February 4, 2016

(Leal, Rosario, Yu)

Topic: Demand and Supply
Key Terms and Definitions:
Law OF DEMAND
- When the price of a commodity is raised (lowered), all other things held
constant, buyers tend to buy fewer (more) of that good
- Exception = Status goods (P ^ D ^) social hierarchy
Same Satisfaction, Lower Cost
Ex: Coke = 20php > Royal = 25php
Demand increases if
Income of buyers increases
Population of potential buyers increases
Preference of buyers increases
Expectation of higher prices in the future (ex. Gasoline prices will increase by
2 pesos at 12am therefore, people will flock to stations to gas up while the
price is still cheaper)
Price of a substitute increases
Price of a complement decreases
Law of SUPPLY
- It shows the quantity of a good that producers are able and willing to sell at a
given price, ceteris paribus
= TR TC
= Total Profit
TR= Total Revenue
TC = Total Cost

P TR =

TC =

Supply increases if
Production costs decrease (e.g. costs of inputs)
- Labor
- Capital
- Land (natural resources)
[if all go up, supply goes down]

Level of technology go up produce the same level of inputs

Expectation of lower prices in the future
Prices will be lower > supply goes down > suppliers will wait for prices to
increase

CS (Consumer Surplus)
-

Difference between what a consumer is willing to pay for a good and the
amount actually paid

Source:
http://www.economicsonline.co.uk/Competitive_markets/Consumer_and_pro
ducer_surplus.html

PS (Producers Surplus)
-

Difference between what a producer is willing to get as payment and the

amount actually obtained for a good

http://www.economicsonline.co.uk/Competitive_markets/Consumer_and_pro
ducer_surplus.html
CS+PS = economic well being

Supply and Demand Chart

Source: https://preetamsushistory.wikispaces.com/A2+++supply+and+demand
Equilibrium
Maximum willingness to buy = Minimum willingness to sell
Above point of equilibrium supply exceeds demand
Below point of equilibrium demand exceeds supply
Summary of Discussion:
The session mainly talked about the relevance of Demand and Supply in
general. There are also certain laws that explains the movement of a commodity
namely the effects of the laws of Supply and Demand. In line with this, a number of
factors also come into play when discussing the cause of the rise and fall of Supply
and Demand as enumerated.
Different examples were given during the session:
Product/Service/Industry
High-rise Buildings and
Condominiums
Oil

Event

Effect

9/11 Bombings

Decrease in demand

President Raegan asks Saudi

Arabia to release its oil
supply to the global market.

Increase in supply

These examples show that a lot of events in our history are influenced by / have
influenced the systems of economics.
The Supply and Demand chart can trace a proper depiction of the effect with
the said movements. When there is a sudden occurrence of a situation that affects
production, a shift in Supply curve or a shift on Demand curve occurs.