4. THE MARKET IS MADE UP OF BUYERS AND
SELLERS MAKING CHOICES UNDER
CONDITIONS O SCARCITY.
BUYERS ASK ABOUT THE TYPES OF GOODS
AND SERVICES AVAILABLE AND THE PRICES
THEY MUST PAY FOR THEM.
SELLERS INQUIRE ABOUT THE TYPES OF
GOODS AND SERVICES BUYERS WANT AND THE
PRICES THEY ARE WILLING TO PAY.
5. COMPETITION AND THE DEMAND SUPPLY MODEL
• UNDERSTANDING COMPETITION IN MARKETS IS IMPORTANT FOR
ONE SIMPLE REASON: THE DEMAND AND SUPPLY MODEL IS
DESIGNED TO SHOW HOW PRICES ARE DETERMINED IN PERFECTLY
COMPETITIVE MARKETS -MARKETS WHERE NO BUYER OR SELLER
HAS ANY INFLUENCE OVER THE PRICE.
• IN PERFECTLY COMPETITIVE MARKETS, THERE ARE MANY BUYERS
AND SELLERS OF AN IDENTICAL PRODUCT. EACH BUYER AND
SELLER IS A SMALL PART OF THE MARKET. SINCE THE PRODUCT IS
IDENTICAL AND EACH SELLER SELLS ONLY A SMALL SHARE OF THE
TOTAL QUANTITY OF THE PRODUCT BEING SOLD, NO INDIVIDUAL
SELLER HAS THE ABILITY TO AFFECT THE MARKET PRICE BY
CHANGING THE LEVEL OF PRODUCTION. THERE IS A SINGLE
MARKET PRICE, AND EACH BUYER AND SELLER TAKES THE MARKET
PRICE AS A GIVEN
6. DEMAND SUPPLY FOR ENTIRE MARKET
• PRICES IN A MARKET ECONOMY ARE AGREED ON BY THE BUYER AND THE
SELLER AFIER BARGAINING. WE CAN OFTEN HAVE A GOOD UNDERSTANDING
ABOUT PRICES AND MAKE GOOD PREDICTIONS ABOUT THEM BY SUMMARIZING
INDIVIDUAL CHOICES OF BUYERS AND SELLERS WITH DEMAND CURVES AND
SUPPLY CURVES FOR AN ENTIRE MARKET
MARKET DEMAND
• DEMAND REFERS TO THE RELATIONSHIP BETWEEN THE PRICE OF A GOOD OR SERVICE
AND THE QUANTITY OR NUMBER OF UNITS ALL CONSUMERS IN A MARKET WOULD
CHOOSE TO BUY DURING A GIVEN TIME PERIOD. A GIVEN QUANTITY OF A GOOD OR
SERVICE CONSUMERS WOULD CHOOSE TO BUY AT A PARTICULAR PRICE IS CALLED
QUANTITY DEMANDED. IT IS IMPORTANT TO REMEMBER THAT. IN ECONOMICS, THE
TERM DEMAND REFERS TO THE ENTIRE RELATIONSHIP BETWEEN PRICE AND
QUANTITY DEMANDED WHILE THE TERM QUANTITY DEMANDED REFERS TO GIVEN
QUANTITY CHOSEN BY BUYERS AT A PARTICULAR PRICE. THIS NEGATIVE
RELATIONSHIP BETWEEN PRICE AND QUANTITY DEMANDED-CALLED THE LAW OF
DEMAND-IS REGULARLY OBSERVED IN VARIOUS MARKETS. THE LAW OF DEMAND
TELLS US WHAT WOULD HAPPEN TO THE QUANTITY OF A GOOD THAT PEOPLE WOULD
CHOOSE TO BUY IF ONLY THE PRICE OF THAT GOOD CHANGED AND ALL THE OTHER
FACTORS AFFECTING DEMAND FOR THAT GOOD REMAINED UNCHANGED
7. PRICE AND QUANTITY DEMANDED ARE
REGULARLY OBSERVED TO BE NEGATIVELY
RELATED FOR TWO REASONS:
FIRST, AS THE MONEY PRICE OF A GOOD RISES RELATIVE TO THE MONEY PRICE
OF OTHER GOODS, THE OPPORTUNITY COST OF BUYING THAT GOOD INCREASES,
AND CONSUMERS WILL SWITCH TO SUBSTITUTES-OTHER GOODS THAT CAN BE
USED IN ITS PLACE. (THIS RESPONSE TO A PRICE CHANGE IS CALLED THE
SUBSTITUTION EFFECT.)
SECOND, AS THE PRICE OF A GOOD RISES AND INCOME REMAINS THE SAME,
CONSUMERS, WHO COULD NO LONGER AFFORD TO BUY ALL THE THINGS THAT
THEY USED TO BUY, WOULD NORMALLY BUY LESS OF THE GOOD WHOSE PRICE
HAS INCREASED. (THIS RESPONSE TO A PRICE CHANGE IS CALLED THE INCOME
EFFECT.) WHEN THE PRICE OF A GOOD CHANGES, THERE IS A MOVEMENT ALONG
THE DEMAND
8. SUPPLY REFERS TO THE RELATIONSHIP BETWEEN THE
PRICE OF A GOOD OR SERVICE AND THE QUANTITY OR
NUMBER OF UNITS ALL SELLERS IN A MARKET WOULD
CHOOSE TO SELL DURING A GIVEN TIME PERIOD. A GIVEN
QUANTITY OF A GOOD OR SERVICE SELLERS WOULD
CHOOSE TO BUY AT A PARTICULAR PRICE IS CALLED
QUANTITY SUPPLIED. JUST AS WE DID WHEN WE STUDIED
DEMAND. WE WILL EMPHASIZE THAT, IN ECONOMICS, THE
TERM SUPPLY REFERS TO THE ENTIRE RELATIONSHIP
BETWEEN PRICE AND QUANTITY SUPPLIED WHILE THE
TERM QUANTITY SUPPLIED REFERS TO A GIVEN QUANTITY
CHOSEN BY SELLERS AT A PARTICULAR PRICE
13. PATAWAD PO!
MAGLAHAD NG KARANASAN O
KWENTO UKOL SA KUNG PAANO KAYO
NAKIKIPAGTAWARAN NG PRESYO NG
BINIBILI NINYONG PRODUKTO SA MGA
TINDERA SA PALENGKE O TINDAHAN.
