c


   
The fundamental economic problem calls for making definite decisions on
what goods to produce, how they shall be produced, and for whom they
shall be produced. To address the problem, the market is used as the
principal mechanism

A market exist when ³buyers wishing to exchange money for a good or services for money.´ It is where people are left
alone to make their own transactions. It is also where the forces of demand and supply interact. The meeting of these two
opposing forces paves way to providing answers to what good to produce, how they shall be produced, and for whom they shall
be produced. These happens because it is through the market where ³buyers make known their decisions to buy or not to buy
and on hat terms, and sellers make known their willingness and ability to sell or not to sell and on what terms.´
  
 

 

 


 
 

 

 
decisions of buyers constitute demand for a product or service, while the sellers¶ decisions and actions constitute supply.
Markets are important because they act as the mechanism by which resources are allocated. For instance, when a buyer
decides on purchasing a certain commodity on a regular basis, he is sending a signal to the seller to produce the wanted
commodity on a regular basis. The collective desires of buyers to purchase a commodity constitute demand for the commodity. If
the sellers accede to the demand, economic resources will be forwarded to the resource owners. The higher the demand is for
product and services, the higher will be the demand for economic resources.
 
   
 



! " 

  

 

money for some amount of a particular good or service. However, the quantity demanded of a good or service will depend on
factors such as needs, preferences, income level, expectations about future, the prices of related commodities, the buyer¶s
situation, etc. The most important consideration, however, is the price. The relationship between price and quantity demanded is
the subject of the law of demand.
Stated in simple terms, the law of demand1 indicates that, ³ the quantity of any good which buyers are ready to
purchase varies inversely with the price of the good.´ This means that people will tend to buy more of the product as its price
decreases, assuming that all other factors influencing demand remain constant.
  #$ 
 

 " 
unit is represented in the vertical axis, while the quantity demanded for each price level is indicated in the horizontal axis. Each
amount in the ³price´ column of the demand schedule is paired with the corresponding figure in the ³quantity demanded´ column.
Each pair is, then, marked by a point in the graph. When the points are connected by a line, a slope becomes visible. This slope
represents the change in one variable when another variable changes.

% 
 




&'())) 
(


*

 

%)())) 


change in price, however, affects demand. At P10, 000 per unit, demand goes down to 5, 000 units. This
means that a certain period in a given market, people will buy more of a product or service if its price is
lowered. Lower prices not only motivate current buyers to buy more of the commodity but also attract new
buyers to buy.
c


   
The graph shows a curve representing the inverse relationship between prices of goods and services and the quantity
of goods and services demnded, which in this case refers to bicycles.this curve is reffered to as the demand curve. It will be
noted that the slope of the demand curve in the brpah is in a downward direction indicating that as price of bicycles decreases,
demand for bicycles in increases., and vice versa.
#+#,-.,,+,&.# .,,+
, /
   
   
 


   "   


 "  

nonprice factors influencing demand remain constant. A change in any of the nonprice factor of demand may affect the original
set of demand for a ceratin product or service. The demand for bicycle (as indicated in Table 1) is such because the price of the
presumed substitute, the motorbike, remains constant. If the motorbike is really a substitute, then a change in its price will affect
the demand for bicycles. Table 2 shows the adjusted demand schedule for bicycles when there is a change in the price of
motorbikes.
.., , #01
When in the demand schedule is plotted in a graph, the original demand curve (c1) will shift to the left(c2) when there is a
decrease in demand, and shift to the right (c3) when there is an increase in demand.


  $   
  
  "
 
 
 
 
  "
 

 


 20  , # 03+
c.#4#3
Price
per
Unit
(Php)
Origin
al
Dema
nd
 

c

.



. 

5 

6



5 

6
'(
)))
%)(
)))
%%()))
7()))
8(
)))
7()))
%)()))
9()))
:(
)))
9()))
7()))
:()))
9(
)))
:()))
9()))
8()))
7(
)))
8()))
:()))
'()))
%)(
'()))
8()))
;()))
/  (
-& 
 
  <=c

(%798
NonPrice
Determinants of
Demand
 %$ " 



e of the Market a. Subs titutes
#




>& 
$  


"

;& 

 /
 c


   
)))
0&&34
Supply constitutes the one side of the market equation of which the other one is demand. Supply may be defined as
³the quantity of a good or service which sellers desire to sell at a given price.´




  

 

ways:
1. The supply schedule
2. The supply curve



 
 



 
 "



  
arket price and the amount of that commodity that producers are willing to produce and sell, other things held equal. Suppliers are encouraged to
produce and sell more of a particular commodity if a higher price idn paid for it by the buyers. The higher the price, therefore, the
higher the quantity supplied. A hypothetical supply schedule is shown in Table 3.
#$
$


"  


 





$$
  
 (
 "

 (
 
 "







 between price and quantity
supplied. The supply curve is manifestation of the law of supply which is stated simply as follows. As price goes up, the quantity
of goods and services under consideration tends to increase. Inversely, as the price goes down, the quantity supplied tends to
decrease.


# "
 
, & 



 20 0&&34# 03+
c.#4#3
Price
per
Unit
(Php)
Origin
al
Dema
nd
 

c

.



. 

5 

6



5 

6
'(
)))
'()))
;()))
>()))
8(
)))
8()))
'()))
;()))
:(
)))
:()))
8()))
'()))
9(
)))
9()))
:()))
8()))
7(
)))
7()))
9()))
:()))
NonPrice
Determinants of
Supply
%#

&
 
 /,



3. Prices of goods
and services
related in
          
    
.., , #01+
c.#4#3