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2. 2nd Quarter 3. Microeconomics Is the study of the small unit of the economy,the individual analysis about the consumer, theproducer, and the market. The behavior of consumer and producer in themarket is a central concern in microeconomics. 4. Chapter 22Analysis of Demand 5. DemandRefers to the number of goods and services that consumers are willing and able o buy at alternative prices.Demand FunctionDemand ScheduleDemand CurveLaw of DemandMarket Demand 6. Demand Function Is a mathematical expression of therelationship of two variables. TheQuantity demanded (Qd) as the dependentvariable and price (P) as the independentvariable. Qd changes as price changes. Asample mathematical equation is given asfollows:Qd = 200 10P 7. Qd = 200 10P Assume that the 200 is the quantity of theproduct, which the consumer does not want to buybecause the price is so high, for example at Php20.what does the demand function say? A consumerwill only buy the product if the price is lower thanPhp20. the value of 10P shows the change in Qd. thenegative sign indicates he inverse relationshipbetween Qd and P. let us have an example inequation, Qd= 200 10P. The price of pineapple isPhp20, Qd is 0. if the price becomes Php18, Qd is 20pieces. Substitute the price Php20 and Php18 in Prespectively to get the quantity demanded. 8. A. Qd= 200 10(20) Qd=200 200 Qd= 0B. Qd= 200 10(18) Qd= 200 180 Qd= 20 What does it show? The demand function showsclearly the inverse relationship of quantity demanded andprice for a certain product. From the demand functionthat we use, we can make a table showing therelationship of two variables. 9. Demand ScheduleA demand schedule is a table showingthe units of the product, which the consumeris willing and able to buy at different prices.It shows the inverse relationship of thevariables.Point QdPrice A020 B 2018 C 4016 D 6014 E 8012 F 100 10 G 1208 H 1604 10. we can check if the price is correct bysubstituting the values for Qd. In our equation Qd=200 10P, deduct the given Qd, which is 40 to 200.(200 40= 160) then divide it by 10 (160+10=16). So whatever is given, Qd or P, you cancomplete the demand the demand schedule with theuse of the demand function. You will notice on thetable that as price increases, the willingness of theconsumers to buy the product, which is pineapple,decreases if all other factors remain constant orceteris paribus, a Latin phrase which means, allother things remain constant. 11. Demand CurveIs a graphical representation of theinverse relationship of price and quantitydemanded. From the demand curve can beshown. Two axes, the horizontal and verticalrepresent a graph. Price is in the Y axisand Qd is the X axis. Plot the data in thedemand schedule.After plotting the Qd and Price,connect all the points on the graph to form aline which will represent the demand curve. 12. PD 20 AE 18BM 16 CA 14 DN 12D 10E8GC6U4 HRV 2 DE 0 20 40 80 100 120 140 160 13. The demand curve shows that at Php20,consumers are not willing to buy the pineapple but whenthe prices becomes lower at Php18, the consumers arewilling to buy 20 pieces of pineapple. And when theprice is decreased to Php16 the quantity demandedincreases at 40 pieces. As price demanded decreases, thequantity demanded for pineapple increases. The demand curve shows a downward slopingline, which signifies the increase relationship of the twovariables, the Qd and P. as the price increases, thequantity demanded decreases assuming all other thingsremain constant. Whatever tools we use demandfunction, demand schedule, and demand curve theincrease relationship of price and demand is evident. 14. Law of Demand The law of demand states that as theprice of the commodity increases, thequantity of the commodity, which the buyeris willing to buy will be lesser, and if theprice of the commodity decreases, the buyeris willing to buy a greater quantity of theproduct. The law of demand clearly statesthe increase relationship of price andquantity demanded of the product by theconsumer. 15. Market Demand Is the combination of all the demand of the consumers inthe market. Assuming there are five consumers in the marketwho are willing and able to buy a kilo of sugar appleAssuming that they will be facing the same demandcurve, Qd=200 - 10P. If you multiply the number of consumersin the market which is 5 in the equation you will get the marketdemand function, Qd=1,000 -50P. There are consumers who are willing to buy a sugarapple even at higher price, but still their demand increases asprice of sugar apple decreases. Market demand will not beaffected if one consumer decreases his demand. 16. Challengercomplete the demand schedule from themathematical equation PointPrice QdA0B23C20D 140E 200F10G 380 17. Chapter 23Factors that DetermineDemand 18. Factors that Affect Demand Income Occasion Preference Population Expectation Price of Related Products 19. Change in price and the Demand Curve Changes in prices results to change inquantity demanded. It can be shown in themovement along the curve with all otherthings remaining constant 20. When the demand curve shifts to the rightfrom D1 to D2, this shows the increase indemand caused by the different factorseven when the price is constant..... 21. P 151050 22. Factors that can shift the demand curve to the right are:Increase in incomeProduct preferenceExpectation and speculationIncrease in the number of consumersCelebration or occasionPrice decrease of a complementary product 23. P 151050 24. The factors that cause decrease in demand are:Decreasein incomePrice increase of complementary goodConsumers do not speculate about price increasesDecrease in the number of consumersPrice decrease of substitute goods 25. Chapter 24Elasticity of Demand 26. Elasticity Measure of degree of responsiveness ofthe change in the demand for a productrelative to price change. The response of Qd or quantity demandedin every percentage of price change willbe known by computing the priceelasticity of demand. 27. Types of ElasticityElasticInelasticUnitary 28. 1. ElasticThe response of quantity demanded inevery percent change in price is consideredelastic when he value is more than one in thecomputation.This kind of elasticity can be shown graphically. 29. P10500 5 10 Q 30. Explanation A consumers are nor ready to acceptany price increase. The graph shows thatconsumers are willing to buy more productsat a lower price. 31. Perfectly ElasticP10500 5 10Q 32. Explanation Consumer can vary at a determinedprice of Php10. it means that demand isperfectly elastic or changing across time. 33. 2. Inelastic The value of less than one represents aninelastic demand. Consumers response isless than the price change. If priceincrease is one percent, the demand ofconsumer decreases by less than onepercent. Consumers have no capacity todecrease their demand even if there is aprice increase. 34. Perfectly InelasticP10500 510 Q 35. Explanation It shows that consumers will consumeproducts and services at certain quantityeven if the price is continuously increasing.Consumers are willing to accept any priceincrease and their quantity demanded willno change even if the price increase iscontinuous. 36. 3. Unitary The response of consumer to pricechange is unitary when the value of quantitydemand and the change in price is equal toone percent. This means demand willdecrease by one percent when there is onepercent price increase. 37. UnitaryP10500 5 10 Q 38. Computation of Elasticity ofDemandThe formula in computing the price elasticity (Ep) is : %QEP=%PWhere :Q = Q2 Q1 P = P2 P1 39. Common Formula for Price elasticity is: Q2 Q1 Q1+Q2__ 2___ EP= P2 P1P1+P22 40. Let us apply the formula by using the following data :Q1 = 500 kilos of sugarP1 = Php15 per kiloQ2 = 450P2 = Php22 So, if we apply the formula of priceelasticity to the given data, you will come upwith: 41. 450 500500+450 __ 2_ __EP = 22 15 15+222 50 950 __ 2_ __EP = 7 37 2 42. 50 475__EP= 7_18.5The next step is to multiply the numerator with the denominator with the denominator. In this process, get the reciprocal of the numerator before multiplying.-50 x 18.5 EP = 4757EP= -0.28 43. EP = -0.28The answer is -028, which is inelasticbecause it is less than 1 in value; wedisregard the negative sign. The consumercannot decrease his demand more than thepercentage price increase because product isa necessity , which is sugar in this example. 44. Compute for the price elasticity and identifyits kind1. Q1 = 50 pieces of mangoQ2 = 20 pieces of mangoP1 = Php8 /mangoP2 = Php12 /mango1. Q1 = 4600 kilos of riceQ2 = 440 kilos of riceP1 = Php13 per kiloP2 = Php19 per kilo 45. Chapter 25The Nature of Supply 46. SupplySupply represents the amount of goodsand services available for consumption atdifferent prices. The producers and sellers areconsidered as suppliers.The willingness and capacity of thesupplier is the basis of declaring the supply. Inthe market. Supply refers to the quantity ofgoods and services, which the supplier iswilling able able to sell at alternative prices. 47. Law of SupplyStates that whenPthe price of theproduct is high, producers are willing to sellmore but if the 30price is low,producers tend to15 decrease thesupply, assumingall other things0remain constant. 10 25 Q 48. Chapter 26Factors that Influence the Elasticity OfSupply 49. Factors that determine thesupply1. Technology the use of modern machineries andtechnical knowledge in the production of goodshelp the producer provide more sufficientsupply in the market.2. Expectation - producers also expect andsometimespeculate about the pricedecrease/increase.3. Number of Sellers is a determinant of anabundant supply of a product in the market.4. Costs in the production of goods, producershave to pay the production cots and otherexpenses like tax. 50. 5. Price of related products the supply ofsubstitute and complementary good increase if theprice is high.6. Subsidy this refers to the assistance provided bythe government to small scale businessmen andfarmers to enable them to produce more products.7. Weather and Climate affects the production ofgoods especially the agricultural products If theclimate or weather fits the needs of the products,sufficient supply is guaranteed to flow to themarket 51. Chapter 27Market Equilibrium 52. Market EquilibriumIs a market condition wherequantity supplied equals quantitydemanded. At this point, selling takesplace when the seller agrees to sell aspecific quantity of products equal tothe quantity which the buyer iswilling to buy. Equilibrium shows theagreement between the seller andbuyer in terms of price and quantityof the product. Market is the placewhere the two actors meet. 53. Price Equilibrium How can price equilibrium bedetermined? In using the givenfunction of demand and supply, priceequilibrium can be computed. For thedemand function of Qd=83 4P andsupply function of Qs= - 22 + 11P;substitute values for Qd=Qs, so Qd= 3 4P, Qs= - 22+11P. Combine bothand solve for each variable.So we will get the : .. 54. Qs = QdThe price -22+11P = 83 4PequilibriumQd= 83+22 = Qs= 11P+4Pis Php7. the Qd= 105 = Qs= 15Pbuyer and 105 = 15Pseller agree105/15 =7to buy and Qd = Qssell the83 4P =-22=11Pproducts at83+22=11P+4Pthe given 105=15Pprice. P=7 55. Market Equilibrium Equilibrium quantity refers to thequantity of products that buyers and sellersare willing to transact at a specified price. 56. P 15 E QS U I L 10 I B R I E U 5 MPriceAndQuantityD 05 10 15 57. Compute the Qd, Qs, and price based on thedemand and supply functionQd = 600 5P; Qs = -200 + 15P QdPriceQs2025040 30700 58. Chapter 28Price Controland Price Support 59. The Role of Government in PricingThe interaction ofdemand and supply leadsto the establishment of amarket price. There aretimeswhen thegovernment sets the priceof commodities based onthe government policy toprotect the public fromsudden change in themarket. 60. Price CeilingRefers to the highest price ormaximum price declared by the governmentfor a particular product. In other words, it isthe selling price of the product approved bythe government. 61. It is effect of theimplementationof a pricePcontrol. Thegovernment isdoing this help30and protect theconsumers 20against theabuses ofbusinessmen andsellers. 10 15 20 30 Q Shortage 62. Floor PriceRefers to the lowest price in buying the products of farmers. 63. Price support isimplemented to Phelp the producersrecover theirproduction cost30and gain some 20profit. Pricesupport is higherthan theequilibrium 1015 20 30 QSurplus 64. Chapter 29Input and Output inProduction 65. Answer the following:1. Is the Philippine government effective in setting the price of the product in the market? Why?2. Do we need price control? Why?3. How effective is the government in declaring price control and price support? 66. Production Function Production deals with the produced goods andservices, which satisfy the needs of an individual. The factors of production and are basicallycomposed of land, labor, capital, and entrepreneur.The factors of production are considered the inputsin productionAfter using the varied factors in producinggoods, the finished product is called output. It is theresult of utilizing and using the factors ofproduction. 67. Raw materials Skills Labor Forceinput Machineries Land and services Rice Bread house Carsoutput Clothing Shoes, jewelry, and etc. 68. Chapter 30Economic Cost andProduction Cost 69. Economic CostIs a cost that is related to the variousexpenses in the business.1. Production cost each factor ofproduction receives payment for theservices like wages for workers, rent forland, and interest for capital. All paymentsto factors of production are calledProduction Cost. 70. 2. Fixed Cost Total Fixed Cost (TFC) is the sumof all the expenses for the payment of the fixedinput. It is constant in any level of production likerent for the land and building, which used inbusiness.3. Variable Cost is a cost that goes with the levelof production is allow, variable cost is also low; ifthe production is high, variable cost is also high. Itis also known as Total Variable Cost (TVC).Total Fixed Cost + Total Variable Cost = Total Cost 71. 4. Total Cost the total expenses in producinggoods and services is called Total Cost. Increasein total cost depends on the increase in variablecost. To sum up this cost, add the fixed costs andvariable costs.Cost for Every Product Average Fixed Cost (AFC) Average Variable Cost (AVC) Average Cost (AC) or Average Total Cost (ATC) Marginal Cost (MC) 72. Table for Production Cost in a Short run Market Period Total Total TotalTotal Average AverageAverage MarginalProduct FixedVariable Cost FixedVariable Total Cost (TP)CostCost (TC)CostCost Cost (MC)(TFC) (TVC)(AFC) (AVC)(ATC)020 020- 00 -1201030 2010 30102201939 109.5 19.5932030506.67 1016.67 1142045655 11.2516.25155206282412.416.4 1762080 1003.3313.3416.66187201041242.8614.8517.7124820140160 2.5 17.5 2035 73. Miscellaneous Cost1. Implicit Cost is the cost that isrelated to the payment received by theowner of the business. The owner of thebusiness receives the rent for the buildingowned by the businessman himself. This isincluded in the implicit cost.This kind of cost is computed to knowthe exact cost running the business. 74. 2. Explicit Cost includes payments to thefactors of production to a person other than theowner of the business. 3. Opportunity Cost giving up something forit to be used in its alternative way is the opportunitycost. A particular resource could have provided anincome to the owner if the use of it was not given up. Any Question?? 75. Chapter 31Perfect Competition 76. 2 classification of Market:Perfect Competition&Imperfect Competition 77. Perfect Competition A market is described to be in a state ofperfect competition when businessmen have theabsolute power to compete among themselves. It isknown as competition among the manyThe Price and Level of Production inThe price of the product depends on the market mechanismPerfect Competitionand the interaction between the sellers and buyers Here are of some of the characteristics of thisstructure:Nobodybuyers and and influence the Many can control sellers of the productHomogenous Products price in the market . No sellers andbuyers can to enter and leave the industry Freedom dictate the price.Sufficient knowledge 78. Chapter 32Monopoly &Monopsony 79. The existence of the characteristics ofperfect competition paved the way for themarket with imperfect competition. Barriersare set for the entry of businessmen in theindustry. There are only few players in themarket who control and manipulate theprice of the commodity. Imperfect Competition is known asamong the few. 80. MonopolyThis is a market structure with only one seller and producer who controls the biggest portion of supply in the market. There is a big difference between monopoly and perfect competition.Characteristics of Monopoly1. One seller2. Product Differentiation3. Barring the competition 81. Advantages and disadvantages of Monopoly Monopoly produces goods and services, whichare necessary in the economy like electricity, water,transportation and communications, and other products.The government cannot provide all these goods andservices for the citizens so the private sector, through themonopolies, are given the opportunity to help thegovernment in giving out these necessary services to thepeople.The power of the monopoly is to control andmanipulate the supply of product, which affects thequality of the products. Despite the low quality ofproducts produced, consumers still buy them because itis the only ones available. It happens when the productshave no close substitutes, which is one of thecharacteristics of monopoly. 82. MonopsonyIs a market structure where there is only onebuyer in the market. It is the exact opposite of monopolywhere there are many buyers but only one supplier. Atthis point the power of the buyer prevails. The buyer hasthe power to determine the price level that will benefithim. He has the opportunity to choose high qualityproducts and services. A government is a Monopsony in buying thedifferent services for the public. The government fromthe top officials down to the rank and file. The salariesand wages of these employees are based on thegovernments financial capacity. As a Monopsony,government can control the price of the said services. 83. Identify the market structure accordingto the following characteristics.1. Only one consumer2. Having a cutthroat competition3. Homogenous product4. Only one seller5. Can control the price of the product 84. Chapter 33Oligopoly and Monopolistic Competition 85. OligopolyIt is a market structure where thenumber of products is few. Products arealmost similar. Brand name is used todifferentiate the products. The decision ofbusiness firms is coordinated regarding thepricing of the products and the setting of thequantity of production because it depends onwhat each business firms in the industrydecides to supply. 86. The reactions and activities of the oligopolists can be explained by the following:Business under the oligopolisticstructure connive to attain thegreatest benefit in the business. To Collusionavoid competition, oligopolists No price competition throughcome up to an agreementcollusion. They discuss the right Common reactionprice that suits their satisfaction. 87. No price competitionIn order to avoid price decrease onproduction, oligopolists agree on pricecollusion. Although here is an agreement onprice among them, it does not mean thatthere is no competition in the market. Eacholigopolist has the freedom to compete onquality, design, and advertisement in sellingtheir product. 88. Common reactionWhen it comes to price and quantity ofthe products, the oligopolists have similarreactions. They know that any reaction fromany business firm affects the others. So theyfollow what they agreed on. 89. Monopolistic CompetitionIs known as the combination ofmonopoly and perfect competition. Themain characteristics of the two marketstructure exist. There are many sellers andbuyers of the same products. Products havebeen identified through brand name. this isthe reason why advertisement is veryimportant in this structure. 90. Monopoly Collusion Cartel Oligopoly 91. Identification: identify the market structure describedbelow. Choose your answer from the box and write iton the blank before each numberOligopoly Perfect CompetitionMonopoly Monopolistic Competition1. Suppliers of the product are few2. Prices are varied3. Production is determined through the MR = MC approach4. Describes a kinked demand is a big help5. Advertisement is a big help 92. ENDMwahPresented by: Ms. Princess M . Coronado 93. Special thanks to : 94. Thank youCREAMYYYY!>>>>>