CHARMAINE ROSE I.

TRIVIO RN
The demand for a certain product emanates
from:

the willingness to buy a certain product,
and
the capacity or ability to buy such product

- Shows the relationship between the price of
a good and the quantity of goods that
consumers are willing to buy
-There is a definite relationship between the
market price of a good and the quantity that
consumers are willing to buy

-Demand schedule is represented by demand
curve when plotted.
DEMAND CURVE


-Is a graphical representation of the demand schedule
- a downward sloping curve
- shows the inverse relationship between the price and
quantity of goods that consumers are willing to buy


D
D
P1
P2
Q1 Q2
THE LAW OF DOWNWARD
AND SLOPING DEMAND
FACTORS THAT AFFECT THE DEMAND CURVE

Own price of the product
- There is an inverse relationship between the
price of the product and the quantity being demanded

Average income
- As the average income of people and
households increases, the demand for specific goods
also increases.
FACTORS THAT AFFECT THE DEMAND CURVE

Average income
- higher incomes make commodities relatively
cheaper simply because people have more money to
buy goods and services
Income 1
Differential 1
Differential 2
Product

Rice
Income 1
Income 2
FACTORS THAT AFFECT THE DEMAND CURVE

Population size and demographics
-as population increases, more people will use
commodities

Remember that an increase in population generally
increases the demand for most products, and changes
or shifts in population demographics will affect the
demand for specific products
FACTORS THAT AFFECT THE DEMAND CURVE

Prices of related goods

-SUBSTITUTE PRODUCTS commodities that
decrease the use of another product when more of
these other products is used

Remember that substitute products change and move
in opposite direction
MRT
MRT AIRCON BUS
1. MRT fare decreases
2. Increased demand
for MRT
2. Demand for aircon
buses decreases
FACTORS THAT AFFECT THE DEMAND CURVE

Complementary products behave in the same
direction
-These are commodities that decrease the use of
another product when less of the other complement I
used and vice versa.

Remember that they change in the same direction
MRT
Gas
Cars
1. Prices
2. Decreased demand
for gas
Decreased demand
for cars
FACTORS THAT AFFECT THE DEMAND CURVE

Taste of buyers
-Influences buying decisions but is more difficult to
assess
- Although difficult to measure, taste is very important
factor in buying decisions of consumers
OTHER FACTORS THAT AFFECT THE DEMAND CURVE

Other particular factors
-climate and weather
THE DEMAND SHIFT

-SHIFTING TO THE RIGHT - increase in the actual
demand

-SHIFTING TO THE LEFT decrease in actual demand
for a commodity
REMEMBER THAT:

1. A shift to the left corresponds to an actual
decrease in demand;

2. a shift to the right corresponds to an actual
increase in demand; and

3. there is a movement along the curve if only prices
of products are manipulated
D
+
Decrease in demand
Movement along the
curve
Increase in
demand
-
QUANTITY
PRICE
THE SUPPLY SCHEDULE

-Shows the relationship between the supply of a good
and its market price holding all other things equal.

SUPPLY CURVE
-Graphically represents the relationship between a at
goods market price and the amount of that good that
producers are willing to produce and sell.
- upward sloping curve, in contrast to the demand
curve


SUPPLY CURVE
-Direct relationship between the price of a good and
the quantity that producers are willing to produce and
sell


PRICE
QUANTITY
Q1 Q2
S
P1
P2
THE LAW OF UPWARD SLOPING SUPPLY


FACTORS DETERMINING SUPPLY

-More often than not, businesses produce and sell
products to make profits not to have fun or do
charity

- Products have costs, and the bigger the difference
between the production cost of products and its
selling price, the better for producers. It simply
translates to higher profits.


OTHER FACTORS AFFECTING THE SUPPLY:

Own Price of the Product
-Higher own price of a certain products give
profits to the producers and sellers of the product.

Production Cost
- The lower the cost relative to the prices, the
better the profit
-They are able to do it by improving production
technology or lowering input prices.





PRODUCT
XYZ
PRODUCT
COST
SELLING PRICE 2
SELLING PRICE 1
PROFIT 1
PROFIT 2
Higher prices lead to higher profits (profit
1 , profit 2). This gives producers
incentive to produce more.


Input Prices labor and materials
PRODUCT
XYZ
SELLING PRICE
COST 1
COST 2
Profit 1
Technological
Input Prices
A decrease in production costs (cost 1.cost 2),
brought about by improvements through
technology and input prices gives better profits
(profit 2.profit 1) and thus incentives for producers
to produce and sell more


OTHER FACTORS AFFECTING THE SUPPLY:

Price of Production Substitutes





ABC LEATHER FACTORY
Limited draw materials;
Limited labor
Bags

Low price
Shoes
High Price
Wallets
Low
Price
PRODUCE MORE!


MARKET ORGANIZATIONS

MONOPOLY in which commodity is supplied by a
single firm.

-e.g MERALCO, PLDT, pharma company

-Effect of monopoly markets to the supply of goods is
to decrease the supply.
- To make more money, monopolistic companies do
not need to produce more goods, they have the option
to increase the prices of their products



CONSUMERS simply do not have a choice but to accept.


MARKET ORGANIZATIONS

OLIGOPOLY is a market state of imperfect
competition, in which the industry is dominated by a
small number of competitors, producing and selling
the same products.

-e.g. petroleum industry (Petron, Shell, Caltex)

-although there is a competition in the market, it is
easy for new companies to collude (IMPERFECT
COMPETITION)





MARKET ORGANIZATIONS

-CARTEL firms in an oligopolistic market who
collude, where they cooperate on certain activities like
pricing
- this inhibits real competition between the
firms



MARKET ORGANIZATIONS

Perfect Competition is the best for consumers and
has the following characteristics:

-the no. of sellers is numerous and;
-the products offered by sellers are almost the
same or indistinguishable. Under the existing
conditions, no single firm can affect the market price,
and each firm faces a perfectly elastic demand curve-
meaning changes in the prices easily affect the
quantity demanded of such



e.g. food chain businesses, schools, hospitals and
insurance

MARKET ORGANIZATIONS

MONOPOLISTIC COMPETTION is a market structure in
between oligopoly and perfect competition wherein
many sellers supply goods that are close, but not
perfect substitutes.
DIFFERENT MARKET ORGANIZATIONS AND THEIR
EFFECT ON THE QUANTITY SUPPLIED AND PRICES OF
PRODUCTS
TYPR OF
ORGANIZATION
DESCRIPTION EFFECT ON Q
SUPPLY
EFFECT ON
PRICES
Monopoly

Oligopoly
*cartel

Perfect
competition
-Single player/
single product
-Few
players/same
product
-many
players/same
product
-Low/very low

-Low to high


-High
-Very high

-High


-Low/very low
PARTICULAR FACTORS

-weather
-full moons effect to the supply of fishes
-government-quotas
THE SUPPLY SHIFT

RIGHT increase supply
LEFT decrease supply

REMEMBER THAT:
1. A shift to the left corresponds to an actual decrease
in supply
2. a shift to the right corresponds to an actual
increase in supply, and
3. there is only a movement along the curve if only
the prices of products are manipulated.
Q1 Q2 Q3
P1
P2
P3
Moving along the curve
Increase in supply
Decrease in supply