CANADA,ELIZABETH MANAGERIAL ECONOMICS

BSA-3 MS.ANGEL VIE RICAPUERTO

1. What is a market?
- A market is a place or a mechanism through which buyers and sellers interact to exchange goods,
services, or resources. It refers to the arrangements that allow buyers and sellers to come together and
engage in mutually beneficial exchanges.

In a market, buyers indicate the amount of a good or service they are willing to purchase at a certain
price, and sellers indicate the amount they are willing to sell at that price. The market then determines
the price at which the quantity demanded by buyers is equal to the quantity supplied by sellers, which is
called the equilibrium price.

2. What are the four types of market? Differentiate each type of market and give 1
example of industry/product each.

The four types of market are:

Perfect competition

Monopolistic competition

Oligopoly

Monopoly

-Perfect competition: In a perfect competition market, there are many small firms selling identical
products. No single firm can influence the market price, and new firms can enter the market with ease.
Examples of industries that fit the perfect competition market structure include agriculture products
such as wheat, rice, or corn.

-Monopolistic competition: In a monopolistic competition market, there are many small firms selling
slightly different products. Each firm has a small degree of market power and can differentiate its
product through branding, quality, or design. Examples of industries that fit the monopolistic
competition market structure include restaurants, clothing, and consumer goods.

-Oligopoly: In an oligopoly market, a small number of firms dominate the market and may collude to
control the market price. There are high barriers to entry, and firms may engage in non-price
competition such as advertising, innovation, or product differentiation. Examples of industries that fit the
oligopoly market structure include the automobile, smartphone, and airline industries.

-Monopoly: In a monopoly market, a single firm controls the entire market, and there are no close
substitutes for its product. The firm has complete market power and can set the price and output level.
Examples of industries that fit the monopoly market structure include public utilities, such as water, gas,
and electricity suppliers, or some software companies that have a dominant position in their market.

3. Give five (5) scenarios resulting in shifting of the demand curve. Explain.
 1. Change in production costs: If the cost of production increases, the supply curve will shift to the
left. For example, if the price of raw materials or labor increases, it becomes more expensive to
produce the goods or services, leading to a decrease in supply at each price level.

2. Technological advancement: An improvement in technology can reduce production costs and

increase efficiency, resulting in a rightward shift of the supply curve. For example, the
introduction of new machinery or software can increase the productivity of workers and reduce
the time and costs associated with production.

3. Changes in taxes or subsidies: If the government imposes a tax on a product, the supply curve
will shift to the left, as the cost of production and hence supply decreases. Conversely, a subsidy
given to producers will shift the supply curve to the right, as the cost of production is reduced.

4. Changes in producer expectations: If producers expect future prices to rise, they may hold back
on supply in order to sell at a higher price later. This will shift the supply curve to the left.
Conversely, if producers expect prices to fall, they may increase supply in order to sell before
prices decrease, leading to a rightward shift of the supply curve.

5. Changes in the number of producers: An increase in the number of producers in a market will
result in a rightward shift of the supply curve, as there are more suppliers competing to sell their
products. Conversely, a decrease in the number of producers will shift the supply curve to the
left, as there are fewer suppliers in the market.

4. Give five (5) scenarios resulting in shifting of supply curve. Explain.

1. Change in production costs: If the cost of production increases, the supply curve will shift to the
left. For example, if the price of raw materials or labor increases, it becomes more expensive to
produce the goods or services, leading to a decrease in supply at each price level.

2. Technological advancement: An improvement in technology can reduce production costs and

increase efficiency, resulting in a rightward shift of the supply curve. For example, the
introduction of new machinery or software can increase the productivity of workers and reduce
the time and costs associated with production.

3. Changes in taxes or subsidies: If the government imposes a tax on a product, the supply curve
will shift to the left, as the cost of production and hence supply decreases. Conversely, a subsidy
given to producers will shift the supply curve to the right, as the cost of production is reduced.
 4. Changes in producer expectations: If producers expect future prices to rise, they may hold back
on supply in order to sell at a higher price later. This will shift the supply curve to the left.
Conversely, if producers expect prices to fall, they may increase supply in order to sell before
prices decrease, leading to a rightward shift of the supply curve.

5. Changes in the number of producers: An increase in the number of producers in a market will
result in a rightward shift of the supply curve, as there are more suppliers competing to sell their
products. Conversely, a decrease in the number of producers will shift the supply curve to the
left, as there are fewer suppliers in the market.

5. What happens to the demand for a product when the price decreases?
- when the price of a product decreases, the demand for the product tends to increase. This is known as
the law of demand, which states that as the price of a product decreases, the quantity demanded of that
product increases, all else being equal.

The reason for this relationship is that, as the price of a product decreases, consumers perceive the
product as being relatively less expensive and more affordable, which can lead to an increase in consumer
willingness to purchase the product. Additionally, a lower price can attract new customers who were
previously deterred by the higher price, leading to an expansion of the market for the product.

6. What happens to the supply for a product when the price increases?
- when the price of a product increases, the supply for that product also increases. This is because higher
prices create an incentive for producers to increase the quantity of the product they are willing to supply
to the market.

There are a few reasons why producers might be willing to supply more of a product when its price goes
up. One reason is that higher prices often mean higher profits, which can motivate producers to increase
production in order to take advantage of the increased profitability. Additionally, higher prices can signal
to producers that there is greater demand for the product, which can encourage them to invest in
additional resources or production capacity to meet that demand.