WEEKLY LEARNING ACTIVITY SHEETS

Applied Economics Quarter III, Week 3

MARKET DEMAND, MARKET SUPPLY AND MARKET

EQUILIBRIUM

NAME_______________________________ GRADE &SECTION_________________

Learning Objective:
MELC: Analyze market demand, market supply and market equilibrium.
(ABM_AE12-Ie-h-4-5)
Time Allotment: 8 hours

Key Concepts

THE MARKET - is an interaction between buyers and sellers of trading or exchange. It is

where the seller buys and the seller to sells.

3 KINDS OF MARKET

1. GOODS MARKET- is the most common type of market because it is where we buy
consumers goods.

2. LABOR MARKET - is where workers offer services and look for jobs, and where
employers look for workers to hire.

3. FINANCIAL MARKET- includes the stock market where securities of corporations are
traded.

DEMAND - is the willingness of a consumer to buy a commodity at a given price. A demand

schedule shows the various quantities the consumer is willing to buy at various prices. A
demand curve is graph illustrating how much of a given product a household would be
willing to buy at different prices.

Assume: Qd= 6-P/2

PRICE PER BOTTLE NUMBER OF BOTTLES
0 6

2 5

4 4
6 3
8 2
10 1
At a price of P10 per bottle, Martha is willing to buy one bottle of vinegar for a given month.
As the price goes down, the quantity the buyer is willing to buy goes up. A lower price allows
the consumer to buy more, but as price increases, the amount the consumer can afford to
buy tends to go down.
The downward slope of the curve indicates that as the price of vinegar increases, the demand
of the goods decreases. The negative slope of the demand curve is due to income and
substitution effects.

INCOME EFFECT – felt when change in the price of a good changes consumer’s real income
or purchasing power, which is the capacity to buy with a given income.

SUBSTITUTION EFFECT – felt when change in the price of a good changes demand due to
alternative consumption of substitute goods.

THE LAW OF DEMAND

As price increases, the quantity demanded decreases. The lower price of the good motivates
the consumer to buy more. When price increases, the quantity demanded for the goods
decreases.

NON- RPICE DETERMINANTS OF DEMAND

TASTE, PREFERENCE, INCOME, SUBSTITUTION, COMPLIMENTARY, BANDWAGON

EFFECT (NO. OF CONSUMERS)

SUPPLY- refers to the quantity of goods that a seller is willing to offer for sale. The supply schedule
shows the different quantities the seller is willing to sell at various prices. The supply function shows
the dependence of supply on the various determinants that affect it.
Assuming that the supply function is given: Qs=100+5P and is used to determine the quantities
supplied at the given prices.

Supply Schedule of Pedro for Fish in One week

Price of Fish (per Kilo) Supply (in kilos)
20 200
40 300
60 400
80 500
100 600
As seen in Table 2.2, the relationship between the price of fish and the quantity that pedro is willing to
sell is direct. The higher the price, the higher the quantity supplied.
We derive a supply curve that is upward sloping, indicating the direct relationship between
the price of the good and the quantity supplied of that good.

THE LAW OF SUPPLY

As the price increases, the quantity supplied of that product also increases. The high price of
the good serves a motivation for the seller to offer more or sale. Thus, when price increases,
the quantity supplied of the goods increases since the seller will take this as an opportunity
to increase his/her income.

DETERMINANTS OF SUPPLY

 Technology
 The COST of producing the good, which in turn depends on:
 The PRICE OF REQUIRED INPUTS (labor, capital, land)
 The availability of Raw Materials

MARKET EQUILIBRIUM- if the forces of demand and supply operate together, we can show
how price is determined in a market economy.

Equilibrium is a state of balance when demand is equal to supply. The equality means
that the quantity that sellers are willing to sell is also he quantity that buyers are
willing to buy for a price. As a market experience, equilibriums an implicit agreement
between how much buyers and sellers are willing to transact. The price at which
demand and supply are equal is the equilibrium price. Market equilibrium is attained
at the point of intersection of the demand and supply.
Example

The weekly demand and supply schedule for a brand of soft drink at various prices
(between 0p and 80p) is shown below.

PRICE (p) QUANTITY SUPPLIED QUANTITY DEMANDED

80 2000 0
70 1800 200
60 1600 400
50 1400 600
40 1200 800
30 1000 1000
20 800 1200
10 600 1400
0 400 1600
Equilibrium
As can be seen, this market will be in equilibrium at a price of 30p per soft drink. At this
price the demand for drinks by students equals the supply, and the market will clear. 1000
drinks will be offered for sale at 30p and 1000 will be bought – there will be no excess
demand or supply at 30p.

Activity 1. Read the article and answer the following questions.

Philippines: Government investigates why pork prices are high if supply is

up

The Philippine Department of Agriculture is looking into the reasons for a rising pork price despite an increased
frozen pork supply.

27 October 2020

Based on data, there is a significant inventory of both domestically slaughtered and imported pork
in cold storage facilities in the Philippines, accredited by the Department of Agriculture’s National
Meat Inspection Service (DA-NMIS). As of the third week of October 2020, the inventory of frozen
pork, both local and imported, in DA-NMIS-accredited cold storages nationwide was up by 55%
compared to the same period in 2019, at 38,216 MT.

“We’re looking into reasons why there’s a very slow withdrawal of frozen pork products despite the
availability of supply, and demand has started to pick up as the government opens up the economy,”
DA Secretary William Dar said.

As of October 21, prices of kasim (pork ham) reached P320/kg and liempo (pork belly) at P360/kg
in most Metro Manila public markets, P20 and P40 more respectively, compared to two weeks ago.

The DA is looking at whether the high prices were a result of inefficiencies in the supply chain. The
Philippine Competition Commission (PCC) is also investigating possible violations of the Philippine
Competition Act by traders that may be manipulating pork supply.

October 23, 2020/ Department of Agriculture/ Philippines.

https://www.da.gov.ph/
1. In your own understanding, what is the reason why the price of Pork is
high? ___________________________________________________________________________.
2. In the current time, how much is the price per kilo of Pork meat? Why do
you think the price is high or low? _______________________________________________.

3. Explain the Law of Supply and Law of Demand? ___________________________

_____________________________________________________________________________.
Activity 2. Problem Solving.

The following data were taken from Company A. The company is selling cupcakes.

2.1 Plot the graph and interpret the results.

PRICE (p) QUANTITY DEMANDED

40 20
35 40
30 60
25 80
20 100
15 120
10 140
5 160

Table 1. Price and Quantity Demanded for cupcakes.

Plot the graph.

QD

Figure 1. Price and Quantity Demanded for cupcakes.

P- Price ; QD- Quantity Demanded

Analyze and interpret the curve.__________________________________________________

__________________________________________________________________________________
2.2 Plot the graph and interpret the results.
 PRICE (p) QUANTITY SUPPLIED

40 180
35 160
30 140
25 120
20 100
15 80
10 60
5 40

Table 2. Price and Quantity Supplied for cupcakes.

Plot the graph.

QS

Figure 2. Price and Supplied for cupcakes.

P- Price ; QS- Quantity Supplied

Analyze and interpret the curve.__________________________________________________

_________________________________________________________________________________

3.3. Using the data from the demand and supply.

a. Determine the equilibrium point of the demand and supply curve.

QS
 Figure 3. The equilibrium

b. Analyze and interpret the curve.________________________________________________

__________________________________________________________________________________

__________________________________________________________________________________

c. What is the equilibrium price?

___________________________________________________.
Assessment.

1. There is an interaction between buyers and sellers.

A. Demand B. Supply C. Market D. Goods Market

2. Is a willingness of the consumer to buy a commodity at a given price.

A. Demand B. Supply C. Market D. Goods Market

3. Refers to the quantity of goods that a seller is willing to offer for sale.
A. Demand B. Supply C. Market D. Goods Market

4. The Law of Demand, as the price ______, the quantity demand __________.
A. Increases, Decreases C. Increases, Increases
B. Decreases, Decreases D. All of the above

5. The following are non-price determinants or factors affecting demand,

EXCEPT_______.
A. Taste B. Income C. Substitution D. Technology

6. The relationship between the price and the quantity of demand is DOWNWARD
SLOPING.
A. TRUE B. FALSE

7. The three kinds of market, EXCEPT___________.

A. Labor Market C. Goods Market
B. Financial Market D. Supply Market

8. Non-price determinants or factors affecting supply are the following,

EXCEPT________.
A. Technology C. Income
B. Availability of Raw Materials D. Cost of Production

9. When a market is in Equilibrium.

A. Excess demand and excess supply are zero.
B. Quantity Demanded equals to quantity supplied.
C. The market is cleared by the equilibrium price
D. All of the above.

10. The LAW of SUPPLY says:

A. As the price Increases, the quantity demanded increases
B. As the price Increases, the quantity demanded decreases
C. As the price Increases, the quantity supplied decreases
D. As the price Increases, the quantity supplied increases
Reflection.
Complete this statement: I have learned in this lesson that
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
______________________________________________________

References for learners:

Applied Economics Textbook (Rosemary P. Dinio, PhD
George A. Villasis) pages 18-24

https://www.economicsonline.co.uk/Competitive_markets/Market_equilibrium.html

Prepared By:
Jeni Lou P. Aleta
Ruth A. Mayo
Ryan A. Egay
Kristina Tanto
Answer key: 10. D
Activity 1: answers may vary 9. B
Activity 2: answer may vary 8. C
Assessment: 7. D
6. B
Writers: 5. D
4. A
3. B
2. A
1. C
JENI LOU P. RYAN A. EGAY

RUTH A. MAYO KRISTINA B. TANTOY

Reviewers: JOY R. DAGON-AY

OIC - ABM Group Head

AMALIA B. RINGOR
Track Head

RUTH A. CASTROMAYOR
Principal IV
Assistant Principal – SHS