 2
6 4
4 6
2 8
0 10
Price Quantity
0 0
2 2
4 4
6 6
8 8
10 10
Price QS QD
0 0 12
2 2 10
4 4 8
6 6 6
8 8 4
10 10 2