appliedeconomicsweek3marketdemand-230414052512-26093346.pptx

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1. Applied economics

2. Learning competency determine the concepts of market demand, market supply and market equilibrium (ABM_AE12-Ie-h3)

3. Market Demand, Market Supply, and Market Equilibrium

4. 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 Expectation :

5. 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

6. In economics, there are terms that you must learn to understand the better market situations.

7. DEMAND 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.

8. PRICE is what a buyer pays for a unit of the specific good or service.

9. QUANTITY DEMANDED The total number of units purchased at that price

10. LAW OF SUPPLY AND DEMAND

11. The law of supply and demand explains 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 .

12. Law of Demand If all other factors remain equal, the higher the price of a good, the fewer people will demand that good.

13. Law of Demand “the higher the price, the lower the quantity demanded” and vice versa.

14. The demand curve is always downward sloping due to the law of diminishing marginal utility .

15. For example, if the price of video game drops, the demand for games may increase as more people want the games.

16. Factors Affecting Demand a) income of buyers b ) number of potential buyers c ) preferences d ) complementary products

17. Law of Supply The law of supply demonstrates the quantities that will be sold at a given price.

18. “The higher the price, the higher the quantity supplied” and vice versa Law of Supply

19. Producers supply more at a higher price because selling at higher quantity at a higher price increases revenue.

20. Factors Affecting Supply a) Production capacity, b) production costs such as labor and materials c) the number of competitors d) Ancillary factors such as e) material availability, f) weather, and g) reliability of supply chains

21. The law of supply says ………………. ―as the price of a product increases, companies will produce more of the Product. When graphing the supply vs. the price, , the slope rises .

22. How Do Supply and Demand Create an Equilibrium Price?

23. Equilibrium price or market-clearing price . is the price at which the producer can sell all the units he wants to produce and the buyer can buy all the units he wants.

24. Supply and demand are balanced, or in equilibrium. the demand curve is downward sloping. This is due to the law of diminishing marginal utility. The supply curve is a vertical line; overtime, supply curve slopes upward; the more suppliers expect to be able to charge, the more they will be willing to produce and bring to market.

25. In the Equilibrium point, the two slopes will intersect. The market price is sufficient to induce suppliers to bring to market that same quantity of goods that consumers will be willing to pay for at that price.

26. ALWAYS REMEMBER! 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.

27. ALWAYS REMEMBER! - 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.

28. ALWAYS REMEMBER! The equilibrium price and equilibrium quantity occur where the supply and demand curves cross.

29. ALWAYS REMEMBER! The equilibrium occurs where the quantity demanded is equal to the quantity supplied.

30. ALWAYS REMEMBER! If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied.

31. ALWAYS REMEMBER! Excess demand or a shortage will exist. If the price is above the equilibrium level, then the quantity supplied will exceed the quantity demanded.