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and Market
Equilibrium
Demand
the schedule of various quantities of goods
and services which buyers are willing and able
to purchase at a given price, time and place,
all other factors are held constant (ceteris
paribus).
Law
statesof
thatDemand
as the price increases, the
quantity demanded decreases; and as the
price decreases, the quantity demanded
increases, ceteris paribus.
1. Price of factors
the product
Various
affecting demand:
2. Income of the buyers
3. Quality of the product
4. Season
5. Price expectation
6. Number of consumers/Population
7. Tastes and preferences
8. Promotion and advertisement
9. Religion
10.Price of related products
11.Fashion/Fad
12.Customs and traditions
Demand
Schedule
the listing of the
different quantities of goods and
services that buyers will purchase given the various
alternative prices
Example:
Table 1. Demand Schedule For Commodity X
Price of X
(Px)
10
20
30
40
50
60
70
80
Demand Curve
a plotted demand schedule
Example:
Quantity Demanded
Figure 2: Demand Curve
Price
10
0
80
60
Deman
d
40
20
0 0
1
9
2
10
Demand Function
is expressed in this form:
Qdx = f (Px)
Demand Equation
is presented as follows:
Qdx = a - bPx
Where: a intercept
b - slope ( the formula :
Example: Qdx = 20 0.4Px
Q/ P )
Example:
Qd
20
12
30
40
40
35
Quantity Demanded
Figure 3: Demand Curve
Price
45
30
Deman
d
25
20
15
10
5
0
0
12
4
14
10
Movement
a given
demand
to the shift inalong
the quantity
demand
schedule due to the changes in the price of
the product when all other factors are held
constant
Price
P2
Deman
d
A
P1
Q1
Q2
Figure 4:
Movement
along a given
demand
Change
Demand
to the shiftin
in the
entire demand schedule
due to the changes in some factors that were
held constant like income, price of related
products, and others.
Price
Qd 1
Qd 2
18
34
10
16
32
15
14
28
20
12
24
25
10
20
30
16
35
12
40
Table 2:
Demand
Schedule
Quantity Demanded
Figure 5: Change in Demand Curve
Price
45
40
35
30
25
20
15
10
D1
5
0
4
36
8
40
12
16
D2
20
24
28
30
Consumer
A
Consumer
B
Consumer
C
Total
Demand
15
10
17
14
13
25
13
11
16
33
12
14
19
41
11
17
22
10
49
10
20
25
12
57
Price
Quantity Demanded
Figure 6: Total Demand Curve
16
15
14
13
12
Tota
l
11
10
0
50
10
60
20
30
40
Supply
the schedule of various quantities of goods
and services which sellers are willing and able
to sell at a given price, time and place, all
other factors are held constant (ceteris
paribus).
Law
statesof
thatSupply
as the price increases, the
quantity supplied also increases; and as the
price decreases, the quantity supplied also
decreases, ceteris paribus.
Supply
Schedule
the listing of
the different quantities of goods and
services that seller will sell given the various
alternative prices
Example:
Table 4. Supply Schedule For Commodity X
Price of X
(Px)
10
20
30
40
50
60
70
80
Supply Curve
a plotted supply schedule
Example:
Quantity Supplied
Figure 7: Supply Curve
Price
90
Supply
80
70
60
50
40
30
20
10
0
1
9
Supply Function
is expressed in this form:
Qsx = f (Px)
Supply Equation
is presented as follows:
Qsx = a + bPx
Where: a intercept
b - slope ( the formula :
Example: Qsx = -10 + 0.6Px
Q/ P )
and the
Example:
Qs
20
30
40
40
14
35
Quantity Supplied
Figure 8: Supply Curve
Prize
45
30
Supply
25
20
15
10
5
0
2
14
4
16
10
12
Supply
B
P2
P1
Q1
Q2
Figure 9:
Movement
along a given
supply
Quantity
Change in Supply
shift in the entire supply schedule due to
the changes in some factors that were held
constant like the cost of product, availability
of raw materials, and others.
Table 5: Supply
Schedule
Price
Qs 1
Qs 2
10
12
14
12
16
16
18
20
10
20
24
12
22
28
14
24
32
16
Quantity Supplied
Figure 10: Change in Supply Curve
Price
28
S2
24
S1
20
16
12
8
4
0
0
20
2
22
4
24
10
12
14
16
18
Seller A
Seller B
Seller C
Total
Supply
11
17
15
28
19
14
40
23
18
10
51
27
22
13
62
31
27
16
74
Quantity Supplied
Figure 11: Total Supply
Price
7
6
Tota
l
4
3
2
1
0
0
70
10
80
20
30
40
50
60
Market Equilibrium
the condition when quantity demanded is
equal to quantity supplied (Qd = Qs)
Equilibrium
Price
Figure 12:
Market
Equilibrium
Equilibrium
Quantity
No
Equilibrium
there
is no balance between the demand
and supply
Shortage
condition when the quantity demanded
exceeds the quantity supplied. This happens
when the price gets lower than the
equilibrium price.
Surplus
condition when the quantity supplied is
greater than the quantity demanded. This
occurs when the price is above the
equilibrium price.
Numerical Example:
Price of X
(Px)
Quantity
Demanded for
commodity X (Qdx)
10
20
30
40
50
60
70
80
Quantity
Figure 13: Market Equilibrium
Price
90
80
Supply
70
60
50
40
30
Demand
20
10
0
1
9
2
10
Marketthe
Equilibrium
in Mathematical
Assume
previous demand
and supplyLanguage
equations:
Demand:
Qdx = 20 0.4Px
Supply: Qsx = -10 + 0.6Px
Find the equilibrium price and quantity.
Demand = Supply
Qdx = Qsx
20 0.4Px = -10 + 0.6Px
20 + 10 = 0.6Px + 0.4Px
30 = 1Px
30 = Px
the
equilibrium
price is P30.00.
Supply:
Qsx = -10 + 0.6Px
= -10 + 0.6(30)
=8
Prepared By:
Aldea H. Zuiga