Demand Analysis

(APPECO)
 MARKET
Is an interaction between
buyers and sellers of trading or
exchange.
It is where the consumer buys
and the seller sells.
 Goods Market

Is the most common type of

market because it is where
we buy consumers good.
 Labor Market
Is where workers offer
services and look for jobs,
where employers look for for
workers to hire.
 Financial Market

Includes the stock market

where securities of
corporation are traded.
 Demand

Demand indicates how much of

a good consumers are willing
and able to buy at each possible
price during a given time period,
other things constant.
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 Law of Demand
Says that quantity demanded varies
inversely with price.
The higher the price, the smaller the
quantity demanded
The lower the price, the larger the
quantity demanded
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 Demand Schedule

In economics, is a table of the

quantity demanded of a good at
different price levels. Given the
price level, it is easy to determine
the expected quantity demanded
 Demand Schedule
Demand Schedule ( Candy)
Price Quantity Demanded
5 10
4 20
3 30
2 40
1 50
0 60
 Demand Curve

Is a graphical illustration of demand

schedule, with the price measured
on the vertical axis (Y) and the
quantity demanded measured on
the horizontal axis (X).
 Demand Schedule
Demand Curve ( Candy)
Price

Quantity Demanded
 Demand Function

Mathematical way of showing the

relationship of demand to its price.

Qd = a - bP
 Substitution Effect
 It is felt when a change in price of a good
changes demand due to alternative consumption
of substitute goods.
Example: Lower prices encourages
consumption away from higher priced substitutes
on top of buying more with budget . Conversely,
higher price of a product encourages the
consumption of its cheaper substitute.
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 Income Effect
Is felt when change in the price of
good changes consumers’ income
or purchasing power, which is the
capacity to buy with the given
income.
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 Activity
1. Qd = 50 -2p
Point Price Qd
A 25 ?
B ? 2
C ? 6
D 18 ?
E 15 ?
F ? 26
G 10 ?
2. Qd = 150 – 5P
Point Qd Price
A ? 30
B 15 ?
C ? 24
D 45 ?
E 60 ?
F ? 15
G 90 ?
Non – Price Determinants of
Demand
 Income
 Tastes and Preferences
 Consumer’s Expectation
 Number of Consumers
 Price of Related Goods 17
Supply Analysis
(APPECO)
 Supply
Supply refers to the quantity of
a commodity which producers
or sellers are willing to produce
and offer at a particular price’, in
a given market, at a purticular
period of time. 19
 Law of Supply
Says that quantity supplied varies directly
with price.
The higher the price, the higher the
quantity supplied;
The lower the price, the lower the
quantity supplied.
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 Supply Schedule
A supply schedule is a table showing
how much of a product firms will supply
at different prices.
Quantity supplied represents the
number of units of a product that a firm
would be willing and able to offer for
sale at a particular price during a given
time period.
 Supply Schedule ( Candy )

Price Quantity Supplied

5 50
4 40
3 30
2 20
1 10
0 0
 Supply Curve
Supply curve, in economics, graphic
representation of the relationship
between product price and quantity of
product that a seller is willing and able
to supply. Product price is measured
on the vertical axis of the graph and
quantity of product supplied on the
horizontal axis.
 Demand Curve ( Candy)
Price

Quantity Supplied
 Supply Function

Mathematical way of showing the

relationship of supply to its price.

Qd = c + bP
 Activity
1. Qs = 100 + 5P
Point Price Qs
A 20 ?
B ? 300
C ? 400
D 80 ?
E 100 ?
2. Qs = - 300 + 20P
Point Qs Price
A ? 15
B 40 ?
C ? 19
D ? 23
E 240 ?
F 300 ?
Non – Price Determinants of
Supply

 Technology
 Cost of Production
 Number of Sellers
 Price of Related Goods
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 Market Equilibrium
 a state of balance when
demand is equal to supply. The
equality means that the quantity
that sellers are willing to sell is
also the quantity that buyers are
willing to buy for a price.
( Qd = Qs ) 29
Shortage
( Qd is greater than Qs )
Surplus
( Qd is lessc than Qs )

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Elasticities
of Demand
and Supply
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 Elasticity
 is measure of how much
buyers and sellers respond to
changes in market conditions.

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 Elastic
 a change in a determinant will
lead to a proportionately greater
change in demand and supply.
 the absolute value of the
coefficient of elasticity is greater 1.
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 Elastic
 a change in a determinant will
lead to a proportionately greater
change in demand and supply.
 the absolute value of the
coefficient of elasticity is greater 1.
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 Inelastic
 a change in a determinant will
lead to a proportionately lesser
change in demand and supply.
 the absolute value of the
coefficient of elasticity is less than
1. 35
 Unitary Elastic
 a change in a determinant will
lead to a proportionately equal
change in demand and supply.
 the absolute value of the
coefficient of elasticity is equal to
1. 36
ɛd = %ΔQd
%ΔP
Elasticity of Supply & Demand