Notes for econ
Chapter 3
Market- the place where buyer and seller meets
Good Market- the most common type of market
● Wet market (fish, meat, chicken)
● Dry market (shoes or clothes)
Labor Market- where workers offers their services and employers look for
workers to hire
Demand - the quantity that the buyers are willing to buy
Ceteris Paribus- all other things remains constant/ state of balance
The Law of demand states that if;
● If the price goes up, the demand goes down; and
● If the price goes down, the demand goes up; ceteris paribus
Shift of the demand curve
Right- increase
Left- decrease
NON- PRICE DETERMINANTS/ FACTORS OF DEMAND
1. Taste and preferences
2. Consumers income
3. Expectations of future prices and income
4. Family size
5. Population growth
6. Prices of related goods are assumed as constant
: there are also referred as parameters
Non price determinants
Qd= Cy+dPc+ePs
Demand Function
Qd= f( P,U, Pc, Ps)
Linear demand function
Qd= a-bP + x x=0
Final; Qd= a-bP
Ex:
Qd= 5000-500P Qd= 5000-500(2)
price= 200 Qd=5000-1000
Qd= 4000
Supply - the quantity that the seller 3. Unitary elastic- a change in a
are willing to sell determinant leads to a
proportionately equal change
The Law of Supply states that if;
(equals to 1) - coefficient of
● If the price goes up, supply elasticity
goes up
PRICE OF ELASTICTY OF
● If the process goes down,
DEMAND
supply goes down ; ceteris
paribus 1. Price elasticity
-the study of responsiveness of
demand changes in the price
NON- PRICE DETERMINANTS OF
of good
SUPPLY ● Has negative sign
1. Producers motive ● Important to the seller
2. Technology
If demand is elastic, TR tends to
3. Number of firms in the market increase as price decreases(+)
4. Cost of production
If demand is inelastic, TR tends to
decrease as price decreases (-)
Supply function
Qs= f(P, PM,T,CP,NF) If demand is unitary elastic, TR
Shift of the supply curve tends remains constant despite a
change in price (0)
Right- increase
Left- decrease 2. Income elasticity
- the study of the
responsiveness of demand to
Equilibrium- state of balance;
a change in consumers income
demand equals supply
Equilibrium price- the price where 3. Cross elasticity
demand and supply are equal - When two goods are
related, the price of one
Alfred Marshall- a british economist
tend to affect the
demand for another
ELASTICITIES OF DEMAND AND
SUPPLY
1. Elastic- a change in
determinant leads to a
proportionately greater
change
2. Inelastic- a change in
determinant results in a
proportionately lesser change
(less than 1)- coefficient of
elasticity