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Applied Economics Week 3

This document provides an overview of key concepts in applied economics, including: 1) It defines demand, supply, market, price, and quantity demanded and discusses how the laws of demand and supply relate higher/lower prices to quantity. 2) It explains how equilibrium price is the price where the quantity suppliers want to produce equals the quantity consumers want to buy. 3) It includes examples of hypothetical demand and supply schedules and functions for vinegar and fish and how to use them to determine equilibrium price and quantity.

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Maria Felixa Ancheta
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47 views

Applied Economics Week 3

This document provides an overview of key concepts in applied economics, including: 1) It defines demand, supply, market, price, and quantity demanded and discusses how the laws of demand and supply relate higher/lower prices to quantity. 2) It explains how equilibrium price is the price where the quantity suppliers want to produce equals the quantity consumers want to buy. 3) It includes examples of hypothetical demand and supply schedules and functions for vinegar and fish and how to use them to determine equilibrium price and quantity.

Uploaded by

Maria Felixa Ancheta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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APPLIED

ECONOMICS
Module 2 – Week 2
TO P I C S
OB JE CTI VES
TERMS TO REMEMBER:

• demand
• supply
• market
• price
Module 2 – Week 2
• quantity demanded
• equilibrium price
DEMAND
the amount of good or service consumers are willing to purchase at
each price

SUPPLY
total amount of specific goods or
services that is available to
consumers
Law of Demand
“the higher the price, the lower the quantity
demanded” and vice versa.

Quantity
Price
Demand

Quantity
Price Demand
Law of Supply
“as the price of a product increases, companies will
produce more of the product

Price Quantity
Supply

Price Quantity
Supply
LET US
WAT C H
THIS
VIDEO
FA C T O R S A F F E C T I N G D E M A N D & S U P P LY
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.
Equilibrium 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 that price.
D E M A N D A N D S U P P LY F U N C T I O N

Ta b l e 1 : H y p o t h e t i c a l m o n t h l y d e m a n d
schedule for vinegar Qd= 6 - P/2
Qd= 6 – P/2 Qd= 6 – P/2
Price Quantity demanded (Qd)
= 6 – (2)/2 = 6 – (4)/2
0 6 =6–1 =6–2
2 5 =5 =4

4 4 Qd= 6 – P/2 Qd= 6 – P/2


6 3 = 6 – (6)/2 = 6 – (8)/2
=6–3 =6–4
8 2
=3 =2
10 1
Qd= 6 – P/2
= 6 – (10)/2
=6–5
=1
D E M A N D A N D S U P P LY F U N C T I O N
Ta b l e 2 : S u p p l y S c h e d u l e o f
Pedro for Fish in One week
Qs= 100 + 5P
Qs= 100 + 5P Qs= 100 + 5P
Price Quantity supplied (Qs)
= 100 + 5(20) = 100 + 5(40)
0 100 = 100+100 = 100+200
20 200 = 200 = 300

40 300 Qs= 100 + 5P Qs= 100 + 5P


60 400 = 100 + 5(60) = 100 + 5(80)
= 100+300 = 100+400
80 500
= 400 = 500
100 600
Qs= 100 + 5P
= 100 + 5(100)
= 100+500
= 600
S H O RTA G E A N D S U R P L U S
S H O RTA G E A N D S U R P L U S
A C T I V I T Y:
Using the following demand & supply function:
Price Qd Qs
 compute for the quantity demand and quantity
supply of Robert given the following prices for 0 60 5
bottled water
 Construct the demand & supply curve in a graph 2
 and identify the equilibrium price and quantity,
4
place the equilibrium point on the graph
6

10

12

14

16
THANK YOU

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