EQUILIBRIUM

OF DEMAND
GROUP 3
AND SUPPLY
ALFRED MARSHALL
A British economist,
introduced a kind of
pricing scheme by
combining the law of
demand and the law of
supply. With this
combination, an
equilibrium price and
equilibrium quantity is
formulated. This known 2
Equilibrium-is the
price at which the
quantity demanded by
consumers is equal to
the quantity that's
supplied by suppliers.
When either demand or
supply changes,
however, the
equilibrium price and 3
Market
equilibrium -is a
market state where
the supply in the
market is equal to
the demand in the
market.
Equilibrium price
-is the price of a
good or service when 4
 SUPPLY AND DEMAND SCHEDULE INDICATING THE
EQUILIBRIUM PRICE AND EQUILIBRIUM QUANTITY

QUANTITY PRICE QUANTITY

SUPPLIED DEMAND
3 ₱3.00 24
6 ₱6.00 20
9 ₱9.00 26
12 ₱12.00 12
15 ₱15.00 8
18 ₱18.00 4

GREEN -SHORTAGE
-SURPLUS 5
AN ILLUSTRATION THROUGH GRAPH OF DEMAND AND SUPPLY
CAN BE SEEN.

Above the equilibrium price is a

SURPLUS and below the equilibrium
price is a SHORTAGE. In the process
of interaction between buyers and
sellers, price tends to move towards 6
EFFECTS OF EQUILIBRIUM OF A SHIFT IN SUPPLY AND DEMAND

• Increase in Demand
When there is an
increase in demand, with
no change in supply, the
demand curve tends to
shift rightwards. As the
demand increases, a
condition of excess
demand occurs at the
old equilibrium price.
This leads to an increase 7
EFFECTS OF EQUILIBRIUM OF A SHIFT IN SUPPLY AND DEMAND

• Decrease in Demand
Under conditions of a
decrease in demand,
with no change in
supply, the demand
curve shifts towards left.
When demand
decreases, a condition of
excess supply is built at
the old equilibrium level.
This leads to an 8
The demand for a product changes due to an
alteration in any of the following factors:

• Price of
complementary goods
• Price of substitute
goods
• Income
• Tastes and preferences
• An expectation of
change in the price in
9
future
EFFECTS OF EQUILIBRIUM OF A SHIFT IN SUPPLY AND DEMAND

• Increase in Supply
When supply increases,
accompanied by no
change in demand, the
supply curve shift
towards the right. When
supply increases, a
condition of excess
supply arises at the old
equilibrium level. This
induces a competition 10
EFFECTS OF EQUILIBRIUM OF A SHIFT IN SUPPLY AND DEMAND

• Decrease in Supply
When the supply
decreases, accompanied
by no change in demand,
there is a leftward shift
of the supply curve. As
supply decreases, a
condition of excess
demand is created at the
old equilibrium level.
Effectively there is an 11
The supply of a product changes due to an
alteration in any of the following factors:
• Prices of factors of
production
• Prices of other goods
• State of technology
• Taxation policy
• An expectation of
change in price in
future 12
PRICE AND EQUILIBRIUM QUANTITY
Increase in income,
one of the
determinants of
demand, increase
demand for good and
services. Demand
curve shifts to the
right to show an
increase in demand.
With constant supply, 13
LAW OF DEMAND AND SUPPLY
What Is the Law of
Supply and
Demand?
• The law of supply
and demand is a
theory that explains
the interaction
between the sellers
of a resource and 14
LAW OF DEMAND AND SUPPLY
What Is the Law of Supply
and Demand?
availability of a particular
product and the desire (or
demand) for that product
has on its price.
Generally, 
low supply and high
demand increase price
and vice versa.
15