Applied Economics CS Past Notes PDF

12 ABM APPLIED ECONOMI CS ALDEN A. BADILLOS Teacher MARKET DEMAND, MARKET SUPPLY and MARKET EQUILIBRIUM  OBJECTIVES Determine the State the Construct concepts of and analyze laws of market demand, dem...

12 ABM APPLIED ECONOMI CS ALDEN A. BADILLOS Teacher MARKET DEMAND, MARKET SUPPLY and MARKET EQUILIBRIUM  OBJECTIVES Determine the State the Construct concepts of and analyze laws of market demand, demand, demand supply and supply and and equilibrium their curves supply, and  GRAPH ANALYSIS Directions: Please analyze the graph and answer the following questions. 1. Locate the equilibrium point on the demand and supply graph.  GRAPH ANALYSIS Directions: Please analyze the graph and answer the following questions. 2. If the price is above the equilibrium level, what could you predict with the demand and supply? a. oversupply/surplus b. Shortage/scarcity c. Demand and supply are equal  GRAPH ANALYSIS Directions: Please analyze the graph and answer the following questions. 3. If the price is below the equilibrium level, what could you predict with the demand and supply? a. oversupply/surplus b. Shortage/scarcity c. The quantity supplied is less than quantity  FILL IN THE BLANKS 1. The law of ____________ applies during online sales of shoes; that is when consumers rush to buy products at 50% discounts. a. The law of demand b. The law of supply c. Market equilibrium  FILL IN THE BLANKS 2. The law of ____________ applies when producers supply more pineapple juices at a higher price; selling at higher quantity at a higher price increases revenue. a. The law of demand b. The law of supply c. Market equilibrium LOOKING BACK TO OUR LESSON Identification. Identify the following problems that may exist in the local and global economies during production of goods and services. LOOKING BACK TO OUR QUESTIONS: LESSON If the economic problem is focused on 1. _________ the legalities of the production 2. _________the nature of goods to produce 3. _________the allocation of the products among members of the society A. Whom to produce B. What to produce 4. _________the method of production of products C. What provision to D. What method or strategy is implement effective and efficient  BRIEF INTRODUCTION Economics helps us solve the problem on excess supply and excess demand, and lead it to a balanced supply and demand. In our needs, we do not want oversupply. It means wastage of income. For entrepreneurs, it is not efficient if their stocks or supplies are greater than the actual demand. It is a loss not revenue.  BRIEF INTRODUCTION In economics, there are terms that you must learn to understand the better market situations. A DEMAND or the amount of good or service consumers are willing to purchase at each price. If customers cannot pay for it, there is no effective demand. PRICE is what a buyer pays for a unit of the specific good or service. The total number of units purchased at price is called the QUANTITY DEMANDED.  LAW OF SUPPLY AND The law of supply and demand DEMAND explains the interaction between the sellers of a product and the buyers. It shows the relationship between the availability of a particular product and the desire (or demand) for that product has on its price.  LAW OF DEMAND If all other factors remain equal, the higher the price of a good, the fewer people will demand that good. “the higher the price, the lower the quantity demanded” and vice versa. The amount of a good that buyers purchase at a higher price is fewer because as the price of  LAW OF DEMAND The demand curve is always downward sloping due to the law of diminishing marginal utility. Marginal utility, in economics, the additional satisfaction or benefit (utility) that a consumer derives from buying an additional unit of a commodity or service. For example, if the price of video game drops, the demand for  LAW OF DEMAND Plot or graph the data and interpret the result. PRODUCT: BREAD PRICE (PESOS) QUANTITY DEMANDED 8.00 10 7.00 20 6.00 30 5.00 40 4.00 50 3.00 60 2.00 70 1.00 80  LAW OF DEMAND Interpretation: “The higher the price, the lower the quantity demanded” and vice versa. (Law of Demand)  LAW OF DEMAND FACTORS AFFECTING DEMAND a. Income of buyers b. Number of potential buyers c. Preferences d. Complementary products  LAW OF SUPPLY The law of supply demonstrates the quantities that will be sold at a given price. The higher the price, the higher the quantity supplied and vice versa. Producers supply more at a higher price because selling at higher quantity at a higher price increases revenue.  LAW OF SUPPLY The law of supply says – as the price of a product increases, companies will produce more of the product. When graphing the supply vs. the price, the slope rises  LAW OF SUPPLY Plot or graph the data and interpret the result. PRODUCT: BREAD PRICE (PESOS) QUANTITY SUPPLIED 1.00 100 2.00 200 3.00 300 4.00 400 5.00 500 6.00 600 7.00 700 8.00 800  LAW OF SUPPLY INTERPRETATION: The higher the price, the higher the quantity supplied and vice versa.  LAW OF SUPPLY FACTORS AFFECTING SUPPLY a. Production capacity b. Production costs such as labor and materials c. The number of competitors d. Ancillary factors such as e. Material availability f. Weather, and g. Reliability of supply chains HOW DO SUPPLY AND DEMAND CREATE AN EQUILIBRIUM PRICE EQUILIBRIUM PRICE? OR MARKET-CLEARING PRICE is the price at which the producer can sell all the units he wants to produce and the buyer can buy all the units he wants. Supply curve slopes upward HOW DO SUPPLY AND DEMAND CREATE AN In the equilibrium EQUILIBRIUM PRICE? point, the two slopes will intersect. The market price is sufficient to induce suppliers to bring to market that same quantity of goods that consumers will be willing to pay for at  A demand curve shows the relationship between quantity WHAT I HAVE demanded and price in a given market on a graph The law of demand LEARNED? states that a higher price typically leads to a lower quantity demanded. A supply curve shows the relationship between quantity supplied and price on a graph  The law of supply says that a higher price typically leads to a WHAT I HAVE higher supplied. quantity The equilibrium price LEARNED? and equilibrium quantity occur where the supply and demand curve cross. The equilibrium occurs where the quantity demanded is equal to the quantity supplied.  If the price is below the equilibrium level, then the quantity demanded will exceed the quantity supplied. WHAT I HAVE Excess demand or a shortage will exist. If LEARNED? the price is above the equilibrium level, then the quantity supplied will exceed the quantity demanded.  UNDERSTANDING 1. CHECKin the price An increase of electricity bill will force you to: a.Increase your demand for kerosene heaters and coal b.Increase your demand for light bulbs and aircon c.Increase your demand for stereos and videoke d.Increase your demand for TV’s and use of gadgets  UNDERSTANDING 2. CHECK The market demand curve for apple shows the: a. Effect on market supply of a change in the demand for apple b. Quantity of an apple that consumers like to buy at different prices c. Marginal cost of producing and selling different quantities of an apple d. Effect of advertising expenditures on the market price of an apple  UNDERSTANDING 3. CHECK If Toyota firm is producing a car faster than people want to buy, there is a. An excess supply of car and price can be expected to decrease b. An excess supply of car and price can be expected to increase c. An excess demand of car and price can be expected to decrease d. An excess demand and price can be THANK YOU