MARKET AND BASIC PRINCIPLES OF DEMAND Flashcards
“any market place or venue for buying and selling of products.”
Market
“an interaction or trading between buyers and sellers.”
Market
composed of consumers and suppliers of a specific product.
Market
Types of market
Factor market
Labor market
Financial market
Goods market
refer to the purchasing and selling of factors of production.
FACTOR MARKETS
where we buy consumer goods. markets for the output of production.
GOODS MARKET
where securities of corporations are traded.
Financial market
the venue for potential employees looking for a job and ready to provide services.
Labor market
the willingness and ability of consumers to buy a certain quantity of goods or services at a certain price.
Demand
is the aggregate demand of all consumers, who buy the goods in the market.
Market demand
all other factors are held constant except the one that is under study
Ceteris paribus
EXAMPLE: price only.
Ceteris paribus
as price increases, the quantity demand for that decreases, other things held constant.
THE LAW OF DEMAND
there is an opposite relationship between the price of a product and the quantity demanded.
THE LAW OF DEMAND
when the price of a good increases or decreases, the consumer’s real income or purchasing power also changes.
INCOME EFFECT
it is felt when a change in the price of a good changes demand due to alternative consumption of substitute goods.
SUBSTITUTE EFFECT
shifting in demand curve.
CHANGE IN DEMAND
movement along the demand curve.
CHANGE IN QUANTITY DEMAND
indicates the different amount or quantity that the consumer is willing to buy at different given prices.
Demand schedule
it illustrates the demand schedule graphically, with the price of a good on the Y axis and the quantity demanded on the X axis.
DEMAND CURVE
it illustrates how the determinants affect the quantity demanded for a product, most importantly, how the price determines the demand for the commodity.
DEMAND FUNCTION
Qd = f (P) DEMAND FUNCTION
Qd = quantity demand
P= Price
INFLUENCES OF DEMAND
- price
- taste
- expectations
- income
- price of related goods
a. complementary goods
b. substitute goods - number of consumers
NON-PRICE DETERMINANTS OF DEMAND
D = f (P, T, Y, E, PR, NC)
where in:
P = price
T = taste
Y = income
E = expectations
PR = price of related goods
NC = number of consumers
