APPLIED ECONOMICS  More people means Qd will increase, and

the demand curve will shift to the right

 Theories – are explanations of a phenomenon
 Models – illustrate theories to make them more
understandable 2.
o Examples: Diagrams (flowchart), Graphs,
and mathematical equations
 Fewer people means Qd will decrease and
the demand curve will shift to the left
Income

HOW TO DRAW AND INTERPRET GRAPHS

3. Tastes and Preferences

4.
 The distance between segments should be the 5.
same equivalent and should be consistent. 6.
7.
The Market
 Where buying and selling of a product (e.g. good
or service) takes place (the place does not matter).
 4 elements; buyer, seller, product,
transaction/purchase (money)
 Modern markets = online markets
 Future transactions = cashless society
Weather and Climate
Season and Occasion
Expectation on changes in prices and supply
Prices of related products
 Substitute Products – products that are
substitutes of each other (Ex. ice cream
and ice candy or ice drop)
 Complementary Products – products that
go together. If you buy one, you have to
buy the other product (Ex. car and
gasoline)

DEMAND
 Quantity Demand – is the amount of the product
that buyers are willing to pay at a given price
 Law of Demand – the higher (lower) the price of a
product, the lower (higher) is its Qd. Price and Qd
has an indirect or negative relationship. D curve is
downward sloping.
 Demand Schedule – a table showing the Qd
(quantities of goods a person is willing to buy) at
various alternative P (prices) at a given time.

SUPPLY 8. Other factors (special influences)

 Quantity Supply – willingness of a producer to
sell a product Ceteris Paribus – means other things being equal; or no
 Law of Supply – the higher (lower) the price of a other factor has changed, except for price
product, the higher (lower) is its Qs. Price and Qs
has a direct or positive relationship. S curve is DETERMINANTS OF SUPPLY: NON – PRICE FACTORS
upward sloping. 1. Number of producers (Industry size)
 Supply Schedule – a table showing the Qs at
various alternative P (prices) at a given time.

Equilibrium will occur where the quantity demanded

equals the quantity supplied.

 Consumption – the purchase and use of a product

or resource
 Opportunity Cost – the value of the second best
option given up

DETERMINANTS OF DEMAND: NON – PRICE FACTORS

1. Number of Buyers (Population)
EUSTAQUIO, A.
 2. Price of Resources(Ex. Rent, Wages, interest)
3. Technology
4. Weather & Climate affecting supply of resources
5. Expectation on changes in future prices of
resources and future demand
6. Prices of related products
7. Other factors (special influences)

SHIFTS IN THE DEMAND CURVE

REMEMBER: Any change on the product itself will not

shift the demand or supply curve of that product. It will
cause either shortage or surplus.

When does a shortage happen?

 If the price of the product is too low, Qd > Qs
or Qs < Qd
 Any price below the market Price: PE will
result to A SHORTAGE
 The lower the given price the bigger the
SHORTAGE
When does a surplus happen?
 If the price of the product is too high, Qd < Qs
or Qs>Qd
 Any price above the market Price: PE will
result to a SURPLUS
 The higher the given price the bigger the
SURPLUS

The Market Price is determined when Qd = Qs.

EUSTAQUIO, A.