 LESSON 2

APPLICATION OF
DEMAND AND SUPPLY
The global
pandemic changed
the pattern of
global supply
chains.
What caused these
changes in prices
and supply? 
In this activity, put yourselves in the shoes of both buyer and seller.
Choose which items to buy or sell.

First round: You are the buyers.

In this activity, put yourselves in the shoes of both buyer and seller.
Choose which items to buy or sell.

First round: You are the sellers.

 MARKET
Every market has its own special characteristics, but all markets ultimately
have two things in common:

 Demand by all people for products

or the resources that make them.

 A willingness by producers to supply

those products or resources.
 LAW OF DEMAND
The law of demand explains the effect of prices on rationing. It notes that the quantity of the
commodity that customers are willing and able to buy rises when all other factors are constant. An
inverse interaction between quantity and price demanded can be seen by the law of demand.

Keeping factors constant or at

ceteris paribus, buyers will purchase
more at lower prices and less at
higher prices.
 LAW OF DEMAND

 DEMAND QUANTITY DEMANDED MARKET DEMAND

Demand is a quantity and The number of a good The market demand is

price relationship. that individuals are simply the sum of all
Demand is defined as the
able and willing to buy individual demand.
various quantities of a
resource, service or good at a particular price
that consumers or during a certain
customers are able and period.
willing to buy even in
possible various prices at
any time given.
DEMANDED SCHEDULE

• Demand schedule is
a table showing the
quantities of a
product that would
be purchased at
various prices at a
given time and
place.
DEMAND CURVE

• A demand curve is a
graph of the demand
schedule. The curve in
Figure 1 shows the
relationship between
the price of T-Shirts and
the quantity buyers are
willing to purchase. It
slopes downward, from
left to right.

CHANGES IN QUANTITY DEMAND
• Is the movement from one point to
another point on the same demand
curve caused by a change in the
price.
CHANGES IN DEMAND
• The demand curve describes the
relationship between purchasing
rates and quantities over a given
period of time, but the price is not
the only factor that shifts, influencing
the desire of the buyer to purchase.
Demand shifts as this happens
increases or decreases.
DETERMINANTS OF DEMAND

1. Consumers’ Tastes and

Preferences

• Tastes and preferences

change in favor of a product
will suggest that at each
price, more would be
ordered than before. On the
other hand, a shift in tastes
and preferences away from a
commodity will mean that
less would be needed at
each price than before.
DETERMINANTS OF DEMAND

2. Consumer’s Income

• Individual’s income may

change depending upon
the economic situation. A
change in income
(increases or decreases),
individual’s demand for a
particular good may rise or
fall.
DETERMINANTS OF DEMAND

3. Population

• Growth in the population

influences the amount
requested in more or less
the same way as real
income rises. A large
population will increase
demand, and demand for a
specific product will decline
with smaller populations.
DETERMINANTS OF DEMAND
A. Substitutes goods 4.
• when the price of a particular
item increases, the consumer will
shift in the demand for a
substitute.

B. Price of Complementary Goods

• If the price of fuel increases, what will
happen to the demand for cars?
 Things often bought together, such as
cars and gasoline, are complementary.
According to the rule of demand, the
demand for imported fuel will
decrease if the price of a car falls.
DETERMINANTS OF DEMAND

5. Expectation of Future Prices

• If the price rises or decreases in

the future, what will happen?
 The demand for goods and
services will be influenced by
future expectations.
 If a customer assumes that the
price of necessities will rise in
times of calamity, the demand
for necessities will presumably
rise.