The Basic Analysis of Demand and Supply

1. The Basic Analysis of
Demand and Supply

2. • A market is where buyers and sellers meet.
• Take note that when there is demand for a good
or service, there is a market.
Market

3. Two types of Market:
1. Wet Market
2. Dry Market

5. Methods of Demand Analysis
1. Demand Schedule
2. Demand Curve
3. Demand Function

7. Hypothetical Demand Schedule for Rice per month
Price Quantity Demand
25 10
20 20
15 30
10 40
5 50
0 60

8. Demand Curve

9. Demand Graph

10. The Law of Demand
If price goes UP, the quantity
demanded of a good will go DOWN.
Conversely, if price goes DOWN, the
quantity demanded of a good will go
UP ceteris paribus.

11. Ceteris Paribus
“all other things being equal”

14. Quiz Time

15. Hypothetical Demand Schedule for candy per month
with the given slope = 10
Price Quantity Demand
5 10
4
3 30
2
1 50
0 60

16. Change in Quantity Demanded
Vs.
Change in Demand

19. Forces that cause the demand curve to change.
• Taste or Preferences
• Changing Incomes
• Occasional or Seasonal Products
• Population Change
• Substitute and Complementary Goods
• Nominal or Normal Good and Inferior Good
• Expectations of Future Prices

20. Example Situation:
Situation 1: We already know that the price of gasoline in the domestics
market tends to change every now and then, because of the price changes, private
cars owners tends to lessen the consumption of gasoline during high prices by
not using their cars, but tend to increase their consumption during low prices by
utilizing more their cars.
Situation 2: On the other hand, because of the increase in the price of
gasoline, the sale of cars has declined. This is because cars and gasoline are
complementary goods so that the increase in the price of gasoline will result in a
decline in the sale of cars. Of course cars will not run without gasoline so that the
higher the price of gasoline (for example P100.00 per liter) the lower will be
demand for cars. The reverse will happen if the price of gasoline will decrease to,
say P30.00 per liter or even lower.

22. Methods of Supply Analysis
1. Supply Schedule
2. Supply Curve
3. Supply Function

27. Change in Quantity Supplied
Vs.
Change in Supply

30. Forces that cause the supply curve to change.
• Optimization in the use of factors of production.
• Technological Change.
• Future Expectations.
• Number of Sellers
• Weather Conditions
• Government Policy