Economics: Demand and Non-Price Determinants

Non-Price Determinants of Demand

• Income, Taste, Expectations of future price and income, Prices of related goods, Population can cause an upward or downward change in the entire demand for a product.
• This change is referred to as a shift of the demand curve.

Demand Schedule

• A table that shows the inverse relationship between price (P) and quantity demanded (Q or Qd)

Demand Function

• A mathematical expression that expresses the relationship of quantity demanded (Qd) and price (P).
• Demand Function is Qd = 120 – 4P
  • Qd is the quantity demanded
  • UD (120) is unwanted demand
  • 4P is the change in the demand
  • P is the price

Demand Curve

• A graphical representation of the relationship between price (P) and quantity demanded (Q or Qd).

Change in Quantity Demanded

• Demand for a commodity changes due to changes in its price.
• This is a shift along the demand curve.
• If the price goes from $50 and a quantity of 100, to $20 and a quantity of 200, this demonstrates a change in quantity demanded.

Change in Demand

• When the demand for a commodity changes due to other factors, such as income, population, taste and preferences, and price of related goods.
• This causes the demand curve to shift to the left or to the right.
• If the price remains the same, say $50, but the quantity demanded changes from 100 to 200, this indicates a shift in demand.

Supply

• Refers to the quantity of goods that a seller is willing to offer for sale.

The Law of Supply

• As the price increases, the quantity supplied of that product also increases.
• This means as the price increases, the seller is willing to offer more of the good for sale as they see an opportunity to increase their income.
• The high price is a motivation for the seller to offer more.

Non-Price Determinants of Supply

• Cost of production, Technology, Availability of raw materials and resources can cause an upward or downward change in the entire supply of the product.
• This is referred to as a shift of the supply curve.

Supply Function

• A mathematical expression that expresses the relationship of quantity supplied (Qs) and price (P)
• This is represented by: Qs = -126+6P
  • Qs is the quantity supplied
  • US (-126) is unwanted supply
  • 6P is the change in the supply
  • P is the price

Supply Schedule

• A table showing the direct relationship between price and quantity supplied.

Supply Curve

• A graphical representation of the relationship between price (P) and quantity supplied (Qs).

Shifts in the Supply Curve

• Use of technology, Subsidy on the expenditures of producers, Increase in the number of sellers, and Increase in the price of related product can increase supply.
• Calamities, Decrease in the number of sellers, Lack of subsidy, Lack of technology, and Low prices of commodities can decrease supply.

Equilibrium

• A state of balance when demand is equal to supply.
• This means that the quantity that sellers are willing to sell is also the quantity that buyers are willing to buy for a price.
• It is an implicit agreement between how much buyers and sellers are willing to transact.

Equilibrium Price

• The price at which demand and supply are equal.

Equilibrium Quantity

• The quantity of products that both buyers and sellers agree to transact at a specified price.

Market Equilibrium

• Qd = Qs

Computation Practices

• Compute for the Demand and the Supply Schedule.
• Graph the demand and the supply curve.
• Compute for the equilibrium price and equilibrium quantity.

Market Structures

• Competition is rivalry among various sellers in the market.

Perfect Competition

• Implies an ideal situation for buyers and sellers.
• There are so many buyers and sellers that each has a negligible impact on market price.
• Homogeneous product is sold by sellers.
• Perfect mobility of resources.
• There is perfect knowledge of economic agents of market conditions.
• Market price and quantity of output are determined exclusively by forces of demand and supply.

Imperfect Competition

• Monopoly exists when a single firm that sells in that market has no close substitutes.
• Oligopoly is a market dominated by a small number of strategically interacting firms.
• Monopolistic Competition is where products are differentiated and entry and exit are easy.
• Government regulation is often necessary in imperfect markets to ensure fair competition.

Application of Demand and Supply to Philippine Economic Problems

• Labor supply (Labor force) refers to the portion of the population who are 15 years old and over, and who are willing and able to work.
• This includes those who are actively seeking work but have not found work, and those who are employed.
• It does not include housewives/househusbands, full time students, those who are physically or mentally disabled, or those who do not wish to work.

Overseas Filipino Workers (OFWs) & Statistics

• In 2019, the estimated number of OFWs was 2.2 million.
• Overseas Contract Workers (OCWs), or those with existing work contracts, made up 96.8% of the total OFWs during that period.
• The remaining 3.2% worked overseas without a contract.
• The proportion of female OFWs was higher than male OFWs, at 56% and 44% respectively.
• 22.6% of all OFWs were in the age group 30-34 years.
• 20.7% were in the age group 25-29 years.
• Female OFWs were younger than male OFWs.
• 7% of female OFWs were in the age group 15-24 years, and 46.9% were in the age group 25-34 years.
• In the same age groups, male OFWs were 5.4% and 38.6% respectively.
• There were more male OFWs (38.1%) than female OFWs (27%) in the age group 40 and over.
• Approximately 39.6% of OFWs worked in elementary occupations.
• Around 18% worked as service and sales workers.