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L AW O F S U P P LY A N D
DEMAND
L AW O F S U P P L Y A N D D E M A N D
• The law of supply and demand states that when supply is greater than
demand prices decreases. When demand is greater than supply, price
increases. When supply is equal to demand, price remains constant
DEMAND
• According to Fajardo (1991), demand is the schedule of various of
quantities of communities which buyers are willing and able to
purchase at a given price, time and place. It is the consumer's desire
and ability to purchase a good or services.
DETERMINANTS OF DEMAND
1. Income of the Buyers
2. Number of Consumers
3. Taste or Preference
4. The prices of related goods or services
5. Consumer expectations.
E X P L A N A T I O N T O T H E B E H AV I O R O F T H E
CONSUMERS WHENEVER THERE IS
INCREASE IN PRICE.
1.Substitution Effect - it refers to the changes in price motivate by
consumers to buy relatively cheaper substitutes goods
2. Income Effect – The changes in price that affects the purchasing
power of consumers’ income.
 Inverse relationship

Table 1. Demand schedule

PRICE QUANTITY DEMANDED
1 60
2 50
3 40
4 30
5 20
6 10
CHANGES IN QUANTITY DEMANDED VS.
CHANGE IN DEMAND
GRAPH 1. CHANGE IN DEMAND

Change in Demand. A change in demand

means that the entire demand curve shifts
either left or right. The initial demand
curve D0 shifts to become either D1 or
D2. This could be caused by a shift in
tastes, changes in population, changes in
income, prices of substitute or
complement goods, or changes future
expectation
CHANGES IN QUANTITY DEMANDED VS.
CHANGE IN DEMAND

GRAPH 2. CHANGE IN QUANTITY DEMAND

Change in Quantity Demanded. A change in the

quantity demanded refers to movement along the
existing demand curve, D0. This is a change in price,
which is caused by a shift in the supply curve.
L AW O F D E M A N D
• As price increases, quantity demanded decreases, and as the price
decreases, quantity demanded increases. To elucidate if the price
increase, consumers tend to buy less goods and services. If the price
decreases, consumers tend to buy more goods and services
S U P P LY
• The schedule of various quantities of commodities which producers
are willing and able to produce and offer at a given price, place and
time (Fajardo, 1991). It describes the amount of goods and services
for the consumers.
D E T E R M I N A N T S O F S U P P LY
1. Technology
2. Cost of Production
3. Price expectation
4. Price of Related Goods
5. Taxes and subsidies
S U P P LY S C H E D U L E
Table 2. Supply schedule
PRICE QUANTITY SUPPLIED
1 10
2 20
3 30
4 40
5 50
6 60
CHANGES IN QUANTITY
S U P P L I E D V S . C H A N G E I N S U P P LY
Change in Supply. A change in supply is caused by factors other than the
price of the product. Decrease in supply, shifting the supply curve from S1
to S1. At the price P1, the quantity supplied will decrease from Q1 to Q2.
A change in quantity supplied - refers to a change in quantity offered for sale as a
result of a change in the price of the product.Suppose the price of a good
increases from P1 to P2. The quantity supplied will increase from Q1 to Q2.