Question 1

A movement along a demand curve means?

This question requires an understanding of Demand

a. A change in price c. A change in demand

d. A change in quantity
a. A change in quantity d. A change in quantity
demanded
demanded

Discussion Review:
Pricing is an integral part of marketing. The heart of
price formation under pure competition, is demand and
supply analysis.
Without analysis of demand and supply, we cannot
understand how prices are determined.

Demand, the powerful force that “pulls” food products

through the marketing channels. It is defined as the various
quantities of a product which consumers will buy at all
probable prices, all other factor affecting demand held
constant.

Effective demand, consist of both a desire for the product

and the ability to pay for it.

The demand relation can be described in two ways: as a table

of prices and a graph or algebraic functions of price and
quantities ( a demand curve).
 Demand Schedule
Price per Kg. Qty.
Demanded
5 8 Demand Curve
4 13 Price

3 20
2 30
1 45

Qty. Demanded
 Change in Quantity Demanded
Demand for rice 45
Price per kg. Qty. Demanded (kg) 40
Q1 29 10
Q2 31 8 35
Q3 33 6
Q4 35 4 30
Q5 37 2
25

Price
Q6 39 0
20
Demand for rice
Price and quantity 15
demanded is inversely 10
related to each other. 5
Law of Demand
0
0 5 10 15
Change in Quantity
Quantity Demanded
demanded is a change
along the demand curve.
Question 2
The effect of a price change is always negative as consumers
tend to substitute other goods resulting to a decrease in
quantity demanded?

a. Substitution
Substitute effect
Effect c. Giffen paradox
b. Income effect d. Inferior good
Discussion Review
If the price of chicken declines relative to pork,
consumers tend to substitute chicken for pork. Consumer
tends to substitute the relatively cheaper commodity for the
more expensive one to remain at the highest possible level of
utility within the constraint of available income.
What is Substitution Effect in relation to change in demand?

Price
Change in Demand is a
movement of the whole demand
Qd1
curve either downward (left
P1
side) or upward (rightward)
P2 Qd2 movement.

Downward movement means

decrease (negative) in demand
and Upward movement means
Quantity increase (positive) in demand.

Qd
DEMAND FOR PORK P Downward movement
 Upward movement
Price

Qd
P2 Qd2

P1 P
Qd1

Quantity

DEMAND FOR CHICKEN

Question 3
Other things being equal, an increase in the per capita
income of consumers will result in?
a. A change in quantity demanded c. A change in demand
b. An increase
b. An increase in
in demand
demand d. A decrease in demand

Discussion Review
Demand increases as the income of the consumers
increases, prices remaining constant. (Demand and income is
positive).
 INCOME EFFECT

Price increase causes to

reduce the value of the
consumers income.
P2

P1 Price increases

Quantity demanded
increases

Qd1 Qd2
Change in Demand
Change in Demand is a change in an entire demand curve.

What causes the change in demand?

1 As population increases, 2 As income increases,
the demand for product assuming prices remain
also increases.(Positive). stable, the demand for
luxurious goods (like steak)
As population decreases may increase while
the demand for products demand for inferior goods
also decreases. (ginamos) decrease.
(Positive/ Negative).
 3 Substitute (Negative)
DEMAND Shifters
Complement (Positive)

What is MARKET DEMAND?

Market Demand is defined as the quantities of a commodity

which all consumers in a particular market are willing and
able to buy as price varies, all other factors are held constant.
A market demand relation can be thought of as summation
of individual demand relations.
Question 4

If the elasticity of demand is less than 1, an increase in own

price of a commodity will result in?

a. An
Anincrease
increaseininrevenue
revenue c. A decrease in total revenue
b. No change in total revenue d. A decrease in the value of
the elasticity of demand

Discussion Review
Reactions of consumers to changes in the price of a
particular commodity may either be a decrease in purchase if
prices increase or an increase in purchases as prices decrease.
But the extent to which this occurs varies widely from product
to product.
 The extent to which purchases change in response to
price changes is referred to as price elasticity of demand.
Price elasticity of demand

E = % change in quantity
% change in price

0 = Perfectly inelastic
more than 0 less than 1 = Inelastic
1 = Unitary elastic
more than 1 to infinity = elastic
Infinity = perfectly elastic
 A drop in price causes consumers to make larger
money expenditure on a commodity whose demand is elastic,
If demand is inelastic, a fall in price causes consumers to
spend less money on the commodity.

Commodity Income Elasticity

Rice 0.08
Corn 0.17
Pork 0.74
Beef 0.74
Processed Meat 0.96
Chicken 0.6
Vegetables 0.16
Root Crops 0.21
Fresh Fruits 0.25
Question 5
When the price of palay increases, total revenue of the
farmer also increase, From this, we can correctly conclude
that the demand for palay is?
a. Perfectly inelastic c. Unitary elastic
b. Elastic d. Inelastic

Question 6
When the price of papaya increase by 30 %, quantity
demanded decrease by 2 %. What is the absolute value of
the elasticity of demand?
a. 2 c. 30
b. 1.5 d.
d. 0.07
0.07 = (2/30=0.0667
Question 7
Under what condition will demand be likely elastic?
a. Newly marketed product c. A product
product has
has many
many uses
uses
b. Perishable product d. All of the above

Question 8
The supply curve for a given commodity will shift to the right
if?
a. Competing or alternative commodities become more
profitable
b. AAtechnological
technologicalimprovement
improvement results
results in a decrease in per
per
unitunit
costcost
c. The cost of producing the commodity increases.
d. All of the above
Question 9
Improvement in production technology, given a constant
demand, will result in?
a. Increase
Increaseininsupply
supplyand
andsubsequently
subsequentlylower
lowerprice
priceofofthe
the
product.
product.
b. Increase in supply without any change in the price of the
product.
c. Increase in supply and an increase in the price of the
product.
d. All of the above
Discussion Review
Supply is quantity offered for sale is made to depend
on price, other variables can affect quantity held constant.
Supply is represented either in supply schedule or
graphical presentation.
A normal supply function should slope upward and to
the right. Producers presumably are willing to offer larger
quantities as the prices rises.
Price Change in quantity supplied.
Is a change of quantity
P2
supply along the supply
P1 curve.

Quantity
Qd1 Qd2
Change in Supply DOWNWARD MOVEMENT
(RIGHTWARD);
Dec. In Price
Inc. In Qty Supplied

Change in Supply

UPWARD / LEFTWARD
MOVEMENT
Inc. In Price
Inc. In Qty Supplied
Supply Shifters

A. Changes in prices of resource inputs (-)

> An increase in input prices, decreases supply

Downward movement
B. Changes in Technology (+)
> An improvement of technology, increase supply

Upward movement
C. Sellers expectations of future prices (+)
Upward movement
D. Prices of closely related commodities. (-). E.g Corn &
Hog / Profitability of competing commodities (+) Rice
& Corn
Upward movement/ Downward Movement
Question 10
That price at which the quantity per unit of time that buyers
want is just equal to the quantity that sellers want to sell?

a. Equilibrium
Equilibriumprice
price c. Selling Price
b. Buying Price d. None of the above
Price Demand Supply
2 4 3
4 7 4
5 5 5
6 3 8