This document provides an overview of microeconomics concepts related to demand and supply, including: 1. Microeconomics analyzes consumer and producer behavior in markets. 2. Demand refers to how much of a good consumers are willing and able to purchase at different prices, shown through demand functions, schedules, and curves which show an inverse relationship between price and quantity demanded. 3. Supply represents the amount of a good producers are willing to provide at different prices, shown through a positive relationship between price and quantity supplied, as stated in the law of supply.

1. Note…
Nothing can be reproduced in whole or in part
in any manner without prior permission from
the presenter.

2. 2nd Quarter

3. Microeconomics
Is the study of the small unit of the economy,
the individual analysis about the consumer, the
producer, and the market.
The behavior of consumer and producer in the
market is a central concern in microeconomics.

4. Chapter 22
Analysis of Demand

5. Demand
Refers to the number of goods and services
that consumers are willing and able o buy
at alternative prices.
Demand Function
Demand Schedule
Demand Curve
Law of Demand
Market Demand

6. Demand Function
 Is a mathematical expression of the
relationship of two variables. The
Quantity demanded (Qd) as the dependent
variable and price (P) as the independent
variable. Qd changes as price changes. A
sample mathematical equation is given as
follows:
Qd = 200 – 10P

7. Qd = 200 – 10P
Assume that the 200 is the quantity of the
product, which the consumer does not want to buy
because the price is so high, for example at Php20.
what does the demand function say? A consumer
will only buy the product if the price is lower than
Php20. the value of 10P shows the change in Qd. the
negative sign indicates he inverse relationship
between Qd and P. let us have an example in
equation, Qd= 200 – 10P. The price of pineapple is
Php20, Qd is 0. if the price becomes Php18, Qd is 20
pieces. Substitute the price Php20 and Php18 in P
respectively to get the quantity demanded.

8. A. Qd= 200 – 10(20)
Qd=200 – 200
Qd= 0
B. Qd= 200 – 10(18)
Qd= 200 – 180
Qd= 20
What does it show? The demand function shows
clearly the inverse relationship of quantity demanded and
price for a certain product. From the demand function
that we use, we can make a table showing the
relationship of two variables.

9. Demand Schedule
A demand schedule is a table showing
the units of the product, which the consumer
is willing and able to buy at different prices.
It shows the inverse relationship of the
variables.
Point Qd Price
A 0 20
B 20 18
C 40 16
D 60 14
E 80 12
F 100 10
G 120 8
H 160 4

10. we can check if the price is correct by
substituting the values for Qd. In our equation Qd=
200 – 10P, deduct the given Qd, which is 40 to 200.
(200 – 40= 160) then divide it by 10 (160+10=16).
So whatever is given, Qd or P, you can
complete the demand the demand schedule with the
use of the demand function. You will notice on the
table that as price increases, the willingness of the
consumers to buy the product, which is pineapple,
decreases if all other factors remain constant or
ceteris paribus, a Latin phrase which means, “all
other things remain constant”.

11. Demand Curve
Is a graphical representation of the
inverse relationship of price and quantity
demanded. From the demand curve can be
shown. Two axes, the horizontal and vertical
represent a graph. Price is in the Y – axis
and Qd is the X – axis. Plot the data in the
demand schedule.
After plotting the Qd and Price,
connect all the points on the graph to form a
line which will represent the demand curve.

12. P
D 20 A
E 18 B
M 16 C
A 14 D
N 12
D 10 E
8 G
C
6
U
4 H
R
V 2 D
E 0
20 40 80 100 120 140 160

13. The demand curve shows that at Php20,
consumers are not willing to buy the pineapple but when
the prices becomes lower at Php18, the consumers are
willing to buy 20 pieces of pineapple. And when the
price is decreased to Php16 the quantity demanded
increases at 40 pieces. As price demanded decreases, the
quantity demanded for pineapple increases.
The demand curve shows a downward sloping
line, which signifies the increase relationship of the two
variables, the Qd and P. as the price increases, the
quantity demanded decreases assuming all other things
remain constant. Whatever tools we use – demand
function, demand schedule, and demand curve – the
increase relationship of price and demand is evident.

14. Law of Demand
The law of demand states that as the
price of the commodity increases, the
quantity of the commodity, which the buyer
is willing to buy will be lesser, and if the
price of the commodity decreases, the buyer
is willing to buy a greater quantity of the
product. The law of demand clearly states
the increase relationship of price and
quantity demanded of the product by the
consumer.

15. Market Demand
 Is the combination of all the demand of the consumers in
the market. Assuming there are five consumers in the market
who are willing and able to buy a kilo of sugar apple
Assuming that they will be facing the same demand
curve, Qd=200 - 10P. If you multiply the number of consumers
in the market which is 5 in the equation you will get the market
demand function, Qd=1,000 -50P.
There are consumers who are willing to buy a sugar
apple even at higher price, but still their demand increases as
price of sugar apple decreases. Market demand will not be
affected if one consumer decreases his demand.

16. Challenger
complete the demand schedule from the
mathematical equation
Point Price Qd
A 0
B 23
C 20
D 140
E 200
F 10
G 380

17. Chapter 23
Factors that Determine
Demand

18. Factors that Affect Demand
• Income
• Occasion
• Preference
• Population
• Expectation
• Price of Related Products

19. Change in price and the Demand
Curve
 Changes in prices results to change in
quantity demanded. It can be shown in the
movement along the curve with all other
things remaining constant

20.  When the demand curve shifts to the right
from D1 to D2, this shows the increase in
demand caused by the different factors
even when the price is constant.
……………………....

21. P 15
10
5
0

22. Factors that can shift the demand curve to
the right are:
Increase in income
Product preference
Expectation and speculation
Increase in the number of consumers
Celebration or occasion
Price decrease of a complementary
product

23. P 15
10
5
0

24. The factors that cause decrease in demand
are:
Decrease in income
Price increase of complementary good
Consumers do not speculate about price
increases
Decrease in the number of consumers
Price decrease of substitute goods

25. Chapter 24
Elasticity of Demand

26. Elasticity
 Measure of degree of responsiveness of
the change in the demand for a product
relative to price change.
 The response of Qd or quantity demanded
in every percentage of price change will
be known by computing the price
elasticity of demand.

27. Types of Elasticity
Elastic
Inelastic
Unitary

28. 1. Elastic
The response of quantity demanded in
every percent change in price is considered
elastic when he value is more than one in the
computation.
This kind of elasticity can be shown
graphically.

29. P
10
5
0
0 5 10 Q

30.  Explanation
A consumers are nor ready to accept
any price increase. The graph shows that
consumers are willing to buy more products
at a lower price.

31. Perfectly Elastic
P
10
5
0
0 5 10 Q

32.  Explanation
Consumer can vary at a determined
price of Php10. it means that demand is
perfectly elastic or changing across time.

33. 2. Inelastic
 The value of less than one represents an
inelastic demand. Consumer’s response is
less than the price change. If price
increase is one percent, the demand of
consumer decreases by less than one
percent. Consumers have no capacity to
decrease their demand even if there is a
price increase.

34. Perfectly Inelastic
P
10
5
0
0 5 10 Q

35.  Explanation
It shows that consumers will consume
products and services at certain quantity
even if the price is continuously increasing.
Consumers are willing to accept any price
increase and their quantity demanded will
no change even if the price increase is
continuous.

36. 3. Unitary
The response of consumer to price
change is unitary when the value of quantity
demand and the change in price is equal to
one percent. This means demand will
decrease by one percent when there is one
percent price increase.

37. Unitary
P
10
5
0
0 5 10 Q

38. Computation of Elasticity of
Demand
The formula in computing the price
elasticity (Ep) is :
%∆Q
EP =
%∆P
Where : ∆Q = Q2 – Q1
∆P = P2 – P1

39. Common Formula for Price elasticity is:
Q2 – Q1
Q1+Q2
__ 2___
EP =
P2 – P1
P1+P2
2

40. Let us apply the formula by using the
following data :
Q1 = 500 kilos of sugar
P1 = Php15 per kilo
Q2 = 450
P2 = Php22
…So, if we apply the formula of price
elasticity to the given data, you will come up
with:

41. 450 – 500
500+450
__ 2_ __
EP = 22 – 15
15+22
2
– 50
950
__ 2_ __
EP =
7
37
2

42. – 50
475__
EP = 7_
18.5
The next step is to multiply the numerator with the
denominator with the denominator. In this process,
get the reciprocal of the numerator before
multiplying.
-50 x 18.5
EP = 475 7
EP = -0.28

43. EP = -0.28
The answer is -028, which is inelastic
because it is less than 1 in value; we
disregard the negative sign. The consumer
cannot decrease his demand more than the
percentage price increase because product is
a necessity , which is sugar in this example.

44. Compute for the price elasticity and identify
its kind
1. Q1 = 50 pieces of mango
Q2 = 20 pieces of mango
P1 = Php8 /mango
P2 = Php12 /mango
1. Q1 = 4600 kilos of rice
Q2 = 440 kilos of rice
P1 = Php13 per kilo
P2 = Php19 per kilo

45. Chapter 25
The Nature of Supply

46. Supply
Supply represents the amount of goods
and services available for consumption at
different prices. The producers and sellers are
considered as suppliers.
The willingness and capacity of the
supplier is the basis of declaring the supply. In
the market. Supply refers to the quantity of
goods and services, which the supplier is
willing able able to sell at alternative prices.

47. Law of Supply
States that when P
the price of the
product is high,
producers are
willing to sell
more but if the 30
price is low,
producers tend to
15
decrease the
supply, assuming
all other things
0
remain constant. 10 25 Q

48. Chapter 26
Factors that Influence
the Elasticity Of
Supply

49. Factors that determine the
supply
1. Technology – the use of modern machineries and
technical knowledge in the production of goods
help the producer provide more sufficient
supply in the market.
2. Expectation - producers also expect and
sometimes peculate about the price
decrease/increase.
3. Number of Sellers – is a determinant of an
abundant supply of a product in the market.
4. Costs – in the production of goods, producers
have to pay the production cots and other
expenses like tax.

50. 5. Price of related products – the supply of
substitute and complementary good increase if the
price is high.
6. Subsidy – this refers to the assistance provided by
the government to small – scale businessmen and
farmers to enable them to produce more products.
7. Weather and Climate – affects the production of
goods especially the agricultural products If the
climate or weather fits the needs of the products,
sufficient supply is guaranteed to flow to the
market

51. Chapter 27
Market Equilibrium

52. Market Equilibrium
Is a market condition where
quantity supplied equals quantity
demanded. At this point, selling takes
place when the seller agrees to sell a
specific quantity of products equal to
the quantity which the buyer is
willing to buy. Equilibrium shows the
agreement between the seller and
buyer in terms of price and quantity
of the product. Market is the place
where the two actors meet.

53. Price Equilibrium
How can price equilibrium be
determined? In using the given
function of demand and supply, price
equilibrium can be computed. For the
demand function of Qd=83 – 4P and
supply function of Qs= - 22 + 11P;
substitute values for Qd=Qs, so Qd= 3
– 4P, Qs= - 22+11P. Combine both
and solve for each variable.
So we will get the : …..

54. Qs = Qd
The price -22+11P = 83 – 4P
equilibrium Qd= 83+22 = Qs= 11P+4P
is Php7. the Qd= 105 = Qs= 15P
buyer and 105 = 15P
seller agree 105/15 =7
to buy and Qd = Qs
sell the 83 – 4P =-22=11P
products at 83+22=11P+4P
the given 105=15P
price. P=7

55. Market Equilibrium
Equilibrium quantity refers to the
quantity of products that buyers and sellers
are willing to transact at a specified price.

56. P 15
E
Q S
U
I
L
10
I
B
R
I E
U
5
M
Price
And
Quantity D
0
5 10 15

57. Compute the Qd, Qs, and price based on the
demand and supply function
Qd = 600 – 5P; Qs = -200 + 15P
Qd Price Qs
20
250
40
30
700

58. Chapter 28
Price Control
and Price
Support

59. The Role of Government in
Pricing
The interaction of
demand and supply leads
to the establishment of a
market price. There are
times when the
government sets the price
of commodities based on
the government policy to
protect the public from
sudden change in the
market.

60. Price Ceiling
Refers to the highest price or
maximum price declared by the government
for a particular product. In other words, it is
the selling price of the product approved by
the government.

61. It is effect of the
implementation
of a price P
control. The
government is
doing this help
30
and protect the
consumers 20
against the
abuses of
businessmen and
sellers. 10 15 20 30
Q
Shortage

62. Floor Price
Refers to the lowest price in buying the
products of farmers.

63. Price support is
implemented to P
help the producers
recover their
production cost 30
and gain some
20
profit. Price
support is higher
than the
equilibrium 10 15 20 30
Q
Surplus

64. Chapter 29
Input and Output in
Production

65. Answer the following:
1. Is the Philippine government effective in
setting the price of the product in the
market? Why?
2. Do we need price control? Why?
3. How effective is the government in
declaring price control and price
support?

66. Production Function
Production deals with the produced goods and
services, which satisfy the needs of an individual.
The factors of production and are basically
composed of land, labor, capital, and entrepreneur.
The factors of production are considered the inputs
in production
After using the varied factors in producing
goods, the finished product is called output. It is the
result of utilizing and using the factors of
production.

67. • Raw materials
• Skills
• Labor Force
input •
•
Machineries
Land and services
• Rice
• Bread
• house
• Cars
output •
•
Clothing
Shoes, jewelry, and etc.

68. Chapter 30
Economic
Cost and
Production
Cost

69. Economic Cost
Is a cost that is related to the various
expenses in the business.
1. Production cost – each factor of
production receives payment for the
services like wages for workers, rent for
land, and interest for capital. All payments
to factors of production are called
Production Cost.

70. 2. Fixed Cost – Total Fixed Cost (TFC) is the sum
of all the expenses for the payment of the fixed
input. It is constant in any level of production like
rent for the land and building, which used in
business.
3. Variable Cost – is a cost that goes with the level
of production is allow, variable cost is also low; if
the production is high, variable cost is also high. It
is also known as Total Variable Cost (TVC).
Total Fixed Cost + Total Variable Cost = Total Cost

71. 4. Total Cost – the total expenses in producing
goods and services is called Total Cost. Increase
in total cost depends on the increase in variable
cost. To sum up this cost, add the fixed costs and
variable costs.
Cost for Every Product
 Average Fixed Cost (AFC)
 Average Variable Cost (AVC)
 Average Cost (AC) or Average Total Cost (ATC)
 Marginal Cost (MC)

72. Table for Production Cost in a
Short – run Market Period
Total Total Total Total Average Average Average Marginal
Product Fixed Variable Cost Fixed Variable Total Cost
(TP) Cost Cost (TC) Cost Cost Cost (MC)
(TFC) (TVC) (AFC) (AVC) (ATC)
0 20 0 20 - 0 0 -
1 20 10 30 20 10 30 10
2 20 19 39 10 9.5 19.5 9
3 20 30 50 6.67 10 16.67 11
4 20 45 65 5 11.25 16.25 15
5 20 62 82 4 12.4 16.4 17
6 20 80 100 3.33 13.34 16.66 18
7 20 104 124 2.86 14.85 17.71 24
8 20 140 160 2.5 17.5 20 35

73. Miscellaneous Cost
1. Implicit Cost – is the cost that is
related to the payment received by the
owner of the business. The owner of the
business receives the rent for the building
owned by the businessman himself. This is
included in the implicit cost.
This kind of cost is computed to know
the exact cost running the business.

74. 2. Explicit Cost – includes payments to the
factors of production to a person other than the
owner of the business.
3. Opportunity Cost – giving up something for
it to be used in its alternative way is the opportunity
cost. A particular resource could have provided an
income to the owner if the use of it was not given up.
Any Question??

75. Chapter 31
Perfect Competition

76. 2 classification of Market:
Perfect
Competition
&
Imperfect
Competition

77. Perfect Competition
A market is described to be in a state of
perfect competition when businessmen have the
absolute power to compete among themselves. It is
known as competition among the many
The Price and Level of Production in
The price of the product depends on the market mechanism
Perfect Competition
and the interaction between the sellers and buyers
Here are of some of the characteristics of this
structure:
 Nobodybuyers and and influence the
Many can control sellers of the product
 Homogenous Products
price in the market . No sellers and
 buyers can to enter and leave the industry
Freedom dictate the price.
 Sufficient knowledge

78. Chapter 32
Monopoly
&
Monopsony

79. The existence of the characteristics of
perfect competition paved the way for the
market with imperfect competition. Barriers
are set for the entry of businessmen in the
industry. There are only few players in the
market who control and manipulate the
price of the commodity.
Imperfect Competition is known as
among the few.

80. Monopoly
This is a market structure with only one seller
and producer who controls the biggest
portion of supply in the market. There is a
big difference between monopoly and perfect
competition.
Characteristics of Monopoly
1. One seller
2. Product Differentiation
3. Barring the competition

81. Advantages and disadvantages
of Monopoly
Monopoly produces goods and services, which
are necessary in the economy like electricity, water,
transportation and communications, and other products.
The government cannot provide all these goods and
services for the citizens so the private sector, through the
monopolies, are given the opportunity to help the
government in giving out these necessary services to the
people.
The power of the monopoly is to control and
manipulate the supply of product, which affects the
quality of the products. Despite the low – quality of
products produced, consumers still buy them because it
is the only ones available. It happens when the products
have no close substitutes, which is one of the
characteristics of monopoly.

82. Monopsony
Is a market structure where there is only one
buyer in the market. It is the exact opposite of monopoly
where there are many buyers but only one supplier. At
this point the power of the buyer prevails. The buyer has
the power to determine the price level that will benefit
him. He has the opportunity to choose high – quality
products and services.
A government is a Monopsony in buying the
different services for the public. The government from
the top officials down to the rank and file. The salaries
and wages of these employees are based on the
government’s financial capacity. As a Monopsony,
government can control the price of the said services.

83. Identify the market structure according
to the following characteristics.
1. Only one consumer
2. Having a cutthroat competition
3. Homogenous product
4. Only one seller
5. Can control the price of the product

84. Chapter 33
Oligopoly and
Monopolistic
Competition

85. Oligopoly
It is a market structure where the
number of products is few. Products are
almost similar. Brand name is used to
differentiate the products. The decision of
business firms is coordinated regarding the
pricing of the products and the setting of the
quantity of production because it depends on
what each business firms in the industry
decides to supply.

86. The reactions and activities of the
oligopolists can be explained by the
following:
Business under the oligopolistic
structure connive to attain the
greatest benefit in the business. To
 Collusion
avoid competition, oligopolists
 No price competition through
come up to an agreement
collusion. They discuss the right
 Common reaction
price that suits their satisfaction.

87.  No price competition
In order to avoid price decrease on
production, oligopolists agree on price
collusion. Although here is an agreement on
price among them, it does not mean that
there is no competition in the market. Each
oligopolist has the freedom to compete on
quality, design, and advertisement in selling
their product.

88.  Common reaction
When it comes to price and quantity of
the products, the oligopolists have similar
reactions. They know that any reaction from
any business firm affects the others. So they
follow what they agreed on.

89. Monopolistic Competition
Is known as the combination of
monopoly and perfect competition. The
main characteristics of the two market
structure exist. There are many sellers and
buyers of the same products. Products have
been identified through brand name. this is
the reason why advertisement is very
important in this structure.

90. Monopoly
Collusion
Cartel
Oligopoly

91. Identification: identify the market structure described
below. Choose your answer from the box and write it
on the blank before each number
Oligopoly Perfect Competition
Monopoly Monopolistic Competition
1. Suppliers of the product are few
2. Prices are varied
3. Production is determined through the MR = MC
approach
4. Describes a kinked demand is a big help
5. Advertisement is a big help

92. END…
Mwah
Presented by: Ms. Princess M . Coronado

93. Special thanks to :

94. Thank you…
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