This presentation focuses on demand and supply analysis.Emphasis is on knowledge and understanding for the following: 1. Demand 2. Law of demand 3. Quantity vs. Quality 4. Individual demand vs. Market demand 5. Factors affecting demand of commodity 6. Supply 7. Law of supple 8. Factors affecting supply of commodity

1. ANALYSIS OF SUPPLY
AND DEMAND
Marikriz M. Paulino, MBA
ECONOMICS

2. WHAT IS DEMAND?
Desire to
posses a thing
Ability to pay
for it
Willingness in
utilizing it
Quantity Demanded refers to the amount (quantity) of a
good that buyers are willing to purchase at alternative
prices for a given period.
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3. LAW OF DEMAND
DP P D
When the PRICE goes UP;
the DEMAND goes DOWN
When the PRICE goes DOWN;
the DEMAND goes UP
A fundamental principles of economic varies inversely with
price, other things constant (ceteris paribus) “Ceteris
Paribus is a Latin term for all other things being equal or
held constant.”
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4. • Quantity the amount or the number of material or
immaterial thing not usually estimated by spatial
measurement.
• Quality is the degree to which a set of inherit
characteristics fulfills requirements.
Price of meat decreases = Quantity demanded for meat will increase
Illustration:
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5. PRICE AND QUANTITY DEMANDED: THE LAW OF DEMAND
Demand schedule, a table
showing how much of a given
product a household would be
willing to buy at different prices.
Demand curve, a graph
illustrating how much of a
given product a household
would be willing to buy at
different prices.
Price of a
regular size
chicken egg
(Php)
Quantity
demanded per
week
9.00 800
8.50 650
7.00 500
7.50 350
6.00 200
5.50 50
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6. INDIVIDUAL DEMAND VS. MARKET DEMAND
Price of a Milk
Tea – Small (Php)
M.
Corona
25 20
30 15
35 10
45 5
A.
Virus
11
5
2
1
Market
31
20
12
6
+ =
• 2 consumer: M. Corona and A. Virus
Market Demand: Relationship between the total quantities
of goods demanded by all consumers in the market and its
price.
Individual Demand: Relationship of the quantities of goods
demanded by a single buyer and their price.
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7. FACTORS AFFECTING THE DEMAND OF A COMMODITY
INCOME
PRICES OR
SUBSITITUTES
TASTE AND
FASHION
POPULATION
NO OF BUYERS
EXPECTA-
TIONS
Income of
consumer
can
influence
the
purchasing
decision of
individual.
Aside from the price of
the commodity being
sold, the demand for a
good or service may
also be influenced by
prices of other goods
and services.
Substitute Goods –
goods that can be used
in place of other
goods.
Complementary goods
– goods that are used
together with another
good.
Changes in
tastes and
fashion can
bring significant
changes in the
demand of
good.
Demand depends on
the size of the total
population or
number of buyers in
the market. a larger
population will bring
out an increase in
demand.
Expectation of
consumers on
future events
would give an
impact on current
demand.
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8. WHAT IS SUPPLY?
Good/Services
willing to sell
Services sold at a
given price to
maximize profit
Maximum quantity
of goods producers
are willing to offer
Quantity Supplied refers to the amount (quantity) of a good
that sellers are willing to make available for sale at
alternative prices for a given period.
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9. LAW OF SUPPLY
S P
When the PRICE goes UP;
the SUPPLIES goes UP
When the PRICE goes DOWN;
the SUPPLIES goes DOWN
The law of supply states that all others factors remaining
unchanged the supply of a good increases as its price
increases.
P S
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10. PRICE AND QUANTITY SUPPLIED: THE LAW OF SUPPLY
Supply schedule, a tabular
presentation showing the relationship
between a commodity’s market price
and the amount of that commodity
that producers are willing to produce
and sell, other things held equal.
Supply Curve, a graphical illustration
of the supply schedule. The supply
curve moves in an upward, sloping
direction, indicating the direct
relationship between price and
quantity supplied.
Price per unit Quantity
Supplied
5, 000 5, 000
6, 000 6, 000
7, 000 7, 000
8, 000 8, 000
9, 000 9, 000
10, 000 10, 000
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11. FACTORS AFFECTING THE DEMAND OF A COMMODITY
PRICE OF
RELATED GOODS
COST OF
PRODUCTION
NO OF
SUPPLIERS
TAXES AND
SUBSIDIES
TECHNO-
LOGY
Substitute Goods – when
the price of goods
increase the price of
substitute goods will
decrease. Therefore,the
manufacturerwill reduce
their supply.
Complementary Goods –
when the price of cars
increase, producerswill
increase the production of
cars. So, the supply of card
will increase. Since cars
and petrol are
complementary , the
supply of petrol will
increase.
Supply is highly
dependent on
the cost of the
production.
Supply is also
dependent on
the numbers of
sellers.
Payment for taxes
is an added
component of the
cost of
production.
Subsidies are
money given to
firms by the
government to
help them
maintain their
current or desired
output..
Improvements
in
technology
make a
possible the
production
of goods
and services
at lower
costs.
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12. MARKET EQUILIBRIUM
A state of perfect economic balance in which
demand equal supply.
Equilibrium the state of equality
or balance between market
demand and market supply.
Prices are demand and supplies
are out of balance are called
Disequilibrium.
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13. SURPLUS AND SHORTAGE
When the quantity
supplied of a good,
service, or resource
is greater than the
quantity demanded.
When the quantity
demanded of a
good, service, or
resource is greater
than quantity
supplied.
Surplus Shortage
 Any price above the equilibrium
causes an excess supply and any
price below the equilibrium
causes a shortage.
 The market if uncontrolled will
automatically arrive at the
equilibrium price at which
supply equals demand.
 Any shift in demand and supply
curves will result in a new
equilibrium
 Comparison of equilibrium is
called comparative statistics.
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14. THE RATIONING FUNCTION
Alternative Price Control Mechanism: A price
ceiling is the legal maximum price for a good or
service, while a price floor is the legal minimum
price.
Where there is a shortage of a product, price will
rise and deter some consumer buying the
products.
Ex: Rising cost of renting, Higher food prices, Tickets for major
events.
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15. References:
 Raw pictures by Google Image
 Wikipedia
 Series of presentation in Economics
END OF THE SLIDE
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