Market Demand, Market Supply

and Market Equilibrium

(Chapter 2)
WHAT IS A MARKET?
AMARKET IS AN
INTERACTION BETWEEN THE
BUYERS AND SELLERS OF
TRADING & EXCHANGE
Demand
 Are amount of some good or service
consumers are willing and able to
purchase at each price.
 Based on ability to pay
Price
 What a buyer pays for a unit of
the specific good or service.

Quantity Demand
 The total number of units
purchased at that price.
Law of Supply and Demand
 The 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 (or demand) for that product
has on its price.
The Law of Demand
Asthe price rises, the quantity demanded
decreases, and vise versa. (inversely
proportional)
QUANTITY
PRICE =
DEMAND

QUANTITY
PRICE =
DEMAND
EXAMPLE: Law of Demand
Plot or graph the data and interpret the result.
PRICE QUANTITY
(PESOS) (DEMANDED)

8.00 10
7.00 20
6.00 30
5.00 40
4.00 50
3.00 60
2.00 70
1.00 80
Interpretation:
The higher the price, the lower the quantity demanded” and vise
versa. (Law of Demand)
FACTORS AFFECTING DEMAND

a.) INCOME OF BUYERS

b.) NUMBER OF POTENTIAL
BUYERS
c.) PREFERENCES
d.) COMPLEMENTARY PRODUCTS
Supply
 Amount of some good or service a
producer is willing to supply at each price.
 Price is what a producer receives for selling
one unit of a good or service.
The Law of Supply
The higher the price leads to a higher quantity
supplied and a lower price leads to a lower quantity
supplied.
(directly proportional)
QUANTITY
PRICE = SUPPLIED

QUANTITY
PRICE = SUPPLIED
EXAMPLE: Law of Supply
Plot or graph the data and interpret the result.
PRICE QUANTITY
(PESOS) (SUPPLIED)

1.00 100
2.00 200
3.00 300
4.00 400
5.00 500
6.00 600
7.00 700
8.00 800
Interpretation:
The higher the price, the higher the quantity supplied” and vise
versa.
FACTORS AFFECTING SUPPLY
a.) PRODUCTION CAPACITY,
b.) PRODUCTION COST SUCH AS LABOR AND
MATERIALS
c.) THE NUMBER OF COMPETITORS
d.) ANCILLARY FACTORS SUCH AS e.)
MATERIAL AVAILABILITY, f.) WAETHER, AND
g.) RELIABILITY OF SUPPLY CHAINS
Equilibrium
Itis a point where the supply curve and
demand curve cross.
Excess supply or surplus

An above equilibrium price

Excess demand or
shortage
An below equilibrium price