Understanding Market Demand

• Markets are institutional arrangements that enable buyers and sellers to exchange goods and services.
• Every market has unique characteristics, but all markets share demand by people for products/resources, and a willingness by producers to supply those products/resources.

Demand

• Demand describes the various quantities of a resource, good, or service that consumers are willing and able to purchase at different prices at any given time.
• Market demand is the sum of all individual demand.

Law Of Demand

• Quantities of a product that consumers are willing to buy increase as prices remain constant.
• Quantity demanded refers to the amount of a good that individuals are willing to buy at a specific price during a period.
• A demand schedule is a table that shows how much of a product will be purchased at various prices at a specific time and place.

Demand Curve

• The demand curve represents the relationship between price and quantity demanded, visually displayed as a graph of the demand schedule.
• An example is: At a price of 300 Php, the quantity demanded is 10; at a price of 100 Php, the quantity demanded is 10
• From left to right the gradient is downward.
• Quantity demand is the amount of units of a good that people are willing to buy at a particular price
• Change in quantity demanded happens when a change occurs in the product price changing one point to another on the demand curve

Determinants of Demand

• Consumer tastes and preferences
• Consumer income
• Population
• Prices of related goods
• Expectations of future prices

Elasticity of Demand

• Elasticity of demand measures how much the quantity demanded changes with a change in price.
• Elasticity of Demand = Percentage change in Quantity demanded / Percentage change in Price
• Determinants of the elasticity of demand are: luxuries vs. necessities, proportion of income, sustainability, and time.

Supply

• Supply refers to the quantity of items that sellers are prepared to sell at varying prices during a specific timeframe.
• Market supply represents the aggregation of all individual supplies.

Supply Schedule

• The supply schedule shows the quantity of items sellers will offer for sale at different prices, such as the number of T-shirts they will make at various prices.

Supply Curve

• The gradient slopes upward from left to right.
• In the supply schedule of PE T-shirts at your school on August 1, 2020 at a price of 300.00 Php, the quantity supplied is 50 and at a price of 100.00, the quantity supplied is 10.
• The quantity supplied is the number of goods that individuals are willing and able to sell at a specific price during a period.
• Change in quantity supplied occurs when there is a change in price causing a shift along the supply curve.

Law of Supply

• The law of supply states that sellers tend to offer more of an item at higher prices and less at lower prices.

Elasticity of Supply

• Technological progress
• Number of sellers
• Cost of production
• Expectations of future price
• Limited amount of raw materials
• Difficulty of producing good
• Time period
• Production surplus
• Inventories
• It is determined to be the proportionate change in quantity supplied to the proportionate change in price.
• High elasticity means the supply is sensitive to price change, low elasticity indicates little sensitivity to price change.
• Elasticity of Supply = Percentage change in Quantity Supplied / Percentage change in Price

Market Equilibrium

• Market equilibrium is when the market price is established through competition, in which the amount of goods/services bought is equal to those produced by sellers.
• An increased demand quantity will lead to a price increase until demand and supply are equal.