Market Demand,
Market Supply
and Market
Equilibrium
Quarter 1 - Lesson 4
Looking Back
Identification. Identify the following problems that may exist in the local and
global economies during production of goods and services. Choose from the
factors below. Just write the letter.
Questions: If the economic problem is focused on
1. ____ the legalities of the production
2. ____ the nature of goods to produce
3. ____ the allocation of the products among members of the society
4. ____ the method of production of products
A. Whom to produce B. What to produce
C. What provision to implement D. What method or strategy is effective
and efficient
Expectations
You will represent real-life situations using the market demand, market
supply and market equilibrium. Specifically, this module will help you to:
1. determine the concepts of market demand, supply and equilibrium
2. state the laws of demand and supply
3. construct and analyze demand, supply and their curves
4. solve problems on demand, supply and equilibrium
Part 1. GRAPH ANALYSIS
Part 2. FILL IN THE BLANKS
Introduction
Economics helps us solve the problem on excess supply and excess demand,
and lead it to a balanced supply and demand. In our needs, we do not want
oversupply. It means wastage of income. For entrepreneurs, it is not efficient
if their stocks or supplies are greater than the actual demand. It is a loss not
revenue.
In economics, there are terms that you must learn to understand the better
market situations. A demand or the amount of good or service consumers are
willing to purchase at each price. If customers cannot pay for it, there is no
effective demand. Price is what a buyer pays for a unit of the specific good or
service. The total number of units purchased at that price is called the
quantity demanded.
LAW OF SUPPLY AND DEMAND
the interaction between the sellers
of a product and the buyers. It
shows the relationship between the
availability of a particular product
and the desire (or demand) for that
product has on its price.
Law of Demand
Law of Supply
How do Supply and Demand Create an
Equilibrium Price?
A demand curve shows the relationship between quantity demanded and price in a given
market on a graph.
The law of demand states that a higher price typically leads to a lower quantity
demanded.
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 equilibrium price and equilibrium quantity occur where the supply and demand
curves cross.
The equilibrium occurs where the quantity demanded is equal to the quantity supplied.
If the price is below the equilibrium level, then the quantity demanded will exceed the
quantity supplied.
Excess demand or a shortage will exist. If the price is above the equilibrium level, then the
quantity supplied will exceed the quantity demanded.
Activity 1: Directions: Analyze this problem. The following data were taken from an
invoice of Company X. The company imports gasoline from other country.
1. Plot or graph the data.
Interpret the results
2. Analyze data and
describe the curve