WEEK 10

Concepts and Principle of

Demand and Supply Analysis
Intended learning outcomes
At the end of the week, students are exected to be able
to;

1. Identify the concepts and principles related to

demand and supply
2. Analyze the effect of changes in the different
determinants of demand and supply.
3. Calculate Simple Demand Projection
Intended Learning Outcome No 1

Identify the concepts and principles related to

demand and supply
Demand and Supply Concepts

Demand Supply
BUYER SELLER
Need/Desire to own The ability to
something produce has the
capacity to buy
Ability to buy resources and is a
risk taker
Willingness to pay
the given price Willingness to sell
at a given price
Motivated by
Satisfaction Motivated by profit

As price decreases, As the price

more quantity is increases, more
demanded quantity is
PRICE supplied
Let’s Practice
1. Elena always dreams of buying a smartwatch, so she
works hard to save money. She saved Php5,000 from
her allowances; she allocated 3,000 for a smartwatch
and 2,000 for a pair of shoes. She went to the store
and saw that a smartwatch was worth Php 3,500.
Considering this scenario, can we conclude that there
is Demand for Smartwatch?
Let’s Practice
1. Rachel is the only rice retailer in Brgy. Tipian.
Currently, she buys her rice supply for 40 per kilo
and maintains 10,000 kgs. of rice weekly. Because of
a recent calamity, the government controls essential
commodity prices. It strictly imposes a Php40.00 per
kilo price on rice, which means all seller can only
sell their rice supply at Php40 per kilo. Considering
this scenario, is Brgy. Tipian is sure that there will be
an available supply of rice for them to buy?
In summary
1. Demand and Supply for products depends
primarily on the given prices in the market, which
means PRICE is the primary determinant of
Demand and Supply

2. Prices in the market is determined by the interaction

of Demand and Supply, technically referred to as
Market Equilibrium.
Market Equilibrium

The point in the

market where buyers
agrees with the sellers
(Demand = Supply)
is the point of
Market Equilibrium
which determines the
price and and quantity
traded for a particular
product.
Intended Learning Outcome No 2

Analyze the effect of changes in the different

determinants of demand and supply.
We just learn that prices in the market is
determined by the interaction between
demand and supply. (Market Equilibrium)

Why is it important to understand the

different determinants of demand &
supply
Introduction
1. We just learn that prices in the market is determined
by the interaction between demand and supply.
(Market Equilibrium)
Concept and Principles
1. Any changes in the different non-price determinants
of demand will cause changes in Demand, and any
Changes in Demand
For example an
INCREASE IN
DEMANDwill
shift the demand
curve to the right
and will create a
new
equilibrium,
thus
INCREASING
the price.
Concept and Principles
1. Any changes in the different non-price determinants
of demand will cause changes in Demand, and any
Changes in Demand
Any Changes in
Demand, for
example an
DECREASE IN
DEMAND will
shift the demand
curve to the left
and will create a
new
equilibrium,
thus
DECREASING
the price.
NON PRICE DETERMINANTS OF
DEMAND
1. POPULATION - determines the number of buyer
2. INCOME - determines the ability to pay
3. TASTE & PREFERENCES - determines the
likelihood of wanting or needing a product
4. PRICES OF RELATED GOODS - determines the
possible choices available to buyer
5. EXPECTATION OF FUTURE PRICES - determines
the timing of buying a product
Concept and Principles
1. Any changes in the different non-price determinants
of demand will cause changes in Supply, and any
Changes in Supply
For example an
INCREASE IN
SUPPLY will
shift the supply
curve to the right
and will create a
new
equilibrium,
thus
DECREASING
the price.
Concept and Principles
1. Any changes in the different non-price determinants
of demand will cause changes in Supply, and any
Changes in Supply
For example an
DECREASE IN
SUPPLY will
shift the supply
curve to the
LEFT and will
create a new
equilibrium,
thus
INCREASING
the price.
NON PRICE DETERMINANTS OF
SUPPLY
1. NUMBER OF SELLERS IN THE MARKET -
determines the degree of competition
2. COST OF PRODUCTION - determines the quantity
of product sellers can produce
3. TECHNOLOGY - determines the efficiency/speed of
production
4. TAXES & SUBSIDIES - Determines motivation and
discouragement to produce
5. CALAMITY - Determines the possible availability
of products
Activity
Collaboratively work as a team and Illustrate
using graphs the effect of changes in the
determinants of demand and supply on the market
equilibrium

This is an assessment task, the result of this activity will be counted both
as a quiz and participation.
Intended Learning Outcome No 3

Calculate Simple Demand Projection

QUESTION

Why is it important to project

demand objectively?
Importance of Demand Projection
1. Demand projection or Demand Forecasting is a
process of using data (historical of collected) to
predict the future demand for a product or service.
2. It makes businesses makes better-informed supply
decision and estimates future sales and revenue.
3. It is used to estimate the number of goods and
services expected to be demanded by the customer
for a period of time
HOW TO CALCULATE DEMAND
PROJECTION/FORECAST
1. For existing product
Use historical data to determined trend and growth
rate.
2. For new product offering it is important to
• Determined your target customer (market
segment/niche market)
• Know the population of your target market (TAM)
• Know the existing competitors (Supply) and their
current Market Share
• Calculate Demand and Supply Gap. (SAM)
• Project your Demand (SOM)
example:
WEEK 10
Concept and Principles of Demand adnd Supply
Analysis

PREPARED BY:
DR. JOEMY C. LOPEZ

THANK YOU