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School of the Holy Child Angeles, Incorporated

101 George Avenue, Villa Angelina Subdivision, Angeles City

Social Studies 10

Kristine Mari P. Demapendan

Ms. Gimberly O. Sales

Production Linkage

 Connection or relation between factors of production The factors of production are resources that are the building blocks of the economy. The first factor of production is land. Labor is the effort that people contribute to the production of goods and services. The second factor of production is labor. This includes not just land. labor.land.  How demand affects production and consumption Economists have a very precise definition of demand.to earn a profit. but this includes any natural resource used to produce goods and services. Concept of Demand  What is Demand? Demand is an economic principle that describes a consumer's desire and willingness to pay a price for a specific good or service. For them demand is the relationship between the quantity of a good or service consumers will purchase and the price charged for that . but anything that comes from the land. The fourth factor of production is entrepreneurship. An entrepreneur is a person who combines the other factors of production . and capital .

services. The specific quantity desired for a good at a given price is known as the quantity demanded.good." Demand is not simply a quantity consumers wish to purchase such as '5 oranges' or '17 books'. the higher the price of a good. Imagine that a special edition CD of your favorite band is released for P200. In other words. only ten CDs were released because the opportunity cost is too high for suppliers to produce more. or financial instruments necessary to make a legal transaction for those goods or services. if all other factors remain equal. The amount of a good that buyers purchase at a higher price is less because as the price of a good goes up. because demand represents the entire relationship between quantities desired of a good and all possible prices charged for that good. If the local Starbucks lowers their price of a tall coffee from P175 to P165. the less people will demand that good. Because the record company's previous analysis showed that consumers will not demand CDs at a price higher than P200. so does the opportunity cost of buying that good. the lower the quantity demanded. When the price of an orange is 65 pesos the quantity demanded is 300 oranges a week. More precisely and formally the Economics Glossary defines demand as "the want or desire to possess a good or service with the necessary goods. Elasticity Demand  How price manipulates demand . Typically a time period is also given when describing quantity demanded. the quantity demanded will rise from 45 coffees an hour to 48 coffees an hour. the higher the price. As a result.  Explanation of the law of demand The law of demand states that. people will naturally avoid buying a product that will force them to forgo the consumption of something else they value more.

. The negative sign indicates that P and Q are inversely related.20 x 250. In this case. the PED will be: -50% / 20% = (-) 2.000 after the price rise (P1. and on the revenue received by firms before and after any price change. This is significant because the newspaper supplier can calculate or estimate how revenue will be affected by the change in price.5.20.000) but falls to £300.000. % change in quantity demanded % change in price We can use this equation to calculate the effect of price changes on quantity demanded. which we would expect for most price/demand relationships.00 is P500. For example. if the price of a daily newspaper increases from P1.000). 000 (P1 x 500.Price elasticity of demand (PED) shows the relationship between price and quantity demanded and provides a precise calculation of the effect of a change in price on quantity demanded.00 to P1. revenue at P1. and the daily sales fall from 500.000 to 250.