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

CAMILLE B. ROJAS ABM 12 NICHOLAS OWEN

 supplied is increasing and production for it is able
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.

CAMILLE B. ROJAS ABM 12 NICHOLAS OWEN

 In this case, the supply
curve will shift to the
right. Come rainy
season, sellers leave
the market making
quantity supply for
mangoes go down. In
this scenario, the
supply curve will shift
to the left.
- More sellers in the
market increase the
market supply.
- Future expectations of
prices future v present
supply (supply)
- Similar to future
expectations in
demand. Demand
increases when supply
increases on specific
goods. (Ex: heart
shaped candies around
January & February).
- Number of suppliers
(supply)
- More businesses = This, in turn, reduces
higher supply & less
businesses = lower
supply.
- When the number of
sellers is high in a
certain market, the
quantity of product or
service supplied to that
market will be high and
vice versa. Therefore,
an increase in the
number of sellers in a
market will decrease
the supply and the
supply curve shifts
leftwards. An example
is a situation where
more companies enter
into an industry, this
CAMILLE B. ROJAS ABM 12 NICHOLAS OWEN
will increase the
number of sellers, and
therefore supply will
increase as well.
3) EXPECTATIONS OF
FUTURE PRICES
- Changes in the
expectations of the
suppliers about the
future price of a service
or a product may affect
the current supply.
However, unlike the
other determinants of
supply, the
expectations of the
supply can be quite
difficult to generalize.
For example, when
farmers anticipate that
the price of the crop
will increase. This will
cause them to withhold
the produce to benefit
from a higher price.
the supply and in the
context of
manufacturers when
there is an expected
increase in price then
they will employ more
resources to increase
the output. This is a
major cause of an
increase in supply.
- Just like the consumer,
the producer also has
his speculation as to
what will happen to
price in the coming
days/weeks/ months.
With the expectations
that the price of rice
will increase in the
 future, at present, the
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.
CAMILLE B. ROJAS ABM 12 NICHOLAS OWEN
CROSS ELASTICITY
- 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