APPLIED ECONOMICS 6&7

• Demand


  Refers to the quantity of a product or service that a consumer wants and can afford to buy at a given price and particular time
• Demand


  Kakayahan + Kagustuhan =
• Price


  The most important determinant of the quantity demanded
• Price


  The amount to be paid for the unit of output
• Law of Demand


  It describes consumer's behavior in response to price changes. When the price of a product or service increases, the quantity demand for it decreases. Meanwhile, when the price of a product and service falls, the amount of demand for it increases
• Ceteris Paribus


  Latin word meaning all other things remain constant or no other factor changes except price
• Utility


  The pleasure, usefulness, or satisfaction they give us
• Demand Function


  It shows the relationship of demand and price that is said to be contradictory or indirect. Quantity demanded is expressed as a "mathematical function" of price.
• Demand Schedule


  A table showing how many products or services a consumer wants to buy at different prices in a particular time period
• Determining price using demand(HOW TO GET THE PRICE)

  P = a - Qd/b
• Demand Curve


  A graphic illustration of the indirect relationship of price and quantity of the product to be purchased. The graph lists prices on the vertical axis and quantities demanded on the horizontal axis. Each point on the graph shows how many units of the product or service an individual will buy at a particular price.
• The demand curve slopes downward. This shows that people are normally willing to buy less of a product at a high price and more at a low price. According to the law of demand, quantity demanded and price move in opposite directions.
• Changes in Demand CurveChange in the quantity demanded due to a price change occurs ALONG the demand curve.

  Demand Curves can also shift in response to changes in:

  • Buyers (# of)
  • Income
  • Tastes
  • Expectations
  • Related Goods (compliments and substitutes)
• Changes in factors other than price

  Causes the demand curve to shift either:

  Decrease in Demand shifts to the Left (Less demanded at each price)

  Increase in Demand shifts to the Right (More demanded at each price)
• Market Demand


  When the individual demand of consumers is aggregated the market demand is obtained
• Supply


  The quantity of products or services that producers want to sell in the market in a given period of time at different prices
• Price


  The amount to be paid for the unit of output
• Law of Supply


  • When the price of a product and service increases, so does the quantity of supply for it. But when the price of a product or service falls, the quantity of supply for it also decreases
• Ceteris paribus


  Latin word meaning all other things remain constant or no other factor changes except price
• Ways to show supply

  • Supply function
  • Supply schedule
  • Supply curve
• Supply function


  Shows the relationship of supply and price that is said to be positive or direct.
• Supply schedule


  A table showing how many products or services a producer wants to sell at different prices in a particular time period
• Supply curve


  A graphic illustration of the direct relationship of price and quantity of the product to be sold. The graph lists prices on the vertical axis and quantity supplied on the horizontal axis
• As the price for a good rises, the quantity supplied rises and the quantity demanded falls. As the price falls, the quantity supplied falls and the quantity demanded rises
• Law of Supply


  Producers will normally offer more for sale at higher prices and less at lower prices
• Change in the quantity supplied due to a price change occurs along the supply curve
• Factors that can shift the supply curve:

  • Subsidies and taxes
  • Technology
  • Other goods
  • Number of sellers
  • Expectations
  • Resource costs
• Government adds a subsidy to boomerang production

  Supply curve shifts right
• Price of Frisbees (another good produced) goes up

  Supply curve shifts right
• Government adds a new tax to boomerang production

  Supply curve shifts left
• Boomerang producers expect an increase in the popularity of boomerangs worldwide

  Supply curve shifts right
• Price of plastic (major input) increases

  Supply curve shifts left
• Pago-Pagan workers are introduced to coffee, productivity increases

  Supply curve shifts right
• DEMAND


  DOWNWARD SLOPING
• SUPPLY


  UPWARDS SLOPING
• QD = a - b(p)

  DEMAND
• Qs = -a + b(p)

  SUPPLY
• Demand


  Inverse Relationship
• Supply 


  Direct relationship