Market Demand Flashcards
is composed of consumers and suppliers of a specific product.
market
determine the demand
buyers/consumers
determine the supply of goods and services.”
suppliers/sellers
Types of Market
Factor Markets
Goods Market
Labor Market
Financial Market
refer to the purchasing and selling of factors of production. In free market or
market economy, households are the owners and therefore could be the providers of the
factors of production (like land, labor, capital). ”
“Factor markets
where we buy consumer goods. markets for the output of production.
Goods market
“the venue for potential employees looking for a job and ready to provide
services. In the same way, it is a venue for employers who are hiring workers for particular
jobs.”
o Financ
Labor market
where securities of corporations are traded.
Financial market
BASIC PRINCIPLES OF DEMAND
DEMAND
MARKET DEMAND
THE LAW OF DEMAND
is the willingness and ability of consumers to buy a certain quantity of good or service at a
certain price.”
Demand
is the aggregate demand of all consumers, who buy the goods in the market
Market demand
“As price increases, the quantity demand for that product decreases, other things held constant
(ceteris paribus)”
Law of demand
“Conditions and assumptions of Law of Demand”
- “There is no variation or change in the consumers’ income. If there is an increase or decrease on this
factor, the law might not be applicable. ” - “The consumers’ taste and preference do not change”
- “The price of substitute goods or complement goods do not increase nor decrease”
“The law of demand can be expressed through demand schedule and demand curve. ”
“all other factors are held constant except the one that is under study (example: price only)”
- “the variables that might influence the demand for the product do not vary or change and the only thing
that affects the quantity demand is only the price”
Ceteris Paribus
“It indicates the different amount or quantity that the consumer is willing to buy at different given
prices.”
DEMAND SCHEDULE
“Classifications of Demand Schedules”:
“Individual Demand Schedule”
Market Demand Schedule
- “It illustrates the demand schedule graphically, with the price of a good on Y axis and the quantity
demanded on 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
Demand Function Formula
Qd= f (P)
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; consumers substitute expensive goods with cheaper goods
Substitution effect
refers to the movements along a “fixed” demand curve as a
response to a change in the good’s own price, ceteris paribus.
Change in the quantity demanded:
“When determinants affect change in demand, and the other things remain constant even the price, then
the demand will change, and the demand curve will move or shift to the right or to the left.
Change in demand
“If ceteris paribus is disregarded or dropped, the variables other than price which also influence
demand can now affect demand (income, taste, expectations, prices of related goods and
population)”
NON-PRICE DETERMINANTS OF DEMAND
