applied eco

• demand

  refers to the consumer’s desire to purchase goods or services
• supply

  refers to the market’s ability to produce a good or service
• demand curve

  a SCHEDULE of willingness and capacity of a consumer to buy a commodity at alternative prices at a given point in time other things held constant
• IDENTIFY

  A) demand curve

  
• IDENTIFY

  A) supply and deman

  B) supply

  C) demand

  
• FACTORS AFFECTING THE DEMAND OF A COMODITY

  INCOME

  PRICES OF OTHER COMMODITIES

  EXPECTATION

  TASTE

  MARKET
• INCOME

  the capacity to purchase is influenced by the income of the consumer a higher level of income will give higher capacity to consume while a lower income will give a limited purchasing power
• PRICES OF OTHER COMMODITIES

  aside from the price of the commodity being sold, the demand for a good or service may be influenced by the prices of other goods and

  services
• expectation

  the expectation or prospect on what is going to happen to the price can influence the demand for the comodity
• taste

  another factor that may influence the demand for a

  commodity

  some shape by :

  cultural values

  peer pressure

  power of advertising
• market

  the size and characteristic of the market can also

  influence the demand for a commodity
• WHY IS THE DEMAND CURVE DOWNWARD SLOPING?

  demand curved focuses on the relatioship between the quantity demand and the price of the commodity at a given point in time other things held constant as the price of commodity declines, the quantity demand increses and vice versa negative relationship between price of goods and quantity demand
• REASONS WHY DEMAND CURVE IS DOWNWARD SLOPING

  SUBSTITUTION AND INCOME EFFECT

  PRINCIPLE OF DIMINISHING MARGINAL

  UTILITY
• substitution effect describes the decisions of a consumer to substitute an

  expensive goods with cheaper goods when there is price change
• income effects refers to the modification of the consumption of a

  commodity due to the change in the purchasing power of the consumer

  resulting from a price change
• PRINCIPLE OF DIMINISHING MARGINAL UTILITY

  consumers can have a feeling of satisfation when they continously

  increase the consumption of a particular comodity. consumers can have a feeling of satisfation when they continously increase the consumption of a particular comodity
• CHANGES IN DEMAND CURVE

  TWO MAJOR CATEGORIES OF CHANGES IN DEMAND CURVE

  MOVEMENT ALONG DEMAND CURVE

  SHIFTS IN DEMAND CURVE
• MOVEMENT ALONG THE DEMAND CURVE

  change in quantity demand resulting from the change in the price of the commodity as the price of the commodity decreases, the movement along the curve will lead to an increase in the quantity demand of the commodity while an increase in price will result in the decrease in quantity demand
• I

  A) MOVEMENT ALONG THE DEMAND CURVE

  
• I

  A) CONTRACTION ALONG THE DEMAND CURVE

  B) EXTENSION ALONG THE DEMAND CURVE

  
• shifts in demand curve

  changes in demand curve caused by any of the other factors

  beside the price of commodity
• A shift in the demand curve occurs when the whole

  demand curve moves to the right or left. A positive effect will shift the demand curve to the right and negative effect will shift the demand curve to the left
• SHIFTS IN DEMAND CURVE

  The demand curve could shift to the right for the following reasons:

  The good became more popular (e.g. fashion changes or successful

  advertising campaign)

  The price of a substitute good increased.

  The price of a complement good decreased.

  A rise in incomes

  Seasonal factors.
• SUPPLY CURVE

  a schedule showing a direct or positive relationship between the price of a commodity and level of output that the seller is willing to supply at a given point in time other things held constant.
• SUPPLY CURVE

  This direct relationship means that: as price of the commodity increases there will be more sellers that will be included to supply the good and as the price of the commodity decreases, there will be lesser sellers that are willing to supply the good in the market.
• FACTORS AFFECTING THE SUPPLY OF A COMODITY

  PRICE OF PRODUCTION

  TAXES

  TECHNOLOGY

  EXPECTATION
• PRICES OF PRODUCTION INPUTS

  two major inputs : intermediate or raw materials and factor inputs intermediate inputs refers to raw materials that are still going to be processed or transformed into higher level of outputs
• PRICES OF PRODUCTION INPUTS

  factors inputs refers to processing or

  transforming inputs examples are :

  labor

  land

  capital

  entrepreneurship
• PRICES OF PRODUCTION INPUTS

  if the the cost of capital as indicated by

  interest rate has been lowered, this may

  encourage sellers to produce more because

  the cost of one of its factor inputs has become

  inexpensive.
• TAXES

  business establishments are required to

  pay a number of taxes to various levels of

  government. Since it is a monetary expense

  on the part of the firms, the payment of

  taxes can be considered as part of cost of

  production.
• TAXES

  an increase in sales tax, real estate tax, and

  other business taxes can increase the costs

  of supplying a commodity. This is turn may

  discourage the sellers to increase their

  supply of the commodity in the market
• TECHNOLOGY

  the manner in which various factor

  inputs process the raw material is done

  through the use of technology

  some firms may use labor-intensive

  technology if the cost of labor is cheap

  but if the wages are very high, firms

  may use capital-intensive technology
• TECHNOLOGY

  Improvements in technology used by

  some firms can lower their production

  costs and can make these firms more

  competitive. A lower cost may

  encourage these firms to suppy more of

  the commodity since they can sell it at

  reduced price.
• EXPECTATION

  another factor that may influence the demand

  for a commodity

  some shape by :

  cultural values

  peer pressure

  power of advertising
• PRINCIPLE OF DIMINISHING MARGINAL PRODUCTIVITY AND INCREASING MARGINAL COSTS

  as the production of goods increase not only does its total cost

  increases but the additional or marginal cost increases as well.

  This means that the additional cost of an aditional unit of

  production is higher than the previous unit of production.