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5 Producer Consumer Relationship.DEMAND

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ClangClang Obsequio-Arinto
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18 views

5 Producer Consumer Relationship.DEMAND

Uploaded by

ClangClang Obsequio-Arinto
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 PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 29

REVIEW:

1.THE INABILITY TO SATISFY


UNLIMITED HUMAN WANTS WITH
LIMITED RESOURCES
A.VARIABLE
B.SCARCITY
C.ECONOMICS
D.VERBAL STATEMENT
2. AMOUNT OF ONE GOOD THAT MUST
BE GIVEN UP TO GET MORE OF
ANOTHER.
A.OPPORTUNITY COST
B.SCARCITY
C.ECONOMICS
D.VARIABLE
3. WHAT LAW IN ECONOMICS DOES THE
OUTWARD CURVATURE OF THE PPC
REFLECT?
A.LAW OF DEMAND
B.LAW OF SUPPLY
C.LAW OF INREASING COSTS
D.LAW OF ENERGY
4.YOU WERE GIVEN THE CHANCE TO WORK
ON A SUMMER JOB FOR 20 DAYS AT P200
PER DAY, BUT YOU CHOSE TO SPEND YOUR
SUMMER VACATION WATCHING TELEVISION.
IS THERE AN OPPORTUNITY WASTED IN THIS
SITUATION?
5. HOW MUCH IS THE OPPORTUNITY COST?
MOTIVATIONAL ACTIVITY:
• “All your friends have MP4. You have
saved P5,000 and you do not want to
buy an MP4 but an i-pod. In this case, is
there demand for MP4? Is there demand
for an i-pod? Explain your answer.
ACTIVITY:
PRODUCER-CONSUMER
RELATIONSHIP

DEMAND
DEMAND

• Demand is the consumers’ desire for a specific


good or service for which they are willing and able
to buy at various prices during a particular period
of time, “ceteris paribus” (a Latin phrase
meaning “other things being equal or
unchanged”). Consumers express their desires for
goods and services only by actually buying them.
• Quantity demanded is the number of
units (amount) of a good or service that
consumers buy at various price levels
during a specified period of time.
• Demand schedule is a table showing
the quantity demanded of a certain
product or service at each price level
during a specified period of time, ceteris
paribus (holding all other determinants
of demand constant or unchanged).
• Demand curve is simply a graphical
representation of a demand schedule. It
is sloping downward from left to right. Its
slope is negative
LAW OF DEMAND
• The law of demand states that as price
increases quantity demanded decreases,
and as price decreases quantity demanded
increases. Consumers are most likely to buy
more goods and services as price decreases, and
buy less goods and services as price increases,
ceteris paribus. These general tendencies of
consumers can be explained by substitution and
TWO EFFECTS OF A PRICE CHANGE
• Income effect. At lower prices, a consumer’s
money has greater purchasing power. This
means he can buy more goods and services.
• Substitution effect. Consumers tend to buy
goods with lower prices. In case the price of a
product that they are buying increases, they look
for substitutes whose prices are lower.
ACTIVITY
1.On a graph, draw a demand curve. On the same
graph, illustrate the change if price decreases from P2
to P1. Explain your answer.
2.On another graph, draw a demand curve of a product.
What will happen to your curve if income increases? Is
your product an inferior or a normal good? Explain.
CHANGE IN DEMAND VERSUS
CHANGE IN QUANTITY
DEMANDED
• Change in demand is the shifting of the demand curve
either to the left or to the right due to the changes in the
determinants of demand or the factors affecting it like
income, population, price expectations, etc.
• Change in quantity demanded is the movement
along a given demand curve, showing a change in
quantity demanded due to a change in price of a good
itself, ceteris paribus. It is the movement from one point
to another point in the demand curve .The demand curve
does not change its position.
DETERMINANTS OF DEMAND

• Tastes and Preferences


• Population
• Consumer Income
• Prices of Related Goods
• Price Expectation
• 1. Tastes/Preferences. A change in consumer
tastes favorable to a product means that more
are demanded of it at a given price; that is,
demand will increase. Unfavorable change in
consumer preferences will cause demand to
decrease, shifting demand curve to the left.
• 2. Population. An increase in the number of
consumers will result to an increase in demand.
Fewer consumers will be reflected by a decrease
in demand. For example, an increase in the
number of family members would mean more
demand for food by the family; and the higher is
the rate of population growth, the more is the
• 3. Consumer Income. For most commodities, a
rise in income normally shifts demand curve
outward to the right. Conversely, the demand of
a product will decline in response to a decrease
in income. Commodities whose demand varies
directly with nominal income are called normal
goods; those goods whose demand varies
inversely with a change in nominal income are
• 4. Prices of related goods. When the price of a certain
product increases, people tend to buy a substitute
product. Thus, two goods are called substitutes if an
increase in the purchase of one good will result to a
decrease in the quantity purchased of the other good,
ceteris paribus. However, in the case of complementary
goods, the price of one good and the demand for the
other good are directly opposite. This means that if the
price of one good increases the demand for the other
good decreases. Thus, two goods are called
complements if an increase in the purchase of one good
• Are cell phones and loads complements
or substitute goods? Are rice and corn
complements or substitute goods?
Explain your answers.
• 5. Price expectation. When people expect the
prices of goods, especially basic commodities like
rice, to increase tomorrow or next week, they buy
more of these goods now. In the same manner,
they may decrease their demand for such products
now if they expect prices to decrease tomorrow or
next week. The reason for such consumers’

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