of production inputs, or resources, necessary to produce goods.
Individuals supply factors of
production to intermediaries or firms.
The Law of Supply
There is a direct relationship between price and quantity supplied.
Quantity supplied rises
as price raises, other things constant. Quantity supplied falls as price falls, other things constant.
The law of supply is accounted
for by two factors: Perfectly Inelastic- 0 Perfectly Elastic- Infinity When prices rise, firms substitute production of **Things to remember one good for another. Assuming firms costs are 1) Kapag tinanong kung ano yung constant, a higher price Price Elasticity, yung sagot is means higher profits. yung 3 types (Elastic, Inelastic or Unitary) ELASTICITY 2) Kapag naman sinabing FIXED price, dalawa lang ang The responsiveness of supply pwedeng maging sagot or demand to the change in (Perfectly Elastic or Perfectly price Inelastic). 3) Kapag Income elasticity, ELASTICITY OF SUPPLY NORMAL good (positive) or The responsiveness of the INFERIOR good (negative). 4) Kapag Cross Price Elasticity, suppliers to the change in SUBSTITUTE (positive) or price COMPLEMENT (negative). INFLATION Inflation PEOPLE WHO BENEFIT FROM INFLATION o a sustained rise in the average price level over a period of 1. Debtors/Borrowers particularly if years. interest rates of loans are lower than o an increase in the general the inflation. level of prices in an economy 2. Businesses that can raise prices that is sustained over a period higher than their cost of production of time - people without fixed income o when demand is more than the supply that may lead to 3. Speculators inflation - Who are inclined to buy product with unstable prices and expects Hyperinflation that their prices can increase rapidly Prices rise very fast at double and easily or triple digit rate. Also called Runway or PEOPLE WHO ARE HURT FROM Galloping Inflations INFLATION
CAUSES OF INFLATION 1. Creditors individuals who gives
loans 1. Cost-push - the real value of the amount they - When cost of production lend falls when there is higher increases the price level inflation automatically increases. - Increase in the production 2. People with fixed income costs of firms - Workers and employees who - Income wages, purchase receive the same income suffer of raw materials and when price increases. machineries and the desire to have more 3. Individuals who save profits - Money saved in banks depreciates in value due to the low interest rate 2. Demand-pull of the bank - Demand for goods and services is greater than what the economy produce - Desire to buy products and services is more than the available supply in the market - Excess demand pushes up prices