Applied SENIOR

HIGH
Economics SCHOOL

Self-Learning
Module

Market Demand 7
666
Quarter 3
Applied Economics
Quarter 3 – Self-Learning Module 7: Market Demand
First Edition, 2020

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Applied SENIOR
HIGH
SCHOOL
Economics

Self-Learning
Module

7
Quarter 3

Market Demand
Introductory Message

For the facilitator:

Welcome to the Senior High School – Applied Economics Self Learning

Module on Market Demand!

This Self-Learning Module was collaboratively designed, developed and

reviewed by educators from the Schools Division Office of Pasig City headed by its
Officer-in-Charge Schools Division Superintendent, Ma. Evalou Concepcion A.
Agustin, in partnership with the City Government of Pasig through its mayor,
Honorable Victor Ma. Regis N. Sotto. The writers utilized the standards set by the K
to 12 Curriculum using the Most Essential Learning Competencies (MELC) in
developing this instructional resource.

This learning material hopes to engage the learners in guided and

independent learning activities at their own pace and time. Further, this also aims
to help learners acquire the needed 21st century skills especially the 5 Cs, namely:
Communication, Collaboration, Creativity, Critical Thinking, and Character while
taking into consideration their needs and circumstances.

In addition to the material in the main text, you will also see this box in the
body of the module:

Notes to the Teacher

This contains helpful tips or strategies
that will help you in guiding the learners.

As a facilitator you are expected to orient the learners on how to use this
module. You also need to keep track of the learners' progress while allowing them
to manage their own learning. Moreover, you are expected to encourage and assist
the learners as they do the tasks included in the module.
 For the learner:

Welcome to the Applied Economics Self Learning Module on Market Demand!

This module was designed to provide you with fun and meaningful
opportunities for guided and independent learning at your own pace and time. You
will be enabled to process the contents of the learning material while being an
active learner.

This module has the following parts and corresponding icons:

Expectations - This points to the set of knowledge and skills

that you will learn after completing the module.

Pretest - This measures your prior knowledge about the lesson

at hand.

Recap - This part of the module provides a review of concepts

and skills that you already know about a previous lesson.

Lesson - This section discusses the topic in the module.

Activities - This is a set of activities that you need to perform.

Wrap-Up - This section summarizes the concepts and

application of the lesson.

Valuing - This part integrates a desirable moral value in the

lesson.

Posttest - This measures how much you have learned from the
entire module.
 EXPECTATIONS

After going through this module, you are expected to:

1. understand the concept of demand and price;
2. analyze the law of demand; and
3. enumerate the non-price determinants of demand.

PRETEST

Directions: Choose the letter of the best answer. Write the letter of your answer on
a separate sheet of paper.

1. Which of the following statements refers to demand?

A. A relationship between the price of a product and the quantity
demanded during a given period.
B. It refers to a quantity of a good or service consumers would choose
to buy at a particular price.
C. It shows the number of goods that consumers are willing and able
to buy.
D. All of the above
2. Which of the following statements does not describe the law of demand?
A. It shows the relationship between price and quantity demanded.
B. There is a negative relationship between price and quantity
demanded.
c. Price is directly affected by quantity demanded.
d. None of the above
3. Which of the following is TRUE about ceteris paribus?
a. It is only focused on market demand.
b. It refers to factors of demand shift.
c. It means that all other things held constant.
d. None of the above
 4. Which of the following scenarios causes the demand to shift upward?

a. Consumers are satiated with product

b. Increase in consumer’s income

c. The price is expected to decrease next week

d. None of the above

5. Which of the following factors does not cause a shift in the demand curve?

a. Price

b. The income of consumers

c. Expectations of future prices

d. None of the above

RECAP

Directions: Enumerate the causes of unemployment and poverty. Write your

answer in the space provided below.

Poverty Unemployment
1. ________________________ 1. _______________________
2. ________________________ 2. _______________________
3. ________________________ 3. _______________________

LESSON

Economics, as per definition, it deals with human behavior and how people
interact with each other in a society. Hence, it is important to know how
individuals make choices out of the resources available. In the market and mixed
economy, we discussed that individuals are free to choose whatever they want to
buy. There are many factors which signal them to buy a certain product. However,
price is the main indicator of why consumers purchase a good or service. This
module will discuss the relationship of the price with the consumer’s buying power.
Market Demand
Demand is an economic principle referring to a consumer's desire to
purchase goods and services and a willingness to pay a price for a specific good or
service (Chappelow, 2020). If we are talking about market demand, it is defined as
the willingness and ability of consumers to buy different quantities of goods or
services at any given time at various possible prices. Because of scarcity, you
cannot get all what you want. Even if you have enough money to pay for a new
dress, you might decide not to buy it because it defies you with an opportunity
cost. There’s a great opportunity cost as the price of a product gets higher – the less
likely that you will buy.

Since price influences our buying decision, consumers are hesitant to buy
products at a higher price. Price is the amount of money that has to be paid to
acquire a given product. The number of units of a good that individuals are willing
and able to buy a particular price during a particular period is called quantity
demanded. As price increases, ceteris paribus, quantity demanded decreases - this
principle is called the law of demand. There is a negative relationship between price
and quantity demanded. Price and quantity demanded are regularly observed to be
negatively related for two reasons:

1. Substitution Effect – As the price of a good increase relative to the price

of the other goods, the opportunity cost of buying that good increases, and
consumers will switch to substitutes-other goods that can be used in its
place.

2. Income Effect – As the price of a good rises and income remains the
same, consumers, who could no longer afford to buy all the things that
they used to buy, would normally buy less of the good whose price has
been increased.

Demand Schedule

It is a table showing the quantities of a product that would be purchased at

various prices at a given time and place. Table 1 contains a hypothetical schedule
of the demand for sandwiches in a local market during school days. The left
column shows the various prices while on the right column shows the number of
units which consumers would choose to buy at a given price. As observed, as the
price rises, the quantity demanded declines.

Table 1. Market Demand Schedule for Sandwiches

Situation Price per unit Quantity demanded

(Php) (Units)

A 30 20
B 25 40

C 20 60
D 15 80
 E 10 100

Demand Curve

It is a graph showing the quantities of a product that would be purchased at

various prices at a given time. The market demand curve for sandwiches is a
graphical representation of a demanding schedule for sandwiches.

As shown in figure 1, the

price is scaled on the graph’s
vertical axis and quantity on the
horizontal axis. Each point on the
curve shows the number of
sandwiches that consumers
would choose to buy at a
particular. In situation A, at ₱30
consumers would buy 20
sandwiches. Situation B
represents the combination of 40
D sandwiches at ₱25 while in
situation C, consumers will buy
60 sandwiches at ₱20 and so on.
When we connect all these points,
we obtain the market curve,
labeled as D – this represents as
demand curve.

The market demand curve slopes downward towards the right. A downward-
sloping demand curve reflects the observed negative relationship between price and
quantity – law of demand. As the price decreases, the quantity demanded
increases, and vice versa. Since the assumption is that price is the only factor that
affects the quantity demanded, for every price change, there is a movement along
the demand curve. When the price of sandwiches falls from ₱25 to ₱20, the
number of units demanded by consumers rises from 40 to 60. There is a movement
along the demand curve from point B to C.

Non-Price Determinants and Shifts of the Demand Curve

 We have discussed earlier that price is the only factor that determines the
quantity of a good or service that consumers choose to buy. Demand can be also
affected by other factors other than price, which is known as non-price
determinants. The non-price determinants are: (1) income of consumers; (2) tastes
or preferences of consumers; (3) number of buyers; (4) prices of related goods; and
(5) expectations of future prices. When these factors change, there is a shift in the
entire demand curve.

Figure 2 shows the shifts in the market demand curve that results from a
change in one of the non-price factors. The rightward shift from D1 to D2 implies an
increase in demand. Consumers would likely buy more sandwiches at every price.
For example, they would choose to buy 80 instead of 60 sandwiches at ₱20. An
increase in demand is an increase in the number of units that consumers would
choose to buy at every price. The leftward shift from D1 to D3 represents a decrease
in demand. Consumers would choose to buy less sandwiches at each and every
price. For example, they would choose to buy 40 instead of 60 sandwiches at ₱20.
A decrease in demand is a decrease in the number of units that consumers would
choose to buy at each and every price.

1. Income

Individual income may change depending upon the economic situation. An

increase in income leads consumers to buy more goods at every price. A decrease
in income leads consumers to buy fewer goods at every price. There are two types of
goods as income basis, normal and inferior goods. For normal goods, demand
increases as income increases. If the sandwich is a normal good, an increase in
income leads to an increase in demand for sandwiches. For inferior goods, demand
decreases as income increases. An increase in income may lead some consumers to
buy less sandwiches because they can now afford to buy other better products like
hamburgers or pizza.

2. Tastes and Preferences

An increase in the likeness of the people place on sandwiches would lead

them to buy more sandwiches at every price. When people become more aggressive
to try new snacks, some of the consumers might choose to buy fewer hamburgers
at each and every price.

3. Number of Buyers

As the population gets bigger, the demand also increases. Metro Manila has
a greater demand because there are many consumers compared to other provinces.

4. Prices of the Related Goods

A. Substitutes Goods. As the price of a good increase the demand for that
good decreases and its substitute good will increase. Sandwiches and
hamburgers are substitute goods. If the price of sandwiches increases,
consumer leads to buy fewer sandwiches and buys more hamburgers.

B. Complimentary Goods. As the price of a good increase the demand for that
good decreases and the complimentary good also decreases. Sandwiches and
drinks are complimentary goods. If the price of sandwiches increases, the
demand for sandwiches decreases and so with the drinks.

5. Expectations of Future Prices

If people expect the price of sandwiches to rise next week, consumers may
buy more hamburgers now and consume fewer later on. If people expect the price
of a sandwich to fall next week, they may buy fewer sandwiches now and buy more
later on.

ACTIVITIES

Activity 1: Law of Demand

Directions: Read and analyze the situation below. Put your answer in the box.

Some students used to buy branded products. These branded products are
known for their quality and expensive price. Some students are willing to buy more
of these products because they feel superior and fame. Thus, the situation wherein
the students tend to buy expensive products violated the law of demand - which
states that as price decreases, quantity demanded increases?
Activity 2: Up or Down
Directions: Identify the following situations below. Put (arrow up) if there is an
increase in demand, and (arrow down) if there’s a decrease in
demand.

____________1. Overpopulation in urban area

____________2. There’s red tide in Cavite

____________3. There will be an inflation next week, the demand for goods today is
expected to

____________4. You want to exchange your US dollar bill however, the peso will be
expected to become strong next week.

____________5. The price of ice cream increases, the demand for sugar cone is
expected to

WRAP-UP

To summarize what you have learned in the lesson, answer the following
questions:

1. What is demand?
2. What is the law of demand?
3. What are the causes of demand shifts?
 VALUING

Reflect on this!

For you, what is the most important factor to consider when buying a
product? Why? Explain your answer.

POSTTEST

Directions: Read each statement carefully. Write T if the statement is correct,

otherwise write F.

____________1. Law of demand states that as price increases, quantity demanded

decreases.

____________2. Quantity demanded refers to the number of goods and services

consumed in a particular price.

____________3. The graph of demand is always upward sloping.

____________4. For normal good, demand decreases as income increases.

____________5. As the price of a good increase the demand for that good decreases
and the complementary good also decreases.
 KEY TO CORRECTION

paribus.
lower prices than higher prices, ceteris ACTIVITY 2: POSTTEST:
demand states that people would buy more at
good increases at any price levels. The law of 1. 1. T
preferences which make the demand for a
2. 2. T
demand. This is more of tastes and
5. A expensive is not a violation of the law of 3. 3. F
4. B quality product which happens to be
3. C for high-quality products. Buying a high- 4. 4. F
2. C quality. Some people have greater preferences
5. 5. T
1. A Brand name items are associated with higher
PRETEST ACTIVITY 1:

References
Amadeo, Kimberly. "What Really Makes the World Go Round." The Balance. Accessed July 12, 2020.
https://www.thebalance.com/what-is-demand-definition-explanation-effect-3305708.

Carnaje, Gideon P. Applied Economics. Vibal Group Inc., Quezon City, 2019.

Chappelow, Jim. "Demand Definition." Investopedia. January 29, 2020. Accessed July 12, 2020.
https://www.investopedia.com/terms/d/demand.asp.

The Editors of Encyclopaedia Britannica. "Price." Encyclopædia Britannica. June 01, 2018. Accessed
July 13, 2020. https://www.britannica.com/topic/price-economics.