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Microeconomics Reviewer

The document provides an overview of microeconomics concepts including markets, demand and supply, and their key determinants. [1] Markets are where buyers and sellers interact through demand and supply to determine what goods are produced and for whom. [2] Demand refers to willingness and ability to pay, while supply represents sellers' production decisions; together they set price and quantity. [3] Non-price factors like income, tastes, and expectations also influence demand, as do production costs, taxes, and technology for supply.

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Angelika Barquilla
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14 views2 pages

Microeconomics Reviewer

The document provides an overview of microeconomics concepts including markets, demand and supply, and their key determinants. [1] Markets are where buyers and sellers interact through demand and supply to determine what goods are produced and for whom. [2] Demand refers to willingness and ability to pay, while supply represents sellers' production decisions; together they set price and quantity. [3] Non-price factors like income, tastes, and expectations also influence demand, as do production costs, taxes, and technology for supply.

Uploaded by

Angelika Barquilla
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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MICROECONOMICS REVIEWER

Market - powerful mechanism used to provide answers to the fundamental economic problem.
- a market exists when buyers wishing to exchange money for a good or service are in
contact with sellers wishing to exchange goods or services for money.
- it is also where people are left alone to make their own transactions.
- where the forces of demand and supply interact.

Demand and Supply


- these two opposing forces paves the way to providing answers to what goods to produce,
how they shall be produced, and for whom they shall be produced.

How a Market Functions


- Markets are strictly made up of buyers and sellers. The actions and decisions of buyers and
sellers. The actions and decisions of buyers constitute demand for a product or service, while the
sellers’ decisions and actions constitute supply.

Market Demand
- refers to the buyers’ willingness and ability to pay a sum of money for some amount of a
particular good or service.

Price - most imporatant consideration.

The relationship between price and quantity demanded is the subject of the law of demand.
Law of Demand - the quantity of any good which buyers are ready to purchase varies inversely with
the price of the good.

Non-Price Determinants of Demand

1. Average Income of Consumers - persons basically purchase the neccessities with their
income.
2. Size of the Market - the demand curve is affected by the number of people living in a given
area.
3. Price and Availability of Related Goods - goods that are related tend to influence each other’s
demand.
2 Types of Related goods and services:
• Substitutes - goods that compete with each other such as meat and fish.
• Complements - goods that are used jointly, like cement and steel bars.

4. Preferences or Taste - People of different cultures vary in taste and preferences.


5. Special Influence - There are certain developments that influence demand for certain goods and
services.
6. Expectations about future economic conditions - expectations about changes in the economy, will
affect the demand for goods and services.

Non-Price Determinants of Supply

1. Cost of Production
- supply is highly dependent on the cost of production.

2. Number of Suppliers
-supply is also dependent on the number of sellers.

3. Prices of Goods and Services


- the prices of some goods and services affect the supply of other goods and services.
4. Taxes and Subsidies
- payment for taxes is an added component of the cost of production. Higher taxes mean
higher production costs, and firms are discouraged to produce more goods and services.
Subsidies are money given to firms by the government to help them maintain their current or
desired output.

5. Technology
- improvements in technology make possible the production of goods and services at lower
costs.

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