COMPETITION AND MARKET

STRUCTURES
MANECO WEEK 7 - FINALS
 CONTENTS OF THE LESSON
0 03
1
SUPPLY MARKET
FUNCTION STRUCTURE

0 0
2 4
MARKET
EQUILIBRIUM EFFICIENCY
 INTENDED LEARNING OUTCOME

01 To evaluate the supply curve and its application in decision making

02 To apply the concept of equilibrium using demand and supply

To make an efficient managerial decision that will reduce opportunities

03 for arbitrage and above market returns
 SKILLS TO DEVELOP

Effectiveness and
Critical thinking skills Innovativeness
Efficiency
SUPPLY
FUNCTION
01
- Definition of Supply
- Law of Supply
- Non-price determinants of Supply
- Supply Function
- Supply Schedule
- Supply Graph
- Supply Curve
 SUPPLY FUNCTION
(Qs = -c + dP)
Samuelian’s supply
1. 1. Solution:
equation for their bread is: 2. Qs = -45 + 15P
Qs = -45+15P 3. -15P/-15 = -45/-15
At what price will they no 4. P=3
longer be willing to sell
their bread?
 SUPPLY FUNCTION
(Qs = -c + dP)
Jeff and Luke both sell baseball cards. Jeff's supply
a.

function is Qs = 2P while Luke’s supply function is Qs =

-5 + 3P. If you wanted to buy 50 cards total,
• a. how much would you have to offer per card?
• b. at what price will Jeff no longer sell any cards?
• c. at what price will Luke no longer sell any cards?
 SUPPLY FUNCTION
Solution: (a)
a .

1. Combine Jeff and Luke’s supply function by adding them

together:
Q = -5 + (2P + 3P)
Q = -5 + 5P
2. Then put the quantity which is 50 (since we want to buy 50
cards)
50 = -5 +5P
3. Then solve for the price
-5P = -5 -50
-5P/5 = -55
 SUPPLY FUNCTION
Solution: (b)
a .

1. To find Jeff's no-sell price, we set Q equal to 0 in his supply

function and solve for P.

0 = 2P

In this case, we find that Jeff’s no-sell price is P0.00

 SUPPLY FUNCTION
Solution: (c)
a .

1. We do the same thing for Luke, plugging 0 in for

the quantity in his supply equation:
0 = -5 +3P
P = 5/3
P = 1.67
Jody owns a used CD store, where she buys and sells used
CDs. Which of the following will cause a movement along her
supply curve, and which will cause a shift in her supply curve?
a) Another CD store opens down the street that also buys
used CDs, so she now has to pay more for the used CDs
before she can sell them again.
b) The landlord now includes utilities in her rent payment, so
she no longer has to pay for electricity.
c) There is an Elvis revival, and the market price of used
Elvis CDs goes up.
Non-Price determinants of SUPPLY
1. Number of producers
2. Production cost
3. Technology
4. Speculation on the future price
5. Weather and climate
6. Calamity
Activity 2: Analyze and identify the non-price
determinants that affects supply.

1.New rice mill machine.

2.Underground economies of the country.
3.Extreme heat experiencing of Cavite.
4.Recession due to pandemic.
5.Taal volcanic eruption.
 Supply Schedule
- table that shows the quantity
supplied at different prices in the
market. A supply curve shows the
relationship between quantity
supplied and price on a graph. The
law of supply says that a higher
price typically leads to a higher
quantity supplied.
The chicken in General Trias market has an equation of Qs = -450 + 8P for
P150.00 per kg. The sellers are predicting a decrease in price as soon as
the bird’s flu issue in agriculture was resolved. A decrease of 2, 4, 5, 10
and 13 pesos is expected consecutively. Complete the supply schedule
and plot it in a graph.
SUPPLY SCHEDULE
POINT PRICE QUANTITY
A 150 ?
B ? ?
C ? ?
D ? ?
E ? ?
Supply Curve
Qs = -450 + 8P

SUPPLY SCHEDULE
POINT PRICE QUANTITY

A 150
B _____ _____
C _____ _____
D _____ _____
E _____ _____
 Supply Function = Qs = -200 +5P

POINT PRICE QUANTITY

Questions:
1. What is the Qs for
P11.00?
2. Qs1 for P7.00
3. Price for Qs = 130
4. What is the shifting
movement of Qs?
5. Change happened
in Qs?
02
 Let’s try this!
1. When the forces of 2. If the preferred
demand and supply are price of the
balanced, the consumer is lower
economy is considered than the price of the
to have _____________. supplier, the market
a. Equilibrium condition is ________.
b. Elasticity a. Equilibrium
c. Competition b. Elasticity
d. supply c. disequilibrium
d. inelastic
 Let’s try this!
3. The interaction between 4. The price ceiling can
the curve of demand and be found at _______.
supply shows that ________.
a. The price is stable a. The bottom of the
b. There is a surplus in intersecting point
supply that will cause b. The above the
deflation
c. There is a shortage in intersecting point
supply that will cause c. The center of the
inflation intersecting point
d. Quantity demanded is d. Beside the
more than quantity
supplied intersecting point
 Let’s try this!
5. The floor price policy was being imposed by the
government to avoid too low price for a specific
product or service. It aims to control the price to
protect ________.

a. Consumer
b. Government
c. Producer
d. Tax payer
02
EQUILIBRIUM
✓ Equilibrium vs. Disequilibrium
✓ States of economic equilibrium
✓ Pricing and economic
equilibrium
✓ Barriers to economic
equilibrium
 INTERACTION OF DEMAND AND SUPPLY
Equilibrium Demand = Supply
Disequilibrium Demand ≠Supply
Surplus Demand <Supply
Shortage Demand>Supply
 Activity 1: Analyze and identify the result of the
interaction of the demand and supply in the market.
1.Outdated units of cellular phones will be sold with
50% off.
2.Having a calamity
3.unequal Qd to Qs
4.Enough supplies of foundation shirts for Samuelians
5.Sufficient disposable income of the BSA family
 LAW OF DEMAND AND SUPPLY

1. Increasing demand while supply remains constant

 LAW OF DEMAND AND SUPPLY

2. Decreasing demand while supply remains constant

 LAW OF DEMAND AND SUPPLY

3. Increasing supply while demand remains constant

 LAW OF DEMAND AND SUPPLY

4. Decreasing supply while demand remains constant

Activity 3: Analyze what will happen on the situation.
1. What will happen to the price of apples if its demand increases
while the supply remains constant?
a. increase b. remain c. decrease

2. How does increasing quantity of supply will affect the price if

the demand remains constant?
a. increase b. remain c. decrease
 Activity 3: Analyze what will happen on the
situation.
3. What will happen if the 4. What does it implies
quantity supplied when there is no stock and
continues to increase no buyer of a coffee in a
without demand? store?
a) Surplus a) Surplus

b) Shortage b) Shortage

c) Equilibrium c) Equilibrium

d) Disequilibrium d) Disequilibrium
Activity 3: Analyze what will happen on the situation.

5. What does it implies when the government import

goods to nearby countries?
a)Surplus
b)Shortage
c)Equilibrium
d)Disequilibrium
1. Equilibrium price
2. Equilibrium
quantity
3. Qd in P70.00
4. Surplus in P65.00
5. Shortage in P20.00
6. Price for Qd 110
7. Qs in P5.00
8. Qs in P75.00
9. Qd in P80.00
10. Shortage for P5.00
Critical thinking question
How will you
explain the
demand and
supply of corn
based on the
graph?
 Let’s Do this: (Equilibrium schedule)
The gel pen of BSA Shop has an equation of Qd= 200 – 12P and Qs = -70
+ 15P. If the gel pen is worth P6.00 and will change continually, find the
equilibrium price and quantity of it. Create a demand and supply schedule.

POINT PRICE Qd Qs RESULT INTERPRETATION

A 6

B 9

C 10

D 15

E 16
 Activity 4: Equilibrium Price

1. Qd = 240 – 14P Qs = -150 +6P

2. Qd = 510 – 38P Qs = -210 + 18P
3. Qd = 1050 – 120P Qs = -850 + 210P
WAYS TO SOLVE SHORTAGE AND SURPLUS IN THE
MARKET
1. Anti-profiteering - DTI
2. Government as producer during shortage
3. Government as consumer during surplus
4. Price freeze from RA 7581 amended by RA 10623 Price Act of
the Philippines (automatic price control)
5. Price ceiling policy
6. Floor price policy
Activity 5: Analyze and identify the solution applied to
solve shortage and surplus.
1. President BBM temporarily suspends the price of multivitamins during
pandemic.
2. The Philippine government imports meat to sustain its demand while
poultry is facing the African swine flu.
3. Imposing SRP on the products to be monitored by DTI
4. Mayor Isko purchased dolomite in Cebu that will give a mutual benefit
to both economy.
5. Despite of being monopoly, Meralco still follows the guidelines imposed
by the Department of Energy.
ESSENTIAL QUESTION

Which is more
important to address,
surplus or shortage?
03 MARKET
STRUCTURE
• Perfect Competition
• Monopolistic Competition
• Monopoly
• Oligopoly
• Monopsony
03 MARKET STRUCTURE
COMPETITIVE EQUILIBRIUM
✓ Competitive equilibrium is a condition in which profit-
maximizing producers and utility-maximizing consumers in
competitive markets with freely determined prices arrive at
an equilibrium price. At this equilibrium price, the quantity
supplied is equal to the quantity demanded. In other words,
all parties—buyers and sellers—are satisfied that they're
getting a fair deal.
Page 289

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equilibriums.asp#:~:text=What%20Is%20Competitive%20Equilibrium%3F,equal%20to%20the%20quantity%20demanded
.
BENEFITS OF COMPETITIVE
EQUILIBRIUM
1. describing how markets might settle on one price for all buyers
and sellers
2. explaining how production and consumption can be brought
in to balance without a central planner,
3. operating as a benchmark for efficiency in economic analysis.
04 MARKET EFICIENCY

✓ Market Efficiency Theory

✓ 3 forms of Market Efficiency
✓ Market Efficiency Hypothesis
 MARKET EFFICIENCY THEORY
• Market efficiency refers to how well current prices reflect
all available, relevant information about the actual value of
the underlying assets.
• A truly efficient market eliminates the possibility of
beating the market, because any information available to
any trader is already incorporated into the market price.
• As the quality and amount of information increases, the
market becomes more efficient reducing opportunities for
arbitrage and above market returns.
https://www.investopedia.com/terms/m/marketefficiency.asp
FQ2

1. Which of the following most appears to contradict the

proposition that the stock market is weakly efficient?
Explain. (10pts)
a) Over 25% of mutual funds outperform the market on
average.

b) Insiders earn abnormal trading profits.

c) Every January, the stock market earns abnormal

returns.
FQ2
2. Suppose that, after conducting an analysis of past stock
prices, you come up with the following observations. Which
would appear to contradict the weak form of the efficient
market hypothesis? Explain. (10 pts)
a. The average rate of return is significantly greater than
zero.
b. The correlation between the return during a given week
and the return during the following week is zero.
c. One could have made superior returns by buying stock
after a 10% rise in price and selling after a 10% fall.
d. One could have made higher-than-average capital gains by
holding stocks with low dividend yields.
Thank you
and
God Bless