12 Questions
What happens to the demand of a product if there is an unfavorable change in consumer's taste and preferences?
The demand decreases
How does an increase in the number of consumers in the marketplace affect demand?
Increases demand
What happens to a consumer's capacity to buy a product if their income decreases?
Capacity to buy also decreases
How are substitute products classified?
Goods that can be replaced when the preferred product is not available
Which factor influences demand when the ceteris paribus assumption is dropped?
Consumer's preferences
How do complementary goods affect each other?
They are used together
What is the relationship between Unrelated Goods in terms of their prices?
A change in the price of one product has little or no effect on the demand for the other product.
How does an expectation of a higher future price affect current demand?
It causes consumers to buy more of the specific product to avoid potential price increases.
What is the impact of an increase in resource prices on production costs and profits?
Increased resource prices raise production costs and potentially reduce profits.
How does technology advancement impact production costs?
It enables firms to produce more output, leading to lower production costs.
How do taxes affect supply?
Increased production cost due to taxes can lower supply.
How does the number of sellers in a marketplace affect supply?
More sellers lead to greater supply, while fewer sellers mean less supply.
Study Notes
Non-Price Determinants of Demand
- Tastes and preferences influence demand, as a desirable product increases demand at a certain price, while an unfavorable change in taste and preferences decreases demand.
- An increase in the number of consumers in the marketplace leads to an increase in demand, while a decline in the number of consumers decreases demand.
- Consumer income affects their capacity to buy a product, with an increase in income leading to an increase in demand, and a decrease in income leading to a decrease in demand.
- Prices of related goods, such as substitutes or complements, affect demand, whereas unrelated goods have little or no effect on demand.
- Changes in customer expectations, such as expecting a higher future price, may increase current demand.
Non-Price Determinants of Supply
- The price of resources affects production cost, with an increase in resource prices potentially reducing profits.
- Technological advancements reduce production costs, enabling firms to produce more units of output.
- Taxes and subsidies are considered as expenses by businesses, increasing production costs and reducing supply.
- Prices of other goods affect supply, as companies may shift production to other product lines when prices increase.
- Price expectations influence the willingness of sellers to supply a product, with expectations of a higher future price increasing supply.
- The number of sellers in the marketplace affects supply, with more sellers increasing supply and fewer sellers reducing supply.
Buying Behavior of Filipinos
- Filipinos have unique characteristics as consumers, prioritizing durable products that fit their preferences, behavior, brand loyalty, advertising, and value of money.
- Preferences are influenced by factors such as beauty, hygiene, health, and convenience.
- Brand loyalty and advertising affect purchasing decisions, with Filipinos preferring brands that meet their needs.
- Value of money is important, with Filipinos choosing affordable products.
Purchasing Power
- Purchasing power is the value of goods or services that a unit of money can buy.
- Price increases reduce the purchasing power of money, having an adverse impact on consumers' welfare.
- Inflation decreases the amount of products or services that can be purchased with a unit of money.
Test your knowledge on the non-price factors affecting demand in economics. Explore how tastes, preferences, income, expectations, and population can influence the quantity of a product consumers are willing to buy.
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