Prepared by; Jan Lloyd S.

Zamora

Demand

Definition

The number of goods and services that consumers are willing and able to buy at alternative prices
at a given period of time.

The capacity and willingness of a consumer in buying certain product determine the demand.

Law of Demand

-The law of demand states that, as price increases, the quantity demand decreases.
-P↑, D↓ Inverse Relationship
-If the price of the product decreases, the consumer will buy less of the product to save resources.

Demand Function

A mathematical expression of the relationship of two variables. The Quantity Demanded (Qd) as
the dependent variable and and Price (P) as the independent variable.

Quantity demanded changes as price changes.

Qd=a-bP

Wherein;

Qd is Quantity Demanded

a is factors

b is slope

P is price

Demand Schedule

A table showing the units of the product which the consumer is willing and able to buy at different
prices. It shows the inverse relationship of the two variables.

Demand Curve

A graphical representation of the inverse relationship of price and quantity demanded, which the
consumer is willing to buy.

Determinants of Demand

1. Population. As the population increases, the number of potential consumers also increases, so
demand for commodities may also rise.
2. Income. If a consumer receives a high income, s/he is capable of buying more products even if the
price is the same.
a. Normal goods are the goods, for which demand increases as income increases.
b. Inferior goods are the goods, for which demand does not increase even when income
increases.
3. Expectations. When the consumer hears about a discord or trouble that is happening in some parts
of the country or even around the world, or if calamities occur, s/he assumes the economy
will be affected.
4. Occasions. Whenever there is a celebration, demand increases for the products that are used for
the occasions like chocolates and flowers during Valentine’s Day.
5. Price of related products. When the price of one commodity increases, the demand for it will
decrease. This depends on the classification of goods.
a. Substitute goods are goods that a person can buy in place of other goods, e.g. Butter and
Margarine
b. Complementary goods are goods that are consumed simultaneously, e.g. coffee and milk.
6. Preferences. Changes in taste and preference for a particular product affect the demand for
products. Demand for imported goods is high because of Filipinos prefer to buy them.
Shifting of the Demand Curve

Figure 1 Figure 2

 In Figure 1, it shows a shift in the demand curve to the left, which means the demand for
Goods/Services decreases but the price remains the same.
 This event is noticeable during the diminishing of the utility of milk tea for example. People are no
longer buying milk tea but the prices are still the same.
 In Figure 2, shows a shift in the demand curve to the right, which means the demand for Goods/
Services increases yet the price remains the same.
 This event is noticeable during the additional utility of coffee for example. People are buying more
and more coffee and still the price remains the same.
SUPPLY

Definition

Represents the amount of goods and services available for consumption at different prices. The
producers and sellers are considered as suppliers.

The willingness and the capacity of the supplier is the basis of declaring the supply in the market.

The quantity of goods and services, which the supplier is willing and able to trade at alternative
prices at given time.

Law of Supply

- The law of supply states that, as price increases the quantity supply also increases.
- P ↑, S↑ Direct Relationship
- If the price of a product increases, the producer will produce more to gain more profit.

Supply Function

Illustrated in a mathematical equation, which consist of two variables, Qs is the dependent

Quantity supplied changes as price changes

Qs=c+dP

Wherein;

Qs is quantity supplied

c is factors

d is slope

P is the price

Supply Schedule

A table showing the units of the product which the producer is willing and able to sell at different
prices. It shows the direct relationship of the two variables.
Supply Curve

The graphical representation of the direct relationship of price and quantity of products, which
supplier is willing and able to sell.

Determinants of Supply

1. Cost. Producers take into consideration the cost of producing the goods they would like to supply in
the market. In the production of goods, producers have to pay the production cost and other
expenses like tax.
a. Tax is a compulsory contribution imposed by the government to individuals and Business
firms.
2. Subsidy. This refers to assistance provided by the government to small-scale businessmen and
farmers to enable them to produce more products.
3. Weather/Climate. If the climate or weather fits the needs of the producers, sufficient supply is
guaranteed to flow to the market.
4. Technology. The use of modern machinery and technical knowledge in the production of goods
helps the producer provide sufficient supply in the market.
5. Number of Sellers. The number of sellers is a determinant of the abundant supply of a product in
the market.
6. Price of Related Products. Sellers are motivated to sell the products if the prices are high. We can
observe that if the price of oranges is higher than apples, sellers will sell oranges rather
than apples.
7. Expectations. Producers also expect and sometimes speculate about the price increase.
Shifting of the Supply Curve

Figure 3 Figure 4

 In figure 3, shows a shift in the supply curve to the left, which means the supply of Goods/Services
decreases but the price remains the same.
 This event is noticeable during the fading of a fashion trend where the supply of trendy clothes
starts to decrease as people are no longer satisfied by its utility but the price, remains the same.
 In figure 4, shows a shift in the supply curve to the right, which means the supply of
Goods/Services increases yet the price remains the same.
 This event is noticeable during the trend of fashion trend where the supply of trendy clothes starts
to increase as people have marginal utility and still the price remains the same.