o LAW OF DEMAND products and services.

In
- States that while price is this situation, the demand
decreasing, the quantity curve will shift to the
demand is increasing and right. The demand curve
while price is increasing, the will shift to the left with a
quantity demand is decrease in number of
decreasing. consumers.
- Inversely proportional

1. INCOME EFFECT - is
the effect on 2. TASTE AND PREFERENCES
real income when price - It has a big impact in the
changes - it can be positive increase or decrease of
and negative. demand. Taste can be
2. SUBSTITUTION EFFECT- is the influenced by age, gender,
economic understanding that culture, climate, occasion,
as prices rise — or income education, environment,
decreases — consumers will and status in society.
replace more expensive - Can be influenced by:
items with less costly weather, season, trends,
alternatives. advertisements.
3. INFERIOR GOODS- is a good
whose demand decreases 3. PRICE EXPECTATIONS
when consumer income rises, - If consumers expect that
unlike normal goods, for price will increase in the
which the opposite is future, the demand for a
observed. product at present will
4. SUPERIOR GOODS-  or luxury increase. This will shift the
goods make up a larger demand curve to the right.
proportion of consumption as
income rises, and therefore 4. PRICE OF OTHER RELATED
are a type of normal goods in GOODS
consumer theory.  - SUBSTITUTE GOODS-
5. refers to products that can
be used in replacement of
o NON-PRICE DETERMINANTS another product.
OF DEMAND
1. NUMBER OF BUYERS/ - COMPLIMENTARY GOODS-
POPULATION refers to products that are
- Societies with a large used together.
population mean having a
large number of o LAW OF SUPPLY
consumers. The increase - States that while price is
in population/ number of increasing, the quantity
consumers is equated to supplied is increasing and
an increase in demand for

CAMILLE B. ROJAS ABM 12 NICHOLAS OWEN

 while the price is to produce more
decreasing, the quantity products.
supplied is decreasing. - Technological
advancements
o NON-PRICE DETERMINANTS lowers the cost of
OF SUPPLY production, thus
1. PRODUCTION COST making production
- The fi rm buys various more profitable. The
FoPs that it uses to supply curve shifts to
produce its product. the right
Prices of FoPs (wages) - Modern technology
are important in incorporation in
determining the firms business and service
costs of production. If a delivery enables
factor price rises, efficient, and efficacy
production costs in the production of
increase, production goods and delivery of
becomes less profitable services reduces the
and the firm produces overall costs of the
less. The supply curve final product. The
shifts to the left. reduction in the
- Since most private production cost
companies’ goal is profit through technology will
maximization. Higher increase
production cost will lower profits. Therefore, the
profit, thus hinder supply. supply increases and
Factors affecting the supply curve will
production cost are: input shift rightwards.
prices, wage rate, Technology rarely
government regulation deteriorates and it
and taxes, etc. ensures the business
remains efficient
1) TECHNOLOGY therefore a constant
- An increase in supply of the goods
technology makes and services.
production more
efficient. Supply 2) NUMBER OF SELLERS
increases. - There is an increase in
- Technology also plays quantity supply when
a role in production for there is an increase in
it introduces new the number of sellers.
machineries and During the summer
methodology. Making time, expect the influx
use of technology of sellers selling
lessens cost of mangoes in the market.
production for it is able In this case, the supply

CAMILLE B. ROJAS ABM 12 NICHOLAS OWEN

 curve will shift to the number of sellers, and
right. Come rainy therefore supply will
season, sellers leave increase as well.
the market making
quantity supply for 3) EXPECTATIONS OF FUTURE
mangoes go down. In PRICES
this scenario, the - Changes in the
supply curve will shift expectations of the
to the left. suppliers about the
- More sellers in the future price of a service
market increase the or a product may affect
market supply. the current supply.
- Future expectations of However, unlike the
prices future v present other determinants of
supply (supply) supply, the
- Similar to future expectations of the
expectations in supply can be quite
demand. Demand difficult to generalize.
increases when supply For example, when
increases on specific farmers anticipate that
goods. (Ex: heart the price of the crop
shaped candies around will increase. This will
January & February). cause them to withhold
- Number of suppliers the produce to benefit
(supply) from a higher price.
- More businesses = This, in turn, reduces
higher supply & less the supply and in the
businesses = lower context of
supply. manufacturers when
- When the number of there is an expected
sellers is high in a increase in price then
certain market, the they will employ more
quantity of product or resources to increase
service supplied to that the output. This is a
market will be high and major cause of an
vice versa. Therefore, increase in supply.
an increase in the - Just like the consumer,
number of sellers in a the producer also has
market will decrease his speculation as to
the supply and the what will happen to
supply curve shifts price in the coming
leftwards. An example days/weeks/ months.
is a situation where With the expectations
more companies enter that the price of rice
into an industry, this will increase in the
will increase the future, at present, the

CAMILLE B. ROJAS ABM 12 NICHOLAS OWEN

 producer will hoard his
supply. The supply of
rice will decrease, that
will shift the supply
curve to the left. Th
producer will unload his
supply of rice if he
expects the price to
decrease. The quantity
supply for rice will
increase thus, shifting
the supply curve to the
right.
o ELASTICITIES OF DEMAND
PRICE ELASTICITY
- Refers to the degree of
response of consumer to a
change in price.
Q 1−Q 0
Q 0+Q 1/2
- Ed=
P 1−P 0
P 0+ P 1/2
ELASTIC
- Coefficient is more than 1
INELASTIC
- Coefficient is less than 1
UNITARY
- Coefficient is equal to 1
INCOME ELASTICITY
- is an economic term that
explains the connection
between the demand of a
product and the income of
the consumer. In other
words, if a person's
income goes up or down,
his income elasticity
impacts if he will purchase
a product or not.
CROSS ELASTICITY
CAMILLE B. ROJAS ABM 12 NICHOLAS OWEN
- is an economic concept
that measures the
responsiveness in the
quantity demanded of one
good when the price for
another good changes.
Also called cross price
elasticity of demand, this
measurement is
calculated by taking the
percentage change in the
quantity demanded of one
good and dividing it by the
percentage change in
price of the other good.
o PRICE ELASTICITY OF SUPPLY
PRICE ELASTICITY
- Refers to the degree of
response of producers to a
change in price.
Q 1−Q 0
Q 0+Q1 /2
- Es=
P 1−P 0
P 0+ P1 /2
1. ELASTIC
2. INELASTIC
3. UNITARY
o MARKET EQUILIBRIUM
- is a market state where
the supply in the market is
equal to the demand in
the market. 
EQUILIBRIUM PRICE
- The price agreed upon by
the consumer and
producer, where the buyer
is able and willing to buy
and the producer is able
and willing to sell.
SHORTAGE
 - Demand is greater than to implicit costs, land
supply. those where no actual
payment is made.
SURPLUS
- Demand is less than 3. IMPLICIT COST- is
supply. any cost that has
already occurred but is
PRICE CONTROLS not necessarily shown
- Government intervention or reported as a
in determining the price in separate expense.
the market.
o LAW OF DIMINISHING
1. PRICE CEILING- highest MARGINAL UTILITY
possible price that a - states that all else equal
commodity can be sold. To as consumption increases
protect the CONSUMER from the marginal utility
high prices. Basic derived from each
commodities. additional unit declines.
2. PRICE FLOOR- lowest possible
price that a commodity can
be sold. To protect the
PRODUCER from a low price.
Minimum wages.

o COST OF PRODUCTION
- The costs related to
making or acquiring goods
and services that directly
generates revenue for a
firm.

1. OPPORTUNITY COST-
also known as
alternative cost, of
making a particular
choice is the value of
the most valuable
choice out of those that
were not taken.

2. EXPLICIT COST- is a
direct payment made
to others in the course
of running a business,
such as wage, rent and
materials, as opposed

CAMILLE B. ROJAS ABM 12 NICHOLAS OWEN