Lesson 3 & 4 Flashcards
is the value of goods and the cost of making the goods.
Price
it is determined by the interaction of the forces of supply and demand.
Price
is associated with consumption and is represented by buyers or consumers.
Demand
is associated with production and is represented by sellers or producers.
supply
this refers to the willingness of the buyers to buy the product at a given price, time and place. There is an element of purchasing power, this means you have the capability to buy the product or service.
Demand
shows the inverse relationship between price and quantity demanded.
Demand Schedule
“If price increases quantity demanded decreases. If price decreases quantity demanded increases.”
Law of Demand
when price of product increases consumers will able to buy less within a given money income.
Income Effect
when the price of the product rises consumers shift their purchases to other products whose price are relatively lower.
Substitution Effect
this refers to a movement of the demand curve itself, indicating changes in quantities bought at each price.
Change in Demand
refers to the movement along a given demand curve caused by change in price.
Change in Quantity Demanded
people buy more goods and services when their income increases
Income
more people means more demand for goods and services.
Population
demand for goods and services increases when people likes it or prefer it.
taste and preferences
if price is expected to increase in basic commodities consumers will have panic buying.
Price Expectations
when price of certain product increases buyers tend to buy substitute product.
Price of related goods
the theory is only true and correct if the assumption of ceteris paribus is applied, which means all other things are equal or constant.
Validity of the Law of Demand
these are commodities whose demand varies directly with money supply (ex. Appliances; jewelry).
Superior/Normal goods
these are goods whose demand varies inversely with money income (ex. Used clothing; second hand cars).
Inferior goods
the price of one good and the demand for the other are directly related (ex. Coke & Pepsi; Ariel & Surf laundry powder soap)
Substitute goods
these are goods that go together and that they are jointly demanded. The price of one good and the demand for the other are inversely related (ex. Car and gasoline; mobile phone and battery).
Complementary goods
these are goods which are not related at all (ex. Bread and nails; paper and glass).
Independent goods
refers to the willingness of the seller or producer to sell or produce the product at a given price, time and place.
Supply
shows the direct relationship between price and quantity.
Supply Schedule
“If price increases quantity supply increases. If price decreases quantity supply decreases.”
Law of supply
refers to the movement of the supply curve indicating changes in quantity bought at each price.
change in supply
refers to the movement along the supply curve caused by the change in price.
change in quantity supplied
this refers to the techniques or methods of production, which increases supply of goods.
Technology
this refers to raw materials, labor and the like. Thus, an increase of these increase the cost of production and decrease of quantity supplied.
Cost of production
more sellers means more supply and vice versa.
Number of sellers
changes in the price of goods affect the supply of such goods. An increase of price of one good, decreases its quantity supplied and increases the quantity supplied of its substitute product.
Prices of other goods
if producers expect prices to rise very soon, they usually keep their goods and then release them in the market when the prices are already high.
Price Expectations
taxes increase cost of production and it discourages production because it reduces the earnings of businessmen.
Taxes and subsidies
is a situation where quantity supplied is equal to quantity demanded.
Equilibrium Price
sellers are willing to sell at a higher price
Surplus
buyers are willing to purchase at a lower price
shortage
indicates the extent to which changes in price or other factors cause changes in the quantity demanded. Mankiw (2018) explains the three classifications of demand elasticity: price elasticity of demand, income elasticity of demand, and cross elasticity of demand.
Demand Elasticity
refers to the reactions or responses of the buyers to changes in the price of goods and services.
Price Elasticity of Demand
where a change in price results in a greater change in quantity demanded.
Elastic Demand
where a change in price results in a lesser change in quantity demanded.
Inelastic Demand
when a change in price results in an equal change in quantity demanded.
Unitary Demand
refers to the determination of how much the quantity demanded of an excellent response to a change in consumers’ income, computed as the percentage change in the amount demanded divided by the percentage change in income.
Income Elasticity of Demand
which is how responsive or elastic the quantity demanded good is in response to a change in the price of another good.
Cross Elasticity of Demand
is the measure of the responsiveness in quantity supplied to a change in price for a specific good.
Price Elasticity of Supply
refers to a change in price results to a greater difference in quantity supplied.
Elastic Supply
refers to a change in price results to a lesser change in quantity supplied.
Inelastic Supply
a change in price results to an equal change in quantity supplied. Goods are classified as semi-industrial or semi-agricultural products.
Unitary Supply
a change in price results to an equal change in quantity supplied. Goods are classified as semi-industrial or semi-agricultural products.
Unitary Supply
