Chapter 2 Application of Demand and Supply PDF

Chapter 2 Application of Demand and Supply Market-is an interaction between buyers and sellers of trading or exchange.  https: //ww w.yell owpa ges.c a/tips /3- thrifty -tips- for- grocer y- shopp ing/ Goods market-is the most...

Chapter 2 Application of Demand and Supply Market-is an interaction between buyers and sellers of trading or exchange.  https: //ww w.yell owpa ges.c a/tips /3- thrifty -tips- for- grocer y- shopp ing/ Goods market-is the most common type of market because it is where we buy consumers goods. Labor market-is where workers offer services and look for jobs, where employers look for workers to hire. https://w ww.philsta r.com/hea dlines/201 9/01/02/1 881616/do le-most- unemploye d-are- educated Financial market-it includes the stock market where securities of corporations are traded. https://ww w.worldfina nce.com/m arkets/the- philippines- closes- financial- markets- due-to-the- coronavirus Examples of Financial market Interbank-arrange or operating between banks Stock Exchange-securities are bought and sold Money Market-the trade in short-term loans between banks and other financial institutions Bond Market-a marketplace where investors buy debt securities that are brought to the market Foreign Exchange-exchanging the currency of one country for another at prevailing exchange rates Demand-is the willingness of a consumer to buy a commodity at a given price. https://www.tes.com/lessons/zGiPKu PEAmByJw/goods-and-services Income effect-is felt when a change in the price of a good changes consumer’s real income or purchasing power, which is the capacity to buy with a given income. -more money, more goods to buy Substitution effect-is felt when a change in the price of a good changes demand due to alternative consumption of substitute goods. -buying cheaper goods than expensive ones The Law of Demand As the price increases, the quantity demanded for that product decreases. The low price of goods motivates the consumer to buy more. When the price increases, the quantity demanded for the good decreases. Ceteris paribus-means all related variables except those that are being studied at the moment are held constant. Non-Price Determinants of Demand The following can cause an upward or downward change in the entire demand for the product and this change is referred to as a shift of the demand curve. Income Taste Expectations of future price and income Prices of related goods Population Demand Schedule a table showing the inverse relationship between price (P) and quantity demanded (Q or Qd)  Market Demand Schedule for Sweet Potato (kilo) POINT P Q (Php) (piece) A 30.00 B 29.00 C 27.00 D 25.00 E 23.00 F 21.00  Demand Function A mathematical expression that expresses the relationship of quantity demanded (Qd) and price (P)  Demand Function Qd = 120 – 4P Qd – quantity demanded UD (120) – unwanted demand 4P - change in the demand P - price  Market Demand Schedule for Sweet Potato (kilo) Qd = 120 – 4P POINT P Q (Php) (piece) A 30.00 B 29.00 C 27.00 D 25.00 E 23.00 F 21.00  Qd = 120 – 4P Qd = 120 – 4 (30) = 120 – 120 =0 Qd = 120 – 4 (29) = 120 - 116 =4 Market Demand Schedule for Sweet Potato (kilo) POINT P Q (Php) (piece) A 30.00 0 B 29.00 4 C 27.00 12 D 25.00 20 E 23.00 28 F 21.00 36  Demand Curve a graphical representation of the relationship between price (P) and quantity demanded (Q or Qd) Market Demand Curve for Sweet Potato P 15 12 9 6 3 0 5 10 15 20 25 30 35 40 45 50 Qd  Market Demand Curve for Sweet Potato (kilo) P 30 25 20 15 10 5 0 5 10 15 20 25 30 35 40 45 50 Qd  Change in Quantity Demanded šwhen demand for a P=50 pesos commodity Q=100 pieces changes due to P=20 pesos its price Q=200 pieces changes šShift along the demand curve  Change in Demand š when demand for a commodity changes due to other factors šDemand curve P=50 pesos P=50 pesos shifts to the left Q=100 pieces Q=200 pieces or to the right Supply-it refers to the quantity of goods that a seller is willing to offer for sale. https://www.profolus.com/topics/examples-of-supply-shifters/ The Law of Supply As the price increases, the quantity supplied of that product also increases. The high price of the good serves as motivation for the seller to offer more for sale. Thus, when price increases, the quantity supplied of the good increases since the seller take this as an opportunity to increase his income. Non-Price Determinants The following can cause an upward or downward change in the entire supply of the product, and this change is referred to as a shift of the supply curve. Cost of production Technology Availability of raw materials and resources  Supply Function A mathematical expression that expresses the relationship of quantity supplied (Qs) and price (P)  Supply Function Qs = -126+6P Qs – quantity supplied US (-126) – unwanted supply 6P - change in the supply P - price  Supply Schedule a table showing the direct relationship between price and quantity supplied  Market Supply Schedule for Sweet Potato (kilo) Qs = -126 + 6P POINT P Q (Php) (piece) A 30.00 B 29.00 C 27.00 D 25.00 E 23.00 F 21.00  Qs = -126 + 6P Qs= -126 + 6 (30) = -126 + 180 = 54 Qs= -126 + 6 (29) = -126 + 174 = 48  Market Supply Schedule for Sweet Potato (kilo) POINT P Q (Php) (piece) A 30.00 54 B 29.00 48 C 27.00 36 D 25.00 24 E 23.00 12 F 21.00 0  Market Supply Curve for Sweet Potato (kilo) P 30 25 20 15 10 5 0 5 10 15 20 25 30 35 40 45 50 Qs Shifts in the Supply Curve Use of technology Subsidy on the expenditures of the producers Increase in the number of sellers Increase in the price of related product Shifts in the Supply Curve Calamities Decrease in the number of sellers Lack of subsidy Lack of technology Low prices of commodities Equilibrium It is a state of balance when demand is equal to supply. The equality 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-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 Image from: https://www.tutor2u.net/economics/reference/equilibrium- market-prices What is the equilibrium price? What is the equilibrium quantity? Page 28 Market Equilibrium Schedule for Sweet Potato (kilo) Qd P (Php) Qs 0 30.00 54 4 29.00 48 12 27.00 36 20 25.00 24 28 23.00 12 36 21.00 0  Compute for the EP and EQ: Demand and Supply Functions Qd=120-4P Qs=-126+6P  Qd=120-4P Qs=-126+6P 120-4P=-126+6P 126+4P=126+4P 246 = +10P 10 10 24.60=P  Qd=120-4P Qs=-126+6P 24.60=P or Qd=120-4(24.60) Qs=-126+6(24.60) =120-98.40 =-126+147.60 =21.60 =21.60  Market Supply Curve for Sweet Potato (kilo) P S 30 25 20 P=24.60 pesos D Q=21.60 kilos 15 10 5 0 5 10 15 20 25 30 35 40 45 50 Q Computation Practices I. Compute for the Demand and the Supply schedule. II. Graph the demand and the supply curve. III. Compute for the equilibrium price and equilibrium quantity.  Market Demand Schedule for Fresh Egg (piece) Qd P (Php) Qs 48 5.00 0 39 8.00 15 33 10.00 25 30 11.00 30 24 13.00 40 18 15.00 50 Qd=63 – 3P Qs=-25 + 5P  Market Supply Curve for Fresh Egg (piece) P 18 15 12 9 6 3 Q 0 5 10 15 20 25 30 35 40 45 50 55 50  Market Supply Curve for Fresh Egg (piece) P 18 S 15 12 9 6 3 D Q 0 5 10 15 20 25 30 35 40 45 50 55 50 Qd=63 – 3P Qs=-25 + 5P Equilibrium Quantity Equilibrium Price Qd=63-3P 63-3(11) 63-3P=-25+5P 63-33 63-3P=-25+5P Q=30 25+3P 25+3P 88=8P Qs=-25+5P 8 8 -25+5(11) 11=P -25+55 Q=30  Market Supply Curve for Fresh Milk (liter) P 200 S 180 160 P=125 Q=375 140 120 100 D Q 0 100 150 200 250 300 350 400 450 500 550 600 650 Market Equilibrium Schedule for Cheddar Cheese Qd= 350-2P Qs=-380+3P Qd P (PHP) Qs 70 140 40 60 ___ 55 50 ___ 70 ___ 152 76 40 155 ___ 30 ___ 100 Market Equilibrium Schedule for Cheddar Cheese Qd= 350-2P Qs=-380+3P Qd P (PHP) Qs 70 140 40 60 145 55 50 150 70 46 152 76 40 155 85 30 160 100  Qd= 350-2P Qs=-380+3P Qd=350-2P Qs=-380+3P 350-Qd=-2P Qs+380=3P 350-70=-2P 40+380=3P 280=-2P 420=3P 2 2 3 3 140=P 140=P Qd= 350-2P Qs=-380+3P Equilibrium Quantity Equilibrium Price Qd=350-2P 350-2(146) 350-2P=-380+3P 350-292 380+2P=380+2P Q=58 730=5P 5 5 Qs=-380+3P -380+3(146) 146=P -380+438 Q=58 Population and Housing 26,374,653 households 57.3% owned house 3.9% own house but rent lot 18.6% own house in a rent-free lot w/owner consent 2.1% own house in a rent-free lot w/o owner consent 10.8% renting house and lot 7.3% housing unit is rent free w/ or w/o owner consent Fewer and fewer households can afford housing. Prices of real estate and construction materials are always on rise. Housing supply is less than the existing demand. There is obviously an excess of demand compared to the supply of housing. Other people are borrowing money from financial institutions with interest. Others are renting from homeowners for a monthly fee. Rent Control Law is a type of government intervention that sets a mandatory ceiling on rental fee. Market Structures  Market Structures Competition-is rivalry among various sellers in the market. 1.Perfect Competition-it implies an ideal situation for the 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 https://www.slideshare.net/MacVasquez/market-structure- 64967734  Market Structures 2. Imperfect Competition Monopoly-it exists when a single firm that sells in that market has no close substitutes. Ex. Meralco (distributor of electricity in Greater Metro Manila), NAPOCOR (government produced electricity) *there is a need for stricter government law  Market Structures 2. Imperfect Competition Oligopoly-it is a market dominated by a small number of strategically interacting firms. Ex. Oil firms (OPEC)  Market Structures 2. Imperfect Competition Monopolistic Competition-wherein products are differentiated and entry and exit are easy. Ex. Toyota, Honda, Mercedes Benz Fast food chains http://osyfi315.kip.net.ru/4230 34- 142f561253b345ff5e5d66cc98c 8087f/532126_556925 Application of Demand and Supply to Philippine Economic Problems A. Labor supply (Labor force)-it refers to the portion of the population, 15 years old and over who are willing and able to work, including those who are actively seeking work but have not found work and those who are employed. Not included are housewives or househusbands, full time students, physically and mentally disabled, those who do not wish to work  Employment Rate in June 2024 2021 2022 2023 June 2024 Labor Force 63.3% 64.7% 64.9% 64.4% Employment Rate 92.2% 94.6% 95.7% 96.1% Underemployment 15.9% 14.2% 12.3% 12.3% rate Unemplyment Rate 7.8% 5.4% 4.3% 3.9% Source: https://psa.gov.ph/.  Population of the Philippines Census Population Census Year Reference (in millions) Date 2000 May 1, 2000 76.51 2010 May 1, 2010 92.34 August 1, 2015 100.98 2015 2020 May 1, 2020 109,035,343 The current population of the Philippines is 116,010,975 as of September 2024. The Philippines ranks number 14 in the list of countries by population. https://www.worldometers.info/ Total Number of OFWs Estimated at 2.2 Million Reference Number: 2020-099 Release Date: June 4, 2020 Based on the results of the 2019 Survey on Overseas Filipinos, the number of Overseas Filipino Workers (OFWs) who worked abroad at any time during the period April to September 2019 was estimated at 2.2 million. Overseas Contract Workers (OCWs) or those with existing work contract comprised 96.8 percent of the total OFWs during the said period. The rest who worked overseas without contract accounted for 3.2 percent. The proportion of female OFWs (56.0%) was higher than male OFWs (44.0%). The largest proportion of OFWs belonged to age group 30 to 34 years comprising 22.6 percent of all OFWs, followed by those aged 25 to 29 years with 20.7 percent. Moreover, female OFWs were younger compared to male OFWs. About seven percent of female OFWs were in the age group 15 to 24 years and 46.9 percent were in the age group 25 to 34 years, while the percentages of male OFWs in the said age groups were 5.4 percent and 38.6 percent, respectively. There were more male OFWs (38.1%) than female OFWs (27.0%) in the age group 40 and over. Two in every five (39.6%) OFWs belonged to elementary occupations. About 18 percent worked as service and sales workers. OFWs who worked as plant and machine operators and assemblers comprised 12.2 percent; technicians and associate professionals, 8.7 percent; professionals, 8.5 percent; and craft and related trade workers, 8.1 percent.  Philippine Peso The Philippine Conversion Peso and Foreign Rates Currencies Dollar 56.841 Trading with other countries is an Yen 0.384 important activity that impacts the economy. Euro 60.572 We need foreign currencies in trading Riyal 15.615 with other countries. Source: Xrates (as of Sep. 15, 2023) https://www.x- rates.com/table/?from=PHP&amount=1 Savings-it is a process of setting aside a portion of current income for future use. Investment-it means building up the capital stock for more future production and consumption. Both are necessary to build the future. Rent-it is the payment for the use of land or buildings belonging to others. It is the positive difference between the actual payment made for a factor of production (land, labor, capital) to its owner.  CURRENT DAILY MINIMUM WAGE RATES National Capital Region (NCR) a/ Per Wage Order No. NCR-24 b/ (Effective: 16 July 2023) Basic New Wage/Int Basic Wage Sector/Industry Minimum egration Increase Wage Rates of COLA Non-Agriculture ₱512.00 ₱98.00 ₱610.00 Agriculture (Plantation and Non Plantation) Retail/Service Establishments employing 15 workers or less ₱475.00 ₱98.00 ₱573.00 Manufacturing Establishments regularly employing less than 10 workers Covers the Cities of Caloocan, Las Pinas, Makati, Malabon, Mandaluyong, Manila, Marikina, Muntinlupa, Paranaque, Pasay, Pasig, Quezon, San Juan, Taguig, Navotas, and Valenzuela and a/ Municipality of Pateros. Source: dole.gov.ph Tax-is the life blood of the government.  Reference: Applied Economics (2017) by Rosemary P. Dinio and George A. Villasis