APE 1ST QUARTER EXAM

SUPPLY CURVE

a graph of the relationship between the price of a good and the quantity supplied

ECONOMIC RESOURCES

also known as factors of production, are the resources used to produce goods and services.

CARTEL

an association of manufacturers or suppliers with the purpose of maintaining prices at a high level and restricting competition.

GROSS DOMESTIC PRODUCT

defined as the market value of final products produced within the country.

GOODS MARKET

is the most common type of market because it is where we buy consumers goods.

NUMBER OF CONSUMERS

the population makes up the group of consumers who will buy the product. The higher the population, the more consumers and the higher will be the demand for the good.

ECONOMICS

the social science that involves the use of scarce resources to satisfy unlimited wants.

MONOPOLISTIC COMPETITION

wherein products are differentiated and entry and exit are easy. CHARACTERISTICS •Multiple firms offer heterogeneous or differentiated products, similar but not identical and satisfy the same basic need. •A blend of competition and monopoly •There is free entry and exit in the market that enables the existence of many sellers. •Firms face down sloping demand curve. •In the limit , firms tend to compete away economic profits (non-price competition)

SURPLUS

• If the market price is higher than the equilibrium price, the amount that firms are willing and able to supply to the market will exceed the amount that consumers are willing and able to buy. There will be a SURPLUS. •This surplus will cause the market price to fall until it reaches the equilibrium price

SHORTAGE

• If the market price is lower than the equilibrium price, the amount that firms are willing and able to supply to the market will be less that the amount that consumers are willing and able to buy. There will be a SHORTAGE. •This shortage will cause the market price to rise until it reaches the equilibrium price

PRICE FLOOR

• Is legally imposed minimum price on the market. Transactions below this price is prohibited. •Examples : minimum wage

SUPPLY SCHEDULE

•A list of the amounts of a product that a seller would offer for sale at different prices in a defined time period when all nonprice factors are held constant.

DEMAND SCHEDULE

•A list of the quantity that a buyer is willing to buy at different prices at one particular time. •Shows a functional relationship between price and quantity. • assumptions:- income, preferences and price related goods are constant.

CHANGES IN INCOME (THE INCOME EFFECT)

•If consumers income decreases, the capacity to buy decreases and the demand will also decrease even the price remain the same WHEN INCOME GOES UP, CONSUMERS BUY MORE WHEN INCOME GOES DOWN, CONSUMERS BUY LESS

OLIGOPOLY

•Is a market dominated by a small number of strategically interacting firms. •Few sellers account for most of or total production since barriers to free entry make it difficult for new firms to enter.

THE MARKET

•Is an interaction between buyers and sellers of trading or exchange.

DIFFERENT TYPES OF IMPERFECTLY COMPETITION

•MONOPOLY •MONOPSONY •MONOPOLISTIC COMPETITION •OLIGOPOLY

MARKET EQUILIBRIUM

•Market equilibrium is attained when the quantity demanded is equal to the quantity supplied.

EQUILIBRIUM PRICE

•On a graph, It is the price at which the supply and demand curves intersect.

DEMAND CURVE

•Refers to the demand curve of an individual or a consumer or a buyer.

MONOPOLY

•Refers to the form of market organization in which there is a single seller of a product without close substitute. •Characterized by an absence of competition, which often results in high prices and inferior products. • On the other hand, it is a marker structure in which there is only one producer/seller for a product. CHARACTERISTICS •A single seller has control of entire supply of raw materials. •Ownership of patent or copyright is invested in a single seller. •The producer will enjoy economies of scale, which are savings from the large range of outputs. •Grant of a government franchise to a single firm.

POSITIVE ECONOMICS

Focuses on facts and cause and effect relationships. It describes what happens and why it happens.. It is testable and avoid judgements. Focus on facts Avoid judgement Testable

FACTORS OF DEMAND (NON PRICE DETERMINANTS OF DEMAND)

1. CHANGES IN INCOME (THE INCOME EFFECT) 2. CHANGES IN TASTES AND PREFERENCES 3. EXPECTATIONS 4. PRICES OF RELATED GOODS 5. NUMBER OF CONSUMERS

DETERMINANTS OF SUPPLY

1. PRICE OF RELATED GOODS 2. LEVEL OF TECHNOLOGY 3. PRODUCTION COST 4. SPECULATION

EXPECTATIONS

Consumers EXPECTATIONS of future price and income. Consumers tend to anticipate changes in the price of good.

SPECULATION

If the price will go down , producers will high the the current supply.

PRODUCTION COSTS

Increase in production cost (labour, raw material, capital) will go down the numbers of supplies.

IDK

LAND LABOR CAPITAL ENTERPRENEUR

THE PHILIPPINES BASIC ECONOMIC PROBLEMS

Non-inclusive Growth despite of Economic Growth Unemployment despite of Improvements Poverty Population growth

TYPES OF MARKET STRUCTURE

PERFECT COMPETITION IMPERFECT COMPETITION CARTEL

DIFFERENCE BETWEEN POSITIVE AND NORMATIVE ECONOMICS

Positive Economics refers to a science which is based on data and facts. Normative economics is described as a science based on opinions, values, and judgment. Positive economics is descriptive, but normative economics is prescriptive. Positive economics explains cause and effect relationship between variables. On the other hand, normative economics pass value judgments. The perspective of positive economics is objective while normative economics have a subjective perspective. Positive economics explains 'what is' whereas normative economics explains 'what should be'. The statements of positive economics can be scientifically tested, proved or disproved, which cannot be done with statements of normative economics. Positive economics clearly define economic issues. Unlike normative economics, in which the remedies are provided for the economic issues, on the basis of value judgment.

DEMAND FUNCTION - EQUATION

Qd = a-b (P) Qd = 300-5P = 300-5(60) = 300-300 = 0 P = Qd - a/b = 0-300 = 300/5 = 60

SUPPLY FUNCTION

Qs = c + dp Where; Qs = the quantity supplied for a particular good C = the quantity at a price of zero d = the amount by which quantity will change as price changes P = the price of the good

SUPPLY

Quantity of goods that a producer is able and willing to sell a certain price in a given period of time.

PRICES OF RELATED GOODS

Substitute goods a substitute is a good that can be used • in place of another. Complementary goods goods that are used together.

LEVEL OF TECHNOLOGY

Supply will go up when the technology goes up.

INCOME EFFECT

The effect of a change in price on quantity demanded arising from the consumer becoming better or worse off as a result of the price change

SUBSTITUTION EFFECT

The effect of a change in price on quantity demanded arising from the consumer switching to or from alternative (substitute) products

LAW OF SUPPLY

The higher the price of a good the higher the quantity supplied and vice versa.

GENERALIZATION

The interaction between the producers and consumers in the market, the actions of consumers in the economy, the reactions of producers with the different situations in the market and the concept of equilibrium affects the price of commodities. The law of demand and supply plays a vital role in the overall economic performance of the country

JOHN NEVILLE KEYNES

first to use the phrase "APPLIED ECONOMICS" to designate the application of economic theory to the interpretation and explanation of particular economic phenomena.

CHANGES IN TASTES AND PREFERENCES

improved taste for a product will cause a consumer to buy more of that good even if its price does not change.

IMPERFECT COMPETITION

in which a competitive market does not meet the conditions in the perfect competition

FINANCIAL MARKET

includes the stock market where securities of corporations are traded.

PERFECT COMPETITION

is a market structure in which there are many small firms selling homogeneous product. CHARACTERISTICS: •Many small firms •Homogeneous product •Free entry to and exit from the industry •Price taker

NORMATIVE ECONOMICS

is a part of economics that expresses value or normative judgments about economic fairness or what the outcome of the economy or goals of public policy ought to be. Value judgement Non-Testable

COMPETITION

is rivalry among various sellers in the market.

LABOUR MARKET

is where workers offer services and look for jobs, and where employers look for workers to hire

GROSS NATIONAL PRODUCT

market value of final products, both sold and unsold, produced by the resources of the economy in a given period of time

DEMAND

•The ability and willingness to buy specific quantities of goods in a given period of time at a particular price, ceteris peribus. •The person must also have the ability to buy the goods and he must be willing to pay the price of the goods.

DEMAND CURVE SHIFT TO THE LEFT

•The demand curve shift to the left side means the demand is decreased even at low price.

DEMAND CURVE SHIFT TO THE RIGHT

•The demand curve shift to the right side means the demand is increased even at high price. •The example is would be the flood or earthquake in the country.

THE LAW OF DEMAND

•The higher the price of the product, the lower the quantity demanded and the lower the price, the higher the quantity demanded. PRICE (P) UP QUANTITY DEMANDED (Qd) DOWN PRICE (P) DOWN QUANTITY DEMANDED (Qd) UP

EQUILIBRIUM

•The implicit agreement between how much buyer and sellers are willing to transact.

Factors to be considered In the degrees of competition in the market

•The number of buyer and sellers in the market •The nature/similarity of the product being sold •The degree of mobility of resources •The ability of individual firms to influence the market price, costs, demand and supply conditions. •The ease of entry into or exit from the market.

EQUILIBRIUM QUANTITY

•The quantity that balances supply and demand. On a graph it is the quantity at which the supply and demand curves intersect.

SUPPLY CURVE SHIFT TO THE LEFT

•The supply curve shift to the left side means the supply is decreased even at high price. •The example is the increase in the price level of raw material.

SUPPLY CURVE SHIFT TO THE RIGHT

•The supply curve shift to the right side means the supply is increased even at low prices. •The example would be the decrease in the price level of raw materials. So the producers saw some profit and increased the supply.

IMPORTANCE OF MARKET STRUCTURE

•The type of market structure in which the business operates will determine the amount of the market power or control the business owner will enjoy. •Greater market power means a greater ability to control prices, differentiate the products one offers for sale, thus, leading to opportunities for more profits.

MARKET STRUCTURE

•Those characteristics of the market that significantly affect the behavior and interaction of buyers and sellers. •Refers to the competitive environment in which buyers and sellers operate. •Is a situation of diffussed, impersonal competition among sellers who compete to sell their goods among buyers who use their purchasing power to acquire the available goods in the market.

COMPLEMENTARY GOODS

•When the price of cars goes up , producers will increase the production of cars. So, the supply of cars will go up . Since cars and oil are complementary, the supply of oil also will go up

SUSBSTITUTE GOODS

•When the price of goods goes down the price of substitute goods will go up therefore, the manufacturer will reduce the supply of substitute goods.

MONOPSONY

•is a market structure where there is only one buyer in the market. •exact opposite of monopoly. •the buyer has the power to determine the price and the level that will benefit him. •the buyer has the opportunity to choose high-quality products and services. EXAMPLE •Government •Coal mining in a town •Shops or companies that are sole buyers of products and services.

PRICE CEILING

•is legally imposed maximum price on the market. Transactions above this price is prohibited. •Example : rent control

FOUR MAIN CHARACTERISTICS OF MARKET STRUCTURE

•the number of buyer and sellers in the market •the nature of the product being sold •the ability of individual firms to influence the market price •the ease of entry into or exit from the market.