The document discusses market equilibrium and how it relates to supply and demand. It defines market equilibrium as the state where the quantity demanded is equal to the quantity supplied at a certain equilibrium price. It explains that shortage occurs when demand exceeds supply, causing the price to fall below equilibrium. Surplus happens when supply exceeds demand, so the price rises above equilibrium. The Philippines sometimes experiences rice shortages due to changes in supply and demand.

1. Applied Economics
General Academic Strand | Accountancy, Business, and Management
Lesson 2.2
Market Equilibrium

2. The Philippines is an
agricultural country.
Rice is the most
important crop of the
country.
2

3. However, the country is
experiencing rice
shortage and thus,
began importing rice
from neighboring
countries.
3

4. Why does the Philippines
experience rice
shortage? How can the
country solve its rice
shortage issues?
4
4

5. Learning
Competency
5
Explain how equilibrium price and equilibrium
quantity are determined (ABM_AE12-le-h-4).

6. Learning
Objectives
6
● Explain market equilibrium.
● Apply the law of demand and supply to
illustrate how equilibrium price and quantity
are determined.

7. Essential
Question
7
What happens to the market when the supply
or demand changes?

8. 8
Market Equilibrium
state of balance when
quantity demanded (qd)
is equal to the quantity
supplied (qs)
qd qs
qd = qs

9. 9
Market Equilibrium
● Equilibrium quantity is
the quantity demanded
and quantity supplied at
equilibrium (qd = qs).
● Equilibrium price (also
marketing clearing
price) is the price where
qd = qs.
qd qs

10. 10
Market Equilibrium
I would like to buy your
50 cavans of rice at
₱720 per cavan. Okay! I could sell my 50
cavans of rice at ₱720 per
cavan.
rice buyer
rice seller

11. 11
Recall: Demand and Supply Curves
Demand curve
As the price of goods and
services increases, the
quantity demanded
decreases.

12. 12
Recall: Demand and Supply Curves
Supply curve
As the price of goods and
services increases, the
quantity supplied also
increases.

13. 13
Market Equilibrium
Market equilibrium exists at the point where demand and
supply curves intersect.
Market equilibrium

14. 14
Market Disequilibrium
state of imbalance
where quantity
demanded (qd) is not
equal to the quantity
supplied (qs)
qd ≠ qs
qd
qs

15. ● excess demand in the
market
● quantity demanded is
greater than quantity
supplied
15
Market Disequilibrium
Shortage
qd > qs
qd
qs

16. price falls below equilibrium
price
16
Market Disequilibrium
Shortage

17. Demand for face masks and
its raw materials increased
as it became an essential
product due to the COVID-
19 pandemic. Hence,
shortage of face mask
occurred in the market.
17
Market Disequilibrium
Example of Shortage

18. 1. increase in demand for goods and services
2. decrease in supply of goods and services
3. government interventions such as imposing
price ceilings
18
Market Disequilibrium
Factors Affecting Shortage

19. ● excess supply in the
market
● quantity supplied is
greater than quantity
demand
19
Market Disequilibrium
Surplus
qs > qd
qs
qd

20. price is shown above
equilibrium price
20
Market Disequilibrium
Surplus

21. In 2019, the Philippine
market experienced a
surplus of two million
kilograms of mangoes. At
the time, the country
produced an excess supply
of mangoes due to El Niño.
21
Market Disequilibrium
Example of Surplus

22. 1. increase in supply of goods and services
2. decrease in demand for goods and services
3. government interventions such as imposing
price floor
22
Market Disequilibrium
Factors Affecting Surplus

23. Try This!
Rearrange the letters to identify what is being
described below.
1. It is the quantity demanded and supplied
at equilibrium.
23
E I I I U M B L R Q U
A U I N Q T T Y

24. Try This!
Rearrange the letters to identify what is being
described below.
2. It is the state of balance where the quantity
supplied that is equal to the quantity
demanded.
24
A E M K R T
L U R E U M B Q I I I

25. Try This!
Rearrange the letters to identify what is being
described below.
3. It is the price where both the price for the
quantity demanded is equal to the price
for the quantity supplied.
25
U E I M B I U I L R Q
E I C P R

26. Try This!
Rearrange the letters to identify what is being
described below.
4. It is a market condition where quantity
demanded is greater than the quantity
supplied.
26
A E O G H R S T

27. Try This!
Rearrange the letters to identify what is being
described below.
5. It is a market condition where there is an
excess supply.
27
L P R S S U U

28. Wrap-Up
● Market equilibrium is a state of balance
where the quantity supplied (qs) that the
sellers would like is equal to the quantity
demanded (qd) by the buyers at a given price.
28

29. Wrap-Up ● Equilibrium price (also called marketing
clearing price) is the price where both the
price for the quantity demanded is equal to
the price for the quantity supplied.
● The quantity demanded and quantity supplied
at equilibrium is also called equilibrium
quantity.
29

30. Wrap-Up ● Shortage happens when there is excess
demand. Price falls below the equilibrium
price.
● Surplus happens when there is excess supply.
Price falls above the equilibrium price.
30