Table of Contents

1.0 Introduction.....................................................................................................................4

2.0 Definition Of Economics................................................................................................5

2.1 Macroeconomics vs. Microeconomics........................................................................5

3.0 Positive Versus Normative Analysis In Economics........................................................6

3.1 Positive Analysis.........................................................................................................6

3.2 Normative Analysis.....................................................................................................6

3.1.1 Examples Of Positive Vs. Normative..................................................................7

4.0 Basic economic concepts................................................................................................7

4.1 Scarcity........................................................................................................................8

4.2 Choices........................................................................................................................9

4.3 Opportunity cost..........................................................................................................9

5.0 Basic economic problem.................................................................................................9

5.1 What to produce........................................................................................................10

5.2 What to produce.....................................................................................................10

5.3 For whom to produce.............................................................................................10

6.0 Production possibilities curve.......................................................................................10

6.1 Factors That Influence the Shift of the PPC..........................................................11

7.0 Economic system..........................................................................................................14

8.0 Definition of Demand...................................................................................................17

8.1 Classification of Goods and Services........................................................................17

9.0 Law of Demand.............................................................................................................18

10.0 Determinants of demand...............................................................................................18

10.1 Price of related goods................................................................................................19

10.2 Consumers’ income...................................................................................................19

10.3 Consumer’s fashion, taste and preferences...............................................................19

10.4 Expectations on future price......................................................................................19

 10.5 Population or number of buyers................................................................................20

11.0 Changes in quantity demanded vs changes in demand.................................................20

12.0 Definition of supply......................................................................................................21

13.0 Law of supply................................................................................................................21

14.0 Determinants of Supply.................................................................................................22

14.1 Number of Seller.......................................................................................................22

14.2 Prices of Resources....................................................................................................22

14.3 Taxes and Subsidies..................................................................................................22

14.4 Technology................................................................................................................23

14.5 Suppliers' Expectations..............................................................................................23

14.6 Prices of Related Products.........................................................................................23

14.7 Prices of Joint Products.............................................................................................23

15.0 Changes in quantity supplied vs changes in supply......................................................24

16.0 Summary.......................................................................................................................25

17.0 References.....................................................................................................................27

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 1.0 Introduction
Our group has chosen introduction to microeconomics and demand and supply as our
topic throughout this assignment. In this topic, we will be discussing about chapter 1 covering
the introduction to mircroeconomics covering from its definition to the differences of
microeconomics and macroeconomics. Then, we will be discussing about the basic economic
concepts and basic economic problems. After that, subtopics on the production possibilities
curve (PPC) and economic systems will be presented.

After finishing about microeconomics introduction, we will be discussing about

chapter 2 which covers demand and supply. In this subtopic, we will separate into 2 parts;
demands and supplies whereas under demands, we will be discussing about its definition, the
classification of goods and services, law of demand, determinants of demand and the
differences between changes in quantity and changes in demand. Under supplies, we will be
discussing on its definition, law of supply, the determinants of supply and the differences
between change in quantity supplied and changes in supply.

As for our focused case study, we will choose Apple inc. as our case study. Apple
Inc., founded by a man named Steve Jobs, is an American multinational
company headquartered in Cupertino, California, that focusing in technology field which
designs, develops, and sells consumer electronics hardware, computer software and online
services such as internet and storage services. It was the first successful personal computer
company and the populariser of the graphical user interface. It is considered one of the Big
Four of technology companies along with Amazon, Google, and Facebook. The company’s
hardware products can be found in computer market such as the mac personal computer,
smartphone such as iPhone and ipad, home appliances such as Apple TV and accessories
such as Apple smartwatch. Its software includes the macOS and iOS operating systems.
Internet services cover from web browsing application such as Safari web browser to iCloud
storage system. [ CITATION Bri19 \l 1033 ]

Apple is the world's largest information technology company by revenue, the world's

largest technology company by total assets, and the world's second-largest mobile phone
manufacturer after Samsung. [ CITATION Wik19 \l 1033 ] Based on its official report, Apple
inc. successfully generated quarterly revenue of $62.9 billion, an increase of 20 percent from
last year and quarterly earnings per diluted share of $2.91, up 41 percent. International sales
accounted for 61 percent of the quarter’s. Their focus on the first quarter of 2019 will be

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generating revenue between $89 billion and $93 billion in its upcoming fiscal 2019 1st quarter
report. [ CITATION App18 \l 1033 ]

2.0 Definition Of Economics

As the science of decision-making, economic philosophy operates in our daily lives
whether we realize it or not. When we are evaluating the interest rates on our credit cards or
trying to decide whether to buy or lease a new car or go out to dinner or on vacation, these
are all decisions we make using economic thinking. We live in a world of limited resources,
and economics helps us decide how to use these limited inputs to satisfy our never-ending list
of wants and needs. Economics is also a large field with a rich history that's been explored
and examined by hundreds of influential people, ranging from philosophers to politicians.

In its most simple and concise definition, economics is the study of how society uses
its limited resources. Economics is a social science that deals with the production,
distribution, and consumption of goods and services. Economics focuses heavily on the four
factors of production, which are land, labor, capital, and enterprise. These are the four
ingredients that make up economic activity in our world today and can each be studied
individually.

Economics is split into the following two broad categories of study:

 Macroeconomics - the branch of economics that studies the overall working of a

national economy. It is more focused on the big picture and analyzing things such as
growth, inflation, interest rates, unemployment, and taxes. When you hear the Federal
Reserve is raising interest rates or that the national unemployment rate is 7.5%, you
are hearing about macroeconomic topics.
 Microeconomics - the branch of economics that studies how households and
businesses reach decisions about purchasing, savings, setting prices, competition in
business, etc. It focuses at the individual level, while macroeconomics looks at the
decisions that affect entire countries and society as a whole.

2.1 Macroeconomics vs. Microeconomics

Among the many branches of economics two of the best known areas are the study of
Macroeconomics and Microeconomics. The two concepts are closely intertwined and can
sometimes be confusing. This article will provide you with the explanations necessary to
differentiate between Macroeconomics and Microeconomics.

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 Table 1:Differences between microeconomics and macroeconomics

3.0 Positive Versus Normative Analysis In Economics

Firstly, we need to define the definition of positive analysis and normative analysis. Both
analysis can defined as:

3.1 Positive Analysis

Descriptive, factual statements about the world are referred to as positive statements by
economists. The term "positive" isn't used to imply that economists always convey good
news, of course, and economists often make very, well, negative-positive statements. Positive
analysis, accordingly, uses scientific principles to arrive at objective, testable conclusions.

3.2 Normative Analysis

On the other hand, economists refer to prescriptive, value-based statements as normative
statements. Normative statements usually use factual evidence as support, but they are not by
themselves factual. Instead, they incorporate the opinions and underlying morals and
standards of those people making the statements. Normative analysis refers to the process of
making recommendations about what action should be taken or taking a particular viewpoint
on a topic.

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 3.1.1 Examples Of Positive Vs. Normative
The distinction between positive and normative statements is easily shown via examples
below. The statement:

 The unemployment rate  is currently at 9 percent.

The above statement is a positive statement, since it conveys factual, testable information
about the world. Statements such as:

 The unemployment rate is too high.

 The government must take action in order to reduce the unemployment rate.

The above statements are normative statements, since they include value judgments and are
of a prescriptive nature. It's important to understand that, despite the fact that the two
normative statements above are intuitively related to the positive statement, they cannot be
logically inferred from the objective information provided. (In other words, they don't have to
be true given that the unemployment rate is at 9 percent)

4.0 Basic economic concepts

Looking back at the definition of economy, we can understand that economy studies
about the relationship between human behavior and ends and scarce means which
produces alternative uses. To know the basic concept of economy, we need to understand
the following pillars:

 Ends which refers to the unlimited desires of human, known as wants. Wants are
different from needs as comprises the meaning of expressing a perceived need. Wants
are broader than needs as needs are the simple basic requirements for survival like
food, water and shelter. For example, nowadays, phone is considered as basic
necessities as it plays important role in our daily lives to meet the changing pace of
the current environment. The type of phone that we uses such as Iphone Xs and Nokia
6610 however, is considered as wants as not all features that are offered are basic
requirements for our daily routine.
 Scarce refers to the unlimited wants that we have but the available means to fulfill
them is limited, also known as limited resources.

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 Alternatives are seen as the available choices that can be offered and involves
opportunity cost. For example, if we cannot afford to buy Iphone XS, there are other
choices that we can choose from with lower prices such as Iphone 6s and Iphone 8.

After understanding these pillars, we may proceed to the basics of economic concept
as divided into few categories as below:

4.1 Scarcity
Scarcity is very important in economic’s concept as it explains well the roels
played by unlimited wants which exceeds the limited resources to fulfill them.
Scarcity is a major problem faced by the world as it is faced by both poor and rich
nations in order to satisfy their needs. However, there will be no economic if there is
no scarcity. Scarcity is influenced by the input availability. Input, which is also known
as resources, are affected by the factors of production used in the production process
in order to produce economic goods and services. The experts have classified these
factors into 4 categories known as:

 Land

All natural resources such as water and air

 Labour

The services contributed by the people which involves physically and mentally
throughout the production processes. Labour cost are usually measured by the total waged
given to hire the specific service.

 Capital

Capital refers to all human made resources which are used in the production process in
order to develop goods and services. Examples are machinery and buildings

 Entrepreneur

All human capabilities to combine all stated factors previously to develop the production
of goods and services.

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 4.2 Choices
When scarcity is present, options have to be decided. Every desires cannot be
fulfilled hence choosing available option is the only way to ensure the survival of the
entitiy.

4.3 Opportunity cost

Opportunity cost can be defined best as the best alternatives that can be chosen
from all available options to get the utmost satisfaction. In this situation, choosing
whichever option that can be fulfilled is compulsory and the next option that cannot
be done will be considered as opportunity cost. For example, with range of RM2000,
you can buy Iphone 7+ and Iphone 7. If you choose Iphone 7+, then Iphone 7 will be
your opportunity cost.

5.0 Basic economic problem

All modern economies have certain fundamental or basic economic problems to deal
with. In every single economy, resources are limited. As a result, decisions regarding the
resource used have to be made together by individuals, business corporations and society. A
nation or society has to make decisions on how to distribute their limited resources efficiently
to satisfy the needs of the people of producing sufficient goods. [CITATION Uni19 \l 1033 ]
To understand more, there are 3 fundamentals that can be studied:

Figure 1:Three basic economic problems of society

Source 1:universalteacher.com

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 5.1 What to produce
Each and every economy must determine what products and services, and what
volume of each product are best to produce. In some way, these kinds of decisions should be
coordinated in every society. In few cases, the government decides which fundamental
decision to choose from in order to produce the demands with limited inputs. Other than that,
consumers and producers decisions act together to find out what the society’s scarce
resources will be utilized for. In a market economy, this ‘what to produce?’ choice is made
mainly by buyers, acting in their own interests to fulfil their needs. Their demands are
fulfilled by organizations looking for profits such as Apple incorporation where they are
working endlessly to innovate their technology to meet the current trend and fulfil customers
demand according to the current changes.

5.2 What to produce

This refers to the cheapest method of production as to what are the available
alternatives of producing goods and services that can be chosen. These types of decisions are
generally made by companies which attempt to create their products at lowest cost. For
example, Apple incorporation are focusing on producing laptops with affordable prices
without looking forward to follow other trending features such as responding touchscreen
laptop as they are focusing on improvising their products while maintaining their products’
prices at the same time.
5.3 For whom to produce
This basic economic question is focused on who receives what share of the products
and services which the economy produces. In other words, the distribution of economic
benefits whereas it depends on the distribution of the income. The portion of production
which each person and family can consume is determined by their income. Income is
distributed in line with the value of resources needed to be sold. For example, Apple targeted
customer is not from the lower class income but from middle class to higher class income.

1.0

6.0 Production possibilities curve

A production possibility curve measures the maximum output of two goods using a
fixed amount of input. There are four factors of production that combines called input. The
factors is land and other natural resources, labor, capital goods and entrepreneurship. Most

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goods manufacture requires a mix of all four. The basic economic concepts of scarcity,
choices and opportunity cost can be explain by the production possibilities curve (PPC).

Each point on the curve shows how much each good will be produced when resources
shift from making more of one good and reduce the production of another good. The curve
measures the trade-off between producing one good versus another. For example, let say an
economy can produce 20,000 of oranges and 120,000 of apples. On the chart below at the
point B, if it wants to produce more oranges, it must reduce the production of apples. On the
same chart at point C shows that if it produce 45,000 oranges, only 85,000 of apples can be
produce.

Same goes to Apple Company, in 2018, the company produce two new products
which is Iphone X and Iphone Xs. But, The Wall Street Journal reported that Apple resumed
the production of the Iphone X due to weaker than expected demand for its latest Xs models.
The Apple Company needs to make a choice to gain more profit. Thus, based on the graph
below shows at point B, the company make an opportunity cost where the production of
Iphone X is increase but the production of Iphone Xs decrease. The reduce of the production
for Iphone Xs models lead to increase of production for Iphone X as demand are higher than
Iphone Xs.

Figure 2 the example chart of PPC

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 6.1 Factors That Influence the Shift of the PPC
There are several events that can occur in real world causing the PPC to shift or cause
changes in shape. Below show one of the factor that determine the shift of the PPC which is
population. For example, the economy of Japan is producing televisions and video games. If
a cure of cancer is discovered and Japan’s citizens consequently become healthier, what will
happen to Japan’s PPC?

With healthier citizens and fewer people dying from cancer, Japan has a larger
workforce every day. The healthier citizens will be able to work more and work harder,
leading to a higher output of goods and an outward shift in Japan’s PPC.

Figure 3 Population effects the shift of Japan's PPC

Same as my case study, even though Singapore economy are more stable than
economy in Malaysia, the demand for Iphone X in Malaysia is more than demand in
Singapore. This is cause by the number of population in Malaysia is greater than the number
of population in Singapore.

Next, the chart below show the second factor that influence the shift of the PPC which
is technological advances. For example, the economy of Cuba produces cigar and boats. If
Cuba purchases advanced technologies from the United States, what happens to Cuba’s PPC?

With greater technology advancements, Cuba can produce more cigar and boat. Thus,
the advanced technology leads to an outward shift in Cuba’s PPC.

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 Figure 4 Technological Advances effect the shift of Cuba's PPC

It also related to my case study, since the introduction of the Iphone in june 2007, the
sales of the Ipod have dramatically decreased from over 10 million units per quarter on
average to less than 3 million units in the fourth quarter of 2014, after which Apple stop
reporting sales figures for the Ipod as its own category. In contrast, sales of the Iphone have
increased rapidly, with over 211 million units sold worldwide in 2016 and over 77 million
units sold in the first quarter of 2018 alone.

The last factor that can influence the shift of PPC is economic growth. When the
country enjoys the economic growth, the PPC bounds to shift outwards. The production
capability of a country increase as there an expansion of resources such as land, labour,
capital and entrepreneurship with the economic growth to occur. For example, the economy
of Germany is currently producing beer and airplanes. If Germany is struck by natural
disaster such as tsunami, a hurricane or an earthquake, natural resources are either exhausted
of reduced. Thus, the economic growth will decline and there will be a decrease in outputs.
Plus, both beer and airplanes reduce from the usual production. This will shift the PPC to the
left.

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 Figure 5 Economic growth effect the shift of Germany's PPC

Apple Company also produce the latest product, Iphone X has been the best-
selling model for every week since it launched, said Apple CEO Tim Cook. How does the
Apple continue to make money? The Apple reported $229.2 billion in revenue during fiscal
year 2017, roughly a 6.3% increase from $215.6 billion in fiscal 2016. In 2015, Apple
announced its highest annual revenue on record of $233.72 billion. Over $150 billion of that
year’s revenue came from Iphone sales, meaning the company’s phone segment was
responsible around 70% of the company’s total global revenue. Iphone sales reached 216
billion units in 2017, up from 150 million in 2013 and 40 million in 2010. Apple is one of the
most valuable companies to date, yet nearly two-thirds of its revenue depends on one product
line. In the future, we may see Apple diversify its product line to include newer models of
accessories like the Apple AirPods, augmented reality glasses, autonomous vehicles, and
health services. [ CITATION The \l 1033 ]

7.0 Economic system

Economic system included four types which is Mixed Economy, Socialism Economy,
capitalism and Islamic Economy. The mixed economic system is an economic that combines
both capitalism and socialism that mainly to solve basic economic system. This economic
system also is a system that combines characteristics of market, command and traditional
economies. It benefits from the advantages of all three while suffering from few of the

13
 advantages. Thus, a mixed economy is an economy in which both public and private sectors
play a role. The government’s role in other areas depends on the priorities of the citizens. In
some, the government creates a central plan that guides the economy. Other mixed economies
allow the government to own key industries. These include aerospace, energy production, and
even banking. The government may also manage health care, welfare, and retirement
programs. Mixed economy practise by most of the countries around the world.

Table below shows some characteristics of a mixed economy:

Characteristics Descriptions of characteristics

Public and private  Private enterprises conduct business freely and the government
ownership of encourages the private sector by providing them with infrastructure
resources and facilities.

Government helps to  In most mixed economies, the government controls income disparity
control income through income taxes and welfare payments. The government also
disparity has direct control over profits, wages and rents.

Co-operation between  In mixed economies, there is significant co-operation between the

the government, public and private sectors leading to economic development.
public and business
sectors.
Price mechanism and  The price mechanism is used to price both goods and services.
economic plans in However, commodities such as sugar, oil and rice are declared as
making economic controlled items in Malaysia and the government fixes their prices
decisions

Government  The government will not intervene in the economy except for
intervention in the particular industries. The government also uses direct provision, e.g.
economy education, defense and health and health to increase standard of
living.
Government control  Monopolies are single players in an industry. They have complete,
of monopolies sole control over the price of goods or services.

Therefore, based on the mixed economy has given several effects to Apple Company.
Apple became the first public U.S. company to be valued at over US$1 trillion.  Apple is
the world's largest information technology company by revenue and the world's third-largest
mobile phone manufacturer after Samsung and Huawei. The company also has a high level
of brand loyalty and is ranked as the world's most valuable brand. However, Apple receives
significant criticism regarding the labour practices of its contractors, its environmental

14
practices and unethical business practices, including anti-competitive behaviour, as well as
the origins of source materials.

Price mechanism refers to the system where the forces of demand and supply
determine the prices of commodities and the changes therein. It is the buyers and sellers who
actually determine the price of a commodity. Most products move from manufacturers to
retailers through a network of distributors. Even though each product has a manufacturer
suggested retail price, (MSRP), each retailer is free to set its own sale price. A different
retailer might offer an even lower price to attract more store traffic, or conversely it finds
itself in a weaker position due to lower sales volume and have to charge its customers more
for the product. That gap leaves enough room for each retailer to set its own policies and
generate a sometimes significant range of market prices for a product. Apple, however,
extends only a tiny wholesale discount on its Macs and iPads to your retailer of choice. The
actual numbers are a closely guarded secret, protected by confidentiality agreements between
Cupertino and its resellers, but the difference probably amounts to only a few percentage
points off the official price that you find at Apple’s own stores. With such a narrow gap to
tinker with, most retailers can’t offer big discounts and still hope to turn a profit.
[ CITATION How18 \l 1033 ]

Moreover, Apple generated exceedingly high profits from the iPhone’s success.
According to iSuppli, Apple made a $326 profit for every unit of the 2nd generation iPhone
sold excluding development and capital costs. This is a classic example of a corporation
which has an almost absolute monopoly on a specific product. Over time, this product could
become essential for many, allowing the corporation to sell it at a very high profit. The
conventional solution for this problem, suggested by many economists and politicians, is to
impose price controls. After all, the free market failed in preventing a market failure from
occurring so the power of government is required to save the day. [ CITATION App \l 1033 ]

8.0 Definition of Demand.

Definition can be defined as the ability and willingness to buy specific quantities of
goods in a given period of time at a particular price, ceteris paribus. Ceteris paribus is a Latin
phrase holding other factors constant, an increase in the price for a specific good or service.

Demand diverges from desire, want, wish and the like. A mere desire or want for a
product will not cause producers to produce that product and place it in the market. The

15
person who desires or want to have a product must have the ability to buy and be willing to
pay for that product and only then is that desire called a demand.

8.1 Classification of Goods and Services.

We desire to have all the things to satisfy our present and future wants. Thus, our
desire is for all those things that satisfy our wants. All these things are either material goods
or services. If something is not wanted by anybody it will not be called a good or service.
Goods are material things wanted by human beings. They can be seen or touched. Services
are non-material things. These cannot be seen or touched only their effects are felt. When we
are hungry, we take food. When we fall sick, we take medicines. When we study, we use
book, notebook, pen, paper etc. All these are examples of goods which satisfy some of our
wants. All the things which satisfy human wants are good.

Table below shows the classification of goods and services:

Type of goods and Descriptions

services
1. Free Goods  Goods that have no production cost. These are usually
considered gifts of nature, such as sunlight, river water and air.

2. Public Goods  Goods that are commonly used and are of benefit to everyone.
For example, public clinics and schools.

3. Economic  Goods that involve a cost of production. Economic goods are

Goods and also things and value that can be seen and touched called
Services tangible things.

9.0 Law of Demand.

The law of demand states that the higher the price of a product, the lower the quantity
demanded of that product and the lower the price of a product, the higher the quantity
demanded, ceteris paribus.

For example, if the price of chicken decrease, the quantity demand for chicken will
increase. The consumer will prefer to buy more chickens when these are cheaper. At the same
time, a consumer’s purchasing power increase since he/she can save more money when price

16
of a chicken falls. Based on the law of demand, a negative relationship exist between price
and the quantity demanded.

Same goes to Apple product, Apple ceased selling the Iphone X in stores when the Xs
was first released. Plus, the price of Iphone X is cheaper than Iphone Xs. But, after a while
Xs model demand decrease. Thus, when there’s enough demand for them in certain markets,
the production of Iphone X will be continued. Below is the example of demand curve when
the price of an Iphone at RM 1,600, the demand of the product is only 8,000 units of that
particular Iphone. But, once the price of an Iphone decrease in the market, the demand of the
product increase.[CITATION Placeholder1 \l 1033 ]

Figure 6 Example demand curve

10.0 Determinants of demand

You can understand how each determinant affects demand if you first assume that all the
other determinants don't change. That principle is called ceteris paribus or “all other things
being equal” . So, ceteris paribus, here's how each element affects demand. [ CITATION
Kim19 \l 1033 ]

10.1 Price of related goods

The price of related goods fall into 2 categories which are:

 The price of complementary goods or services

The price of complementary goods or services raises the cost of using the product you
demand, so you'll want less. For example, when iPhones’ price increases, the demand

17
 for iPhone covers fall. iPhone is a complementary good to iPhones cover. The cost of
getting an iPhone rose along with iPhone cover prices.

 The price of substitute goods or services

The opposite reaction occurs when the price of a substitute rises. When that happens,
people will want more of the good or service and less of its substitute. That's why
Apple continually innovates with its iPhones and iPods. As soon as a substitute, such
as a new Android phone, appears at a lower price, Apple comes out with a better
product. Then the Android is no longer a substitute.

10.2 Consumers’ income

When income rises, so will the quantity demanded. When income falls, so will demand. But
if income doubles, it becomes vice versa. When Apple’s product rises its prices beyond
consumers’ income average, they will find other gadget that suits their income and
affordable.

10.3 Consumer’s fashion, taste and preferences

When the public’s desires, emotions, or preferences change in favor of a product, so does the
quantity demanded. Likewise, when tastes go against it, that depresses the amount demanded.
Brand advertising tries to increase the desire for consumer goods. Like iPhone, they don’t
have to advertise heavily because its brand is well known and acknowledged globally. People
will still look upon Apple’s product. Unlike other competitors like Vivo smartphone, the need
to push their advertisement and try winning consumers’ taste and preferences.

10.4 Expectations on future price

When people expect that the value of something will rise, they demand more of it. Same goes
to vice versa. For example, consumers who prefer iPhone waited for the newly announced
iPhone XS Max to be launched so that their previous version, iPhone X will decrease its
market price. To buy the newly launched phone will cost consumer huge amount of money
for an upgrade. Instead of buying the latest one with similar features that can be found on
their previous version, consumer will go for iPhone X after the price goes down than buying
while the price is at higher price. Hence, the demand before the decrease in price is lower
than after the decrease occurs.

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 10.5 Population or number of buyers
The number of consumers affects overall, or “aggregate,” demand. As more buyers enter the
market, demand rises. That's true even if prices don't change. For example, the demand for an
iPhone in Malaysia is higher than the demand in Singapore because the population in
Malaysia is 6 times more than the population in Singapore.

11.0 Changes in quantity demanded vs changes in demand

A change in quantity demanded is a change in the specific quantity of a good that buyers
are willing and able to buy. This change in quantity demanded is caused by a change in the
demand price. A change in demand, however, is affected by the price of a product and other
factors in the determinants of demand.[ CITATION Amo19 \l 1033 ] It is illustrated by a
movement along a given demand curve as seen in the figure below:

Figure 7: Graph for changes in demand vs change in quantity demanded

Source 2: busanlottedfs.com

From the above graph, we can conclude that shift in demand curve, from D O to D1 or
Do to Dn occurs when there are changes in other factors in the determinants of demand and
only if the price remain constant. For example, when the income of Apple’s customers
increases, the demand curve shifts to right, from DO to D1. Another example is if Apple’s
product increases in price such as its iPhone XS Max while its substitute goods decreases or
maintain at lower prices such as the latest Samsung Galaxy S10+, the demand curve shift to
left, from Do to Dn..

19
 As the demand price induces a change in the quantity demanded and a movement
along the demand curve, the determinants of demand such as population of buyers or
consumers’ income remain unchanged.

In fact, the only way to induce a change in quantity demanded is with a change in the
price, either change from point A to point B or vice versa, as seen on the graph above.
Anything else will affect changes in demand curve.

12.0 Definition of supply

Supply is an economic term that refers to the amount of a given product or service
that suppliers are willing to offer to consumers at a given price level at a given period.In
economics, supply is the amount of something that firms, producers, labourers, providers of
financial assets, or other economic agents are willing and able to provide to the marketplace.
Supply is often plotted graphically with the quantity provided (the dependent variable)
plotted horizontally and the price (the independent variable) plotted vertically.

In the goods market, supply is the amount of a product per unit of time that producers
are willing to sell at various given prices when all other factors are held constant(ceteris
paribus). In the labor market, the supply of labor is the amount of time per week, month, or
year that individuals are willing to spend working, as a function of the wage rate. In the
financial markets, the money supply is the amount of highly liquid assets available in the
money market, which is either determined or influenced by a country's monetary authority.

13.0 Law of supply

Law of supply states that other factors remaining constant, price and quantity supplied
of a good are directly related to each other. In other words, when the price paid by buyers for
a good rises, then suppliers increase the supply of that good in the market.

Law of supply depicts the producer behavior at the time of changes in the prices of
goods and services. When the price of a good rises, the supplier increases the supply in order
to earn a profit because of higher prices.

14.0 Determinants of Supply

The quantity of a product or service supplied factors are influence by determinants of supply
that is known as factors affecting supply. The main factor that affecting the ability is and the
willingness to supply is the price of a product. Although, our main focus is about

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determinants of supply and not the price. Law of supply states that there are other factors
which are assumed to be constant.

As the price-quantity combination to move along the supply curve are cause by the change in
the price of a particular product. Although, supply curve will shift when determinants is
change. Following are the main determinants of supply other than price:

14.1 Number of Seller

The law of supply also state that the more the number of sellers, the more the quantity
of a product or service supplied in a market and vice versa. So, the number seller increase and
the number of supply also increase. It also affects the shift supply curve to rightwards when
the number of seller decrease whereas supply curve leftwards when the number of seller
increase. For example, when new firms enters an industry, the number of sellers and suppliers
also increase. For example, new smartphone company such as xiaomi enters the market, the
number of seller increase and suppliers also increase to produce the latest features on their
smartphone.

14.2 Prices of Resources

Shrinking in profits are cause by the increase of resource price at the same time the increase
of production cost. The increase in profits can also increase in supply, same goes to decrease
in profits can reduce the supply since profit is a main incentive for producers to supply goods
and services. To put it simply, supply is inversely proportional to resource prices. Supply is
reduce when resource prices is increase causing the supply curve to shift leftwards whereas
supply curve increase when resource prices decrease causing supply curve to shift rightwards.
For example, Wall Street Journal report that Iphone Xs weaker demand than Iphone X, so to
gain more profit, Apple decide to continue the production of Iphone X because the resource
price is lower than the production of Iphone Xs.

14.3 Taxes and Subsidies

Profits can be reduce by taxes, so supply will decrease when the taxes is increase whereas
supply will increase when taxes is decrease. Although, the production cost on suppliers can
reduce the burden through subsidies. Thus, supply will increase when subsidies is increase
and supply will decrease when subsidies is decrease.

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 14.4 Technology
The production of goods and services can be more efficient after the industry enables
technology improvements. Therefore, to increase the profits, the production cost needs to
reduce. The increase in supply can lead the supply curve to shift rightwards. Generally,
technology are rarely to fail, therefore the fall of technology can also reduce the supply. For
example, the latest feature on Iphone XR is new Liquid Retina LCD. So, the price may
increase also.

14.5 Suppliers' Expectations

The current supply of suppliers may affected by the expected future price of a product.
Although, the effect if suppliers’ expectations on supply is hard to simplify unlike other
determinants of supply. For example, when farmers suspect the increase future price of a
crop, they will reserve their agricultural produce to benefit from higher price thus the supply
is reduce. Same goes to Apple Company, when they expect the increase of the price of an
incoming Iphone XR, more resources will be focus on the latest Iphone rather the old one.
Thus to increase their output, Apple decides to reduce the price of the old model of Iphone
and this may also increase their current supply as well for the latest Iphone.

14.6 Prices of Related Products

Related products are able manufacture by a firm such as toothbrush and toothpaste will shift
their production to a product the price which increase both the related products. Therefore
supply of the product which produced before is reduced. For example, Apple Company that
able to produce Iphone X is usually can manufacture Iphone Xs as well. So, when increase in
price of an Iphone X, the Apple Company will produce more Iphone X and reduce the
production of an Iphone Xs. So the outcome is the supply of an Iphone Xs will be reduced.

14.7 Prices of Joint Products

If the production of two or more goods in a joint process, the price of any product will
increase. Therefore, it will also increased of all joint product supplied and vice versa. For
example, the increase IOS system for smartphone will also increase the production of new
Iphone.

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 15.0 Changes in quantity supplied vs changes in supply
Any changes that occur in determinants of supply influence the seller’s plan. This causes
a movement or shift in the supply curve. This can be illustrated and explained as below:

Figure 8: Changes in quantity supplied vs changes in supply

Source 3: williballenthin.com

In changes in quantity supplied, if the prices of product changes while other factors
remain the same, there will be movement along the supply curve. The movement illustrates
the change in quantity supplied whereas:

 An upward movement along the supply curve shows the increasing number of
quantity supplied from point B to point S. This usually happens if the price of the
product rises.
 A downward movement along the supply curve shows the decreasing number in
quantity supplied from point B to point A. This usually happens if the price of the
product falls.

For changes in supply, if the price of the product is the same while other factors in the
determinants of supply change, there will be a shift in the supply curve. In a simple
comparison:

 An increase in supply will shift the curve to the right from S o to S1. This usually
happens if the price of substitute goods or the input cost decreases or if there is an
increasing changes for the complementary goods’ prices or number of sellers. For
example, if Apple’s there’s a substitute for iPhone XS Max such as iPhone XR, the
supply for iPhone XS Max will decreases.

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  A decrease in supply will shift the curve to the left from S1 to S0. This usually happens
if the price of substitute goods or the input cost increases or if there is a decreasing
changes for the complementary goods’ prices or number of sellers. For example,
iPhone’s future product is expected to be twice the current iPhone price, there will be
a decreasing number in supply.

16.0 Summary
Economics is a study of how people use their limited resources to satisfy their unlimited
needs and desires. A positive statement deals with the question of what is and there is no
indication of approval or disapproval and a normative statement deals with question of what
ought to be. The microeconomics analyzes the specific economic units in detail, such as
households, firms and government. Whereas macroeconomics analyzes the aggregate
behaviour of the entire economy, such as inflation, unemployment and national income. In
addition, human wants being always greater than the available resources is called scarcity. In
order to produce economics goods and services basic resources used in the production
process is called factors of production. Opportunity cost can be defined as the second best
alternative that has to be forgone for another choice which gives more satisfaction.

Next, production possibilities curve (PPC) shows the various possible combinations of
goods and services produced within a specified time period with given technologies and
resources. The points lying inside the PPC indicate inefficiency and waste of resources. In
other means they are not fully utilize all their resources. Besides that, points lying outside the
PPC are unattainable and show the concept of scarcity. The demands is greater than the
available resources. The resources is limited, so they can’t produce more. After that points
along the PPC show the maximum amount of output attainable and efficiency, which indicate
choices. Then, mixed economy is an economic system which is a mix of capitalism and
socialism systems to solve basic economic problems.

In chapter 2, demand is defined as the ability and willingness to buy specific quantities of
goods in a given period of time at a particular price, ceteris paribus. Ceteris paribus means
holding other factors constant. The law of demand states that the higher the price of a good,
the lower the quantity demanded for that good and vice versa, other things being equal. Next,
supply is defined as the ability and willingness to sell specific quantities of goods in a given
period of time at a particular price, ceteris paribus. In addition, the law of supply states that

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the higher the price of a good, the higher the quantity supplied for that good and vice versa,
ceteris paribus.

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 17.0 References
Amadeo, K. (21 January, 2019). Dotdash. Retrieved from the Balance:
https://www.thebalance.com/five-determinants-of-demand-with-examples-and-
formula-3305706

Amos Web Encyclonomic. (2019). Web Pedia. Retrieved from Amos Web:
http://www.amosweb.com/cgi-bin/awb_nav.pl?
s=wpd&c=dsp&k=change+in+quantity+demanded

Apple inc. (November, 2018). Apple newsroom. Retrieved from www.apple.com:

https://www.apple.com/newsroom/2018/11/apple-reports-fourth-quarter-results/

Apple product sales (iPhone, iPad & iPod) 2009-2018. (n.d.). Retrieved from Statista:
https://www.statista.com/statistics/253725/iphone-ipad-and-ipod-sales-comparison/

Apple resumes iPhone X production in face of weak XS sales, report claims. (22 November,
2018). Retrieved from The Verge:
https://www.theverge.com/2018/11/22/18107795/iphone-x-production-resumed-
weak-demand-2018-models-rumor

Britannica. (2019). Encyclopedia Britannica. Retrieved from www.britannica.com:

https://www.britannica.com/topic/Apple-Inc

How Does the iPhone Make Money? (AAPL). (5 December , 2018). Retrieved from
Investopedia: https://www.investopedia.com/articles/investing/022316/economics-
iphone-aapl.asp

The Production Possibility Curve (Production Possibility Frontier) - ppt download. (n.d.).
Retrieved from SlidePlayer: https://slideplayer.com/slide/6032223/

Universal Teacher. (2019). universalteacher.com. Retrieved from Universal Teacher:

http://universalteacher.com/1/three-basic-economic-problems/

Vengedasalam, D. (2013). Principles of Economics Third Edition. Oxford Fajar.

Wikipedia. (10 March, 2019). Wikipedia. Retrieved from en.wikipedia.org:

https://en.wikipedia.org/wiki/Apple_Inc.#Finance

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