PACIFIC SOUTHBAY COLLEGE, INC.

Purok Carmenville, Calumpang, General Santos City

DEMAND. Is an economic principle that refers to a consumer’s desire and willingness to pay for a
specific good or service. It is the relationship between the quantities of a good or service consumers will
purchase and the price charged for that good.
It is not simply a quantity consumers wish to purchase such as ’15 chocolates’ or ‘7 books’, because
demand represents the entire entrepreneurship between quantities desired of a good and all possible
price charged for that good. The specific quantity desired for a good at a given price is known as the
‘quantity demanded’.
The law of demand states that, the quantity demanded for a good rises as the price falls.  This law of
demand states that, ceteribus paribus ( Latin for ‘assuming all else is held constant’), the quantity
demanded for a good rises as the price falls. In other words, the quantity  demanded and prices are
inversely proportionate.
Examples of Quantity demanded:
   When the price of chocolate is Php 80.00 and the quantity demanded is 300 chocolates a week; if the
price of a chocolate falls from Php80.00 to Php 50.00, the quantity demanded will rise from 300 to 400
chocolates.
 Demand Schedule
A demand schedule is a table that shows the relationship between the product prices and quantity
demanded:
                       Table A.
                                      _______________________________________________________
                                            Price                                          Quantity Demanded
                                       ________________________________________________________
                                           Php 140                                                  100
                                           Php  110                                                  200
                                           Php   80                                                    300
                                           Php   50                                                    400
                                           Php   20                                                    500
                                    ________________________________________________________

 Demand Curve
It is simply a demand schedule presented in graphical form. It shows the quantity demanded
at different prices.
 It is drawn as the “downward sloping” due to this inverse relationship between price and
quantity demanded.  When there is a change in quantity demanded there has a movement
along the curve.

Note: Draw a graph (or use a graphing paper) for this activity
Activity 1-A Determining a Demand Curve

                          The X & Y axis.  The X axis represents the quantity buyers are willing and able to
pay at a given price.  Further the Y axis , represents the maximum price the buyers are willing
to pay for a given unit.
                                                             Demand Curve  (for Chocolates)
        Prices             Php
                                160   ______________________________
                                 140  ______________________________
                                 120  ______________________________
                                 100 ______________________________ 
                                   80 _______________________________
                                   60 _______________________________
                                   40 _______________________________
                                   20________________________________
                                     0____|_____|____|____|____|____|_                                                     
                                                     0      100     200    300     400    500    600     Quantity
Task:  You are going to connect(plot the points) the x and y axis  passing from 140(price) to 500
(quantity).Make a graph to this effect to form an economic demand curve.(downward slope) 
    Question: To what extent is the effect of the price as to the demanded supply? Justify your
answer.      

Activity 1-B.  Connect/make a graph showing the relationship of the price of a certain commodity to
the demanded supply as depicted below:
                                                              Commodity:  Maong Pant (Jeans)   
                             Price           Php
                                                 1000 _____________________________
                                                   800 _____________________________
                                                   600 _____________________________
                                                   400 _____________________________
200. _____________________________                                                   
0|____|____|____|____|____|__
1. 1000  1500  2000  2500  3000  
              Question: Based on the presentation above, what can you say about the relationship of the
price versus the number of supply needed in the market? Does it affect the law of supply and
demand? What is its implication then to the economy?
_____________________________________________________________________________________
 Individual Demand
The individual demand is the demand of an individual or any entity considered as one. IT is the
quantity of a good that a specific consumer would purchase at a specific price point at a
specific point in time.
 

 Market Demand.  Supports the total quantity demanded by all consumers. It is an important
economic indicator because it displays the one’s market competitiveness, a purchaser’s
willingness to buy certain products, and the ability of an entity to leverage in a competitive
environment. If the market demand is low, it signals to a company that they should lay off a
product or service or consider redesigning it.
 Change in Demand. There is a change in demand when the change alters the quantity
demanded in a given price, vice versa.  When it happens, there is a shift in the entire demand
curve. The following are considered as demand shifters:
1. Consumer Income.  Generally, when the price of a good falls demand also decreases
because the consumer can maintain the same consumption for less expenditure, providing
that the good is normal.  However, when the good is considered inferior the demand for
this good increases as the price falls.
2. Prices of Related Goods. When the price of a good falls because the product is now
relatively cheaper than an alternative item and some consumers switch their spending
from the alternative good or service the demand for substitute increases. Conversely,
when the good is considered as a complement of the good which the price has fallen, the
demand for this good also falls.
3. Population. Basically, demand changes when the number of buyers changes.
4. Expectations. Higher prices for a good in the future increases current demand for that
good. Consumers will adjust their current spending in anticipation of the direction of
future prices in order to obtain the lowest possible price.
ALFRED MARSHALL: a great English economist who came up with the idea of the law of demand and
supply. According to him, prices are set through the forces of demand and supply as same as the
cutting done by two blades of scissors.  Just as you need two blades in order for the scissor to
function, as so as to…

 SUPPLY .is the total quantity of a good that is available for purchase at a given price. It is the
relationship between the quantities of a good or service consumers will offer for sale and the
price charged for that good. 
Supply is not simply the number of an item available in the market, such as ‘5 chocolates’ or
’17 books’, because supply represents the entire relationship between the quantity available
for sale and all possible prices charged for that good. The specific quantity desired to sell of a
good at a given price is known as the “quantity supplied”.

The law of supply states that, ceteribus paribus (Latin for ‘assuming all else is held constant’),
“the quantity supplied for a good rises as the price rises”. In other words, the quantity
demanded and price are directly proportionate.
Examples of Quantity Supplied:
 When  the price of a chocolate is Php 80 the quantity supplied is 300 chocolates a week.
 If the price of chocolates  falls from Php 80 to Php 50, the quantity supplied will fall from
400 to 300 chocolates.
 It can be depicted by showing the Supply Schedule:
 A supply schedule is a table that shows the relationship between product prices and
quantity supplied.
Price                              |           Quantity Supplied
 Php 140                        |                  500
          110                       |                  400
             80                      |                  300
             50                      |                  200
             20                      |                   100
 SUPPLY CURVE
A Supply Curve is simply a supply schedule presented in graphical form. It shows the quantity
supplied at different prices.
The supply curves are drawn as ‘upward sloping’ due to this positive relationship between
price and quantity supplied. When there is a change in quantity supplied there has a
movement  along the curve.
                                                 Supply Curve
Task: Draw a diagonal line traversing from x to the y axis. Where X-axis represents the
quantity sellers are willing and able to sell at a given price. On the other hand, the y axis
represents the maximum price the sellers are willing to sell for a given quantity.
             Price   
                                   160____________________________________
                                    140____________________________________
                                    120____________________________________
                                    100____________________________________
                                      80____________________________________
                                      60____________________________________
                                      40____________________________________
                                      20____________________________________
                                        0__|___|____|____|____|____|____|_____
                                              0     100    200    300    400     500    600           Quantity
 CHANGE IN SUPPLY:
There is a change in supply when the change alters the quantity supplied in a given price, vice
versa. When  it happens, there is a shift in the entire supply curve. The following are
considered as supply shifters:
1. Technological Innovation. Lowers costs and increases supply which means that sellers are
willing to supply greater quantity at a given price or equivalently they are willing to sell a
given quantity at a lower price.
2. Input prices. An increase in the price of input decreases supply because of higher costs
incurred.
3. Taxes and Subsidies. Tax increases cost and also considered as an input price. Subsidy is
equivalent to a decrease in the firms’ cost and therefore increases supply.
4. Expectation. Higher price of a good in the future increases the cost of supplying now and
thus decreases current supply.
5. Entry/Exit of Producers. as producers enter or exit the market, the number of sellers’
changes, directly influencing supply.
6. Opportunity Cost. Inputs in production have opportunity cost and sellers will choose to
employ those inputs in the production of the highest priced goods.
 PRICE FLOORS AND PRICE CEILINGS
 Price Floors and Price Ceilings are examples of regulations established by government
intervention to avoid loss and taking advantage of opportunity in the market.
 Price Floor.  is the minimum market price set for a certain commodity established to
prevent manufacturers in instituting prices that would ruin the market economic system.
 For instance, different rates of minimum wages are implemented in different geographic
area in accordance to the lifestyle of the household in the location. This is settled to assure
that the individuals are able to suffice one’s staple and afford provision of needs. When a
city establishes a wage lower than the minimum, the tendency is that businessmen would
invest more in that city because of lower cost of labor.
 Thus, taking away the opportunity from other cities to be competitive in terms of their labor
market.  Moreover, if minimum wages are fixed all though out the country  the tendency is
households would transfer to the area that has lower cost of lifestyle to increase their
wealth and savings.
 Price floor is only an issue when they are set above the market clearing price because once
it is set beyond the market price; there is a chance of excess supply (surplus),. When it
occurs, manufacturers might produce more quantity unknowingly, customers might not buy
those goods at the higher price and thus, those goods will remain unsold.
 Price Ceiling. Is the minimum market price set for a certain commodity and services that is
believed to be sold at an unreasonable high price. It only becomes a problem when they are
set below the market equilibrium price because there would be excess demand or a supply
shortage.  Manufacturers won’t produce as much and consumers will demand more.
 EQUILIBRIUM
Equilibrium refers to a situation in which the price has reached the level where quantity
supplied equals quantity demanded.
>Surplus exists when there is an excess in supply. In this case, suppliers should lower the price
to increase sales, thereby moving to the equilibrium.
>Shortage exists when there is an excess in demand. In this case, suppliers will increase the 
price due to many buyers chasing few goods, thereby moving to the equilibrium. 
SUMMARY: DEMAND AND SUPPLY are the market forces that affect prices in the market.
Demand represents the standpoint of consumers while supply represents the standpoint of
manufacturers. To better understand the concepts, we must also have an understanding of its
law through analysing the schedule and its curve. Also, we must understand that there are
factors affecting the quantity demanded and quantity supplied.  We must also take into
consideration the price ceilings and price floors established by law, because it also affects our
decision making in settling with prices. Moreover, to compare supply and demand, and be able
to suffice one’s needs without any excess, we must also understand their equilibrium
relationship.
Activity 2. Graphing Activity
Note: Along with activity 1.A/1.B (as earlier required), do the following:
I. Graph
Amount              Quantity Supplied          Quantity Demanded
Php 10                            15                                      490
        20                           130                                     390
        30                           250                                     280
        40                           360                                     185
        50                           485                                      80
1. Plot the points for selling price, number supplied and number demanded.
 Draw a line through these points and label them.
2. Estimate where supply and demand are equal. Highlight this point (use highlighter  if its
available) and identify the selling price and units sold.
___________________Required_______________________________