MARKET

EQUILIBRI
UM
MARKET
■ It shows an organized
transaction between
sellers and buyers.
■ A place where there is
transaction among buyers
and sellers.
Buyers – determine the
demand

Sellers – determine the

supply.
EQUILIBRIUM
■ A market condition where the
quantity supplied equals the
quantity demanded.
■ It shows the agreement
between the sellers (PRICE)
and buyers (QUANTITY OF THE
PRODUCT).
EQUILIBRIUM PRICE
■ is the price level that
both buyers and sellers
agree to consummate a
transaction in the market.
EQUILIBRIUM PRICE
■ in using the given demand and
supply function, price equilibrium
can be computed.

■ QD = QS (substitute the demand

function in this formula, then
proceed on transposition method)
Example
Demand function:
Qd – 400 – 6P
Supply function:
Qs = -400 + 10P
Step 1: Substitute to the
formula Qd= Qs
Qd = Qs
Qd = 400 – 6P = Qs = -400
+ 10P
Step 2: Combine like terms
(Intercept = Slope and
Price)

C = dP
400 – 6P = Qs = -400 + 10P
400 + 400 = 10P +6P
Step 3: Finalize your answer.

C = dP
400 – 6P = Qs = -400 + 10P
400 + 400 = 10P +6P
800 = 16P
16 = 16P
50 = P
EQUILIBRIUM QUANTITY
■ refers to the quantity of products
that buyers and sellers have agreed
to transact at a specified price.

■ it can be determined by
substituting the price in the
demand and supply function.
Step 1: Substitute the
price on the the demand
and supply function
Qd = 400 – 6P = Qs = -400
+ 10P
= 400–6(50) = Qs = -
400+10(50)
Step 2: Multiply the slope
to price
Qd = 400 – 6P = Qs = -400 +
10P
= 400 – 6(50) = -400 + 10(50)
= 400 – 300 = -400 + 500
= 100 = 100
CHANGES
IN
EQUILIBRI
UM
■ Any price above and below
the equilibrium price
indicates that there is NO
agreement between the
consumer and supplier.

■There is NO equilibrium in
the market.
■If an individual
enjoys and if
satisfied with
the products
he/she
consumes,
his/her demand
will increase.
■But when he/she
has reached the
peak of
satisfaction in
consuming such
product, his
demand will
decrease.
 CHANGE IN
DEMAND WHILE
SUPPLY IS
CONSTANT
Shift from left to right:
■As income of individuals
increase, their demand
increases too.

■Price increases motivate

sellers to increase their
supply.
Shift from right to left:
■It indicates a decrease in
demand.
■It happens when an individual
reaches the peak of satisfaction
in consuming products.
■Price will decrease in order to
sell the excess supply.
 CHANGE IN
SUPPLY WHILE
DEMAND IS
CONSTANT
A. Effect of Low Costs of
Production
■If a seller sells an umbrella at
150.00 and the quantity sold
is 500 pieces, but with low
cost of production, then the
producer can make 700
pieces.
A. Effect of Low Costs of
Production
■This results to a surplus
in the supply of umbrella.
■Supply curve shifts from
the left to right.
B. Effect of Calamities in
Supply
■It can cause a decrease
in supply and a change in
the market equilibrium.
B. Effect of Calamities in
Supply
■A business man can
supply 1,000 bundles of
string beans at 40.00
undernormal condition in
the environment.
B. Effect of Calamities in
Supply
■When a typhoon come
frequently, agricultural
activities are affected.
■The supply curve shifts
from right to left.
SIMULTANEOUS
CHANGE OF
SUPPLY AND
DEMAND
■The increase in workers’
income and low cost of
production show the
simultaneous change in
supply and demand
curves.
■Example:

In the production of
slippers, consumers and
producers will buy and sell
500 slippers at 80.00 each.
■As a result in increase in
income:

The demand curve shifts to

the right (D2), which shows
the increase in demand to
800 pieces.
■As a result in increase in
income:

The second equilibrium

point is formed at E2 with
the same price.
■This means that:

At the same price, 80.00,

the consumer and supplier
agree to buy and sell 800
pieces of slippers.
 ROLES OF THE
GOVERNMENT IN
MAINTAINING THE
MARKET
EQUILIBRIUM
How does the
relationship of
government, sellers,
and consumers affect
to the market price?
■The agreement of
consumers and producers
is important in the
market.
■The government sets the
price of commodities based
on government policies to
protect the public from
sudden change
of price in the
market.
Price Control
■Government-mandated
minimum or maximum
prices set for specific
goods and services.
Price Control
■They are usually
mandated as a means of
direct economic
intervention to manage the
affordability of products.
Price Control
■It can often lead to
disruptions in the market,
losses for producers, and a
noticeable change in
quantity.
TYPES OF PRICE
CONTROLS
1. Price Floors – minimum
prices set for goods and
services.

2. Price Ceilings – maximum or

highest points at which
goods and services can be
sold.
 PRICE
CEILING
 What is
Republic Act
7581 all
■RA 7581 is also known as
Price Act.
■It was approved to help
the government in the
implementation of price
control on basic
commodities.
 What does
NPCC means?
■NPCC or National Price
Coordination Council.
■It was formed to implement
the Price Act.
■Its main objective and function
is to guard and monitor the
prices after the announcement
of a price ceiling.
■The government is doing
this to help and protect the
consumers against the
abuses of businessmen
and sellers.
Basic commodities:
■Rice
■Sugar
■Milk
■Oil
■Soap
■Fish
■Chicken
■Pork
■Etc.
■During calamities and
state of emergencies.
■The price declared is
lower than the equilibrium
price in the market.
■Price ceilings prevent a
price from rising above a
certain level.
■When a price ceiling is set
below the equilibrium
SHORTA
price, Qd will exceed Qs.
PRICE
FLOOR
■It is the lowest price for
buying the products of
farmers.
■It is the lowest price for
buying the products of
farmers.
■The price of palay
depends on how much
support the government
will declare.
■Price support is
implemented to help the
producers recover their
production cost and to gain
some profit.
■Price floors prevent a
price from falling below a
certain level.
■When a price floor is set
above the equilibrium
price, Qs will exceed Qd.
SURPLUS
PRICE
FREEZE
■The government also
implements price freeze if
there is calamity.
■Prices must not increase
nor change.
 PRICE
SUPPORT
■It is implemented to help
the producers recover
their production costs and
to gain some profit.
■It is higher than the
equilibrium price in the
market.
Do price ceilings
and floors
change demand
and supply?
■They simply set a price
that limits what can be
legally charged in the
market.
■Changes in price does not
cause demand and supply
 HOW TO
CALCULATE THE
SHORTAGE AND
SURPLUS?
■Quantity Supplied subtracted
to Quantity Demanded

Qs – Qd
= negative value (SHORTAGE)
= positive value (SURPLUS)
TAKE NOTE:
■In calculating and specifying a
shortage or surplus on a
market equilibrium schedule,
you must write the final
answer and if it’s shortage or
surplus.
■Example: (-1, SHORTAGE)
Price Quantity Quantity Surplus
Demande Supplied or
d Shortage
?
50 52 73

45 62 62

40 72 51

35 82 42
Price Quantit Quantity Surplus or
y Supplied Shortage?
Demand
ed
50 52 73 Surplus of 21

45 62 62

40 72 51

35 82 42
Price Quantit Quantity Surplus or
y Supplied Shortage?
Demand
ed
50 52 73 Surplus of 21

45 62 62 Equilibrium
of 0
40 72 51

35 82 42
Price Quantit Quantity Surplus or
y Supplied Shortage?
Demand
ed
50 52 73 Surplus of 21

45 62 62 Equilibrium
of 0
40 72 51 Shortage of -
21
35 82 42
Price Quantit Quantity Surplus or
y Supplied Shortage?
Demand
ed
50 52 73 Surplus of 21

45 62 62 Equilibrium of
0
40 72 51 Shortage of 21
or -21
35 82 42 Shortage of 40
or -40
Price Quantity Quantity Surplus or
Demanded Supplied Shortage?
12.00 0 36
10.00 3 30
8.00 6 24
6.00 9 18
4.00 12 12
2.00 15 6
0.00 18 0
Price Quantity Quantity Surplus or
Demanded Supplied Shortage?
12.00 0 36 36, SURPLUS
10.00 3 30
8.00 6 24
6.00 9 18
4.00 12 12
2.00 15 6
0.00 18 0
Price Quantity Quantity Surplus or
Demanded Supplied Shortage?
12.00 0 36 36, SURPLUS
10.00 3 30 27, SURPLUS
8.00 6 24
6.00 9 18
4.00 12 12
2.00 15 6
0.00 18 0
Price Quantity Quantity Surplus or
Demanded Supplied Shortage?
12.00 0 36 36, SURPLUS
10.00 3 30 27, SURPLUS
8.00 6 24 18, SURPLUS
6.00 9 18
4.00 12 12
2.00 15 6
0.00 18 0
Price Quantity Quantity Surplus or
Demanded Supplied Shortage?
12.00 0 36 36, SURPLUS
10.00 3 30 27, SURPLUS
8.00 6 24 18, SURPLUS
6.00 9 18 9, SURPLUS
4.00 12 12
2.00 15 6
0.00 18 0
Price Quantity Quantity Surplus or
Demanded Supplied Shortage?
12.00 0 36 36, SURPLUS
10.00 3 30 27, SURPLUS
8.00 6 24 18, SURPLUS
6.00 9 18 9, SURPLUS
4.00 12 12 0,
EQUILIBRIUM
2.00 15 6
Price Quantity Quantity Surplus or
Demanded Supplied Shortage?
12.00 0 36 36, SURPLUS
10.00 3 30 27, SURPLUS
8.00 6 24 18, SURPLUS
6.00 9 18 9, SURPLUS
4.00 12 12 0,
EQUILIBRIUM
2.00 15 6 -9,
SHORTAGE
Price Quantity Quantity Surplus or
Demanded Supplied Shortage?
12.00 0 36 36, SURPLUS
10.00 3 30 27, SURPLUS
8.00 6 24 18, SURPLUS
6.00 9 18 9, SURPLUS
4.00 12 12 0,
EQUILIBRIUM
2.00 15 6 -9,
SHORTAGE
At the price of 40
Qs – Qd

200 – 400
= -200
At the price of 400,
Qs – Qd

200 – 400
= -200
SHORTAGE
Price Floor
Price Floor

At the price of 1000

Qs – Qd

500 – 100
= 400
Price Floor

At the price of 1000

Qs – Qd

500 – 100
= 400
SURPLUS