micro

• SUPPLY - is a fundamental economic concept that describes the total amount of a specific good or service that is available to consumers.
• SUPPLY CURVE - is a graphic representation of the correlation between the cost of a good or service and the quantity supplied for a given period. In typical illustration, the price will appear on the left vertical axis, while the quantity supplied will appear on the horizontal axis.
• DERTEMINANTS OF SUPPLY - is an important aspect for determining the willingness and desire to part with goods/services, many other factors determine the supply of a product or service.
• IMPROVEMENT IN TECHNOLOGY - improvements help to reduce production cost and increase profit, thus production cost and increase profit, thus stimulate higher supply.
• NUMBER OF SELLER - will have an effect on the market supply, since the market is simply the sum of supply of each individual seller 鈥� more sellers entering the market increases supplies while departing decreases supply.
• COST OF PRODUCTION - In producing goods, raw materials are needed, together with laborer. If the prices of raw materials or the salaries of the laborers increase, it means higher cost of production.
• EXPECTED PRICE - This can also change the present supply, because if suppliers believe that prices will decline in the near future, they may try to sell all that they have presently. Likewise, if prices are expected to rise in the future, then suppliers may hold onto their supply until prices rise.
• TAXES AND SUBSIDIES - reduces profits, therefor increase in taxes reduce supply whereas decrease in taxes increase supply. Subsidies reduce the burden of production costs on the suppliers, thus increasing the profits. Therefor increase in subsidies increase in supply and decrease in subsidies decrease supply.
• LAW OF SUPPLY - is the microeconomics law that states that, all other factors being equal, as the price of a good or service increases, the quantity of goods or services that suppliers offer will increase, and vice versa. The law of supply says that as the price of an item goes up, suppliers will attempt to maximize their profits by increasing the quantity offered for sale.
• ELASTICITY OF SUPPLY - refers to the reaction or response of the sellers/producers to price change of goods. Based on the law of supply, producers are willing and able to offer more goods at a higher price, and fewer goods at a lower price.
• Elastic Supply - a change in price results in a greater change in quality supplied. This means producers are very responsive to price change. For example, with a 10 % increase in price, they increase their quantity supplied by 20%. Such reaction similarly applies if there is a decrease in price.
• Inelastic Supply - a change in price results in a less change in quantity supplied. This shows that producers have very weak response to price change. With a high price, they like to increase their supplied, but they cannot do it at once. For example, if the price of coconut increases, producers cannot respond immediately.
• Unitary Supply - a change in price results to an equal change in quantity supplied. For instance, 15 % change in prices creates 15 % change in quantity supplied. This is a borderline case between elastic and inelastic supply. Example goods that must be those that are classified as semi-products or semi-agricultural products.
• Perfectly Elastic Supply - Without change in price, there in an infinite change in supplied. Example in a poor county where massive unemployment prevails, unlimited number of jobless individuals are willing to word at a fixed wage even if such wage is very low, which is general situation in the rural areas of less develop countries.
• Perfectly Inelastic Supply - a change in price has no effect on quantity supplied. An Example of this is land in a community. Land area is fixed regardless of price. The big increase in population has tremendously increased the price of land.
• DEMAND - is an economic principle referring to a consumer鈥檚 desire to purchase goods and services and willingness to pay a price for a specific good or service. Holding all other factors constant, an increase in the price of a good or service will decrease the quantity demanded, and vice versa.
• DEMAND CURVE - is a graphical representation of the relationship between the price of a good or service and the quantity demanded for a given period of time. In a typical representation, the price will appear in the left vertical axis, the quantity demanded on the horizontal axis.
• DETERMINANTS OF DEMAND - may be classified as individual demand and market demand. The latter refers to all individual market demands. There are factors which affect the demand.
• INCOME - Individuals tend to purchase foods and services when their incomes increase. On the other hand, if their incomes fall, their purchasing power also falls. That is, they buy less number of goods and services. Obviously, individuals with more incomes consume more goods and services than those with less income.
• POPULATION - People consume goods and services. Clearly, more people mean more demand for goods and services. There are more people in the cities that barrios. Hence, there are more buyers in the cities.
• TASTE AND PREFERENCES - When people prefer certain foods to other goods, demand for such preferred goods rises. Such taste and preferences are greatly influence by fashions. Goods which are out of fashion have very low demand even when their prices have been lowered.
• PRICE EXPECTATION - When people expect the prices of goods, particularly essential commodities, like rice, cooking oil or sugar, to increase in a few day times, they buy more of these goods. On the other hand, if they expect to fall in the prices of said products in a few days period, they reduce their purchases. Such consumer behaviour is indeed rational. They want to spend their money wisely. In short, they are economizing.
• PRICES OF RELATED GOODS - They are close substitute, like Pepsi cola, Coca Cola and Pop Cola or Camay, Dial and Ivory.
• LAW OF DEMAND - is one of the most fundamental concept in economics. It works with the law of supply to explain how the market economies allocate resources and determine the prices of goods and services that we observe in everyday transactions. The law of demand states that quantity purchased varies inversely with price. In other words, the higher the price, the lower the quantity demanded. This occurs because of diminishing marginal utility.
• ELASTICITY OF DEMAND - refers to the reaction or response of the buyers to changes in price of goods and services. As mentioned earlier, buyers tend to reduce their purchases as price increases, and tend to increase their purchases whenever price falls.
• Elastic demand - a change in price results to a greater change in quantity demanded. For example, a 20 % change in price (increase or decrease) creates a 60 % change in quantity demanded (increase or decrease). This shows buyers are very sensitive to price change.
• Inelastic demand - a change in price results to a less change in quality demanded. For example, a 50 % change in price creates only a 5 % change in quantity demanded. This means buyers are not sensitive to price change.
• Unitary demand - a change in price results to an equal change in quantity demanded. For example, a 25 % chance in price produces a 25 % chance in demanded. Goods and services under this category are considered semi-luxury or semi-essential goods. Some type of clothing or shoes is either luxury or essential good.
• Perfectly elastic demand - without change in price, there is an infinite change in quantity demanded. Such demand applies to a company which sells in a purely competitive market
• Perfectly inelastic demand - a change in price creates no change in quantity demanded. This is an extreme situation which involves life or death to an individual. Regardless of price, he has to buy the product like a medicine with no substitute.
• SUPPLY AND DEMAND - is a theory that explains the interaction between the sellers of a resource and the buyers for that resource. The theory defines what affects the relationship between the availability of a particular product desire (or demand) for that product has on its price. Generally, low supply and high demand increase and vice versa.
• LAW OF SUPPLY VERSUS LAW OF DEMAND - The law of demand states that, if all other factors remain equal, the higher the price of a good, the less people will demand that good. In other words, the higher the price, the lower the quantity demanded. The amount of a good buyers purchase at a higher price is less because as the price of a good goes up, so does the opportunity cost of buying that good. As a result, people will naturally avoid buying a product that will force them to forgo the consumption of something else they value more.
• LAW OF SUPPLY AND DEMAND - In the market, supply and demand interact freely. Supply is represented by producers or sellers while demand is represented by buyers. Producers are willing and able to offer more goods at high price.
• EQUILIBRUIM PRICE - is the only price where the desires of consumer and the desires of producers agree that is, where the amount of the product consumer want to buy(quantity demanded) is equal to the amount producers want to sell( quantity supplied. This mutual desired amount is called the equilibrium quantity. At any other price, the quantity demanded does not equal the quantity supplied, so the market is not in equilibrium at that price.
• IMPORTANCE OF EQUILIBRIUM - to create both a balanced market and an efficient market. If a market is at its equilibrium price and quantity, then it has no reason to move away from that point. Because it鈥檚 balancing the quantity supplied and the quantity demanded. However, if a market is not at equilibrium, then economic pressures arise to move market toward equilibrium price and equilibrium quantity. This happens either because there more supply than what the market is demanding or because there is more demand that the market is supplying. This is a natural function of a free-market economy.