And Health Care

Services

By: Kimberly Estilles

What is Demand?
refers to the quantity or amount
of goods or services consumers are
willing and able to buy at a given
price, place, and at a given
period of time.

Determinants of Demand
Determine the quantity of demand
Factor that influence how much of
a certain good and services people
are willing to buy

Determinants of Demand
1. Price Factor
A. Price of the good or service

This is what the people consider

in buying a certain good/service.
price =demand (vice-versa)

Determinants of Demand
2. Non-Price Factors:
A. Consumers Income

- Change in income = change in demand

- Consumers buy more when income
increases
- Demand decreases once income
decreases

Determinants of Demand
A. Consumers Income
I. Normal Goods/Services
- goods/services increase when
income increases.
ex: people go to health spa centers
if the income rises

Determinants of Demand
A. Consumers Income
II. Inferior Goods/Services
- goods/services fall when income
decreases.
ex: diet modification instead of
liposuction as a means of reducing
weight

Determinants of Demand
2. Non-Price Factors:
B. Changes in Consumers Taste &
Preferences

- Increase in the taste/preference for a

certain good will increase the demand
Ex: people prefer food that reduce chance of
heart disease = high demand for high fiber
diets

Determinants of Demand
2. Non-Price Factors:
C. The Size of Population
- Increase in population = increase in
demand ( vice-versa )
- As population grows, demand for health
services increases

Determinants of Demand
2. Non-Price Factors:
D. Prices of Related Goods and Services
- Quantity demand for any good/service
affected by changes in prices of related
good/service either substitute or
complementary

Determinants of Demand
2. Non-Price Factors:
D. Prices of Related Goods and Services
I. Substitute goods/services
- can be used in place of other
goods/services
- increase in the price of one good will
cause an increase in the demand for the
other good (vice-versa)

Determinants of Demand
2. Non-Price Factors:
D. Prices of Related Goods and Services
II. Complementary goods/services
- goods consumed together
- increase in the price of one good will
cause an decrease in the demand for the
other good

Determinants of Demand
2. Non-Price Factors:
E. Consumers Expectation of Future Prices
- Quantity of a good/service demanded within
any period depends not only on prices in that
period but also on prices in the future
- When someone expects higher prices in the
future, tendency is to buy more of it today

Demand Schedule
Relationship bet. the quantity of a
good/service demanded and the price of
that good/service.
Quantity demanded of a good at diff. price
levels
Easy to determine the expected quantity
demanded
form of a table

Demand Schedule

https://courses.byui.edu/econ_150/econ_150_old_site/lesson_03.htm

Demand Curve
shows graphically the relationship bet. the
quantity of a good/service demanded and
its corresponding price, w/ other variables
held constant.
typically downward-sloping
form of a graph

Demand Function
Another way of presenting the relationship bet.
the price and quantity demanded
Form of a mathematical expression
Eqn: Qd = f (P, Y,Pr, Ps)
where; Qd = quantity demand
P = price of goods/services
Y = income of consumers
Pr = price of related commodities
Ps = population size

Law of Demand

When the price

goes up
The quantity
demanded
goes down
And vice-versa*

Validity of the Law of Demand

The law of demand is only true if other
determinants remain constant, no change, and
movement in income, population, and others.
Ex: Price of foot spa decreases by 50% from
original price, then the quantity demanded for
such treatment increases (only true if other
variables remain constant like consumers
income)

Justification for the Law of

Demand
A. Income Effect
- when the price of goods decreases, the
consumers can afford to buy more of it or
vice-versa
B. Substitution Effect
- If the price of good the consumer buy
increases, they look for substitutions w/ a
lower price

Demand Terminology
Change in Quantity Demand movement of
points along a demand curve. Indicates
movement from one point to another of the same
demand curve.

Ex: price of liposuction procedure falls from

20,000Php to 10,000Php. This will cause
quantity demanded to increase from 20-40
persons or from point X to Y.

Demand Terminology
Change in Quantity Demand
Price

20

10
Quantity
10

20

30

40
Liposuction Procedure

Demand Terminology
Change in Demand shifting from one demand
curve to another. Brought by the changes in all
determinants except price.

*Shifting of demand curve to the right is called

increase in demand
* Shifting of demand curve to the left is called
decrease in demand

Demand
A) Determinants of Demand
1. Price Factor
2. Non-price factor
A. consumers income
I. Normal Goods/Services
II. Inferior Goods/Services
B. Changes in Consumers Taste and Preferences
C. The size of population
D. Prices of Related Goods and Services
I. Substitute goods/services
II. Complementary goods
E. Consumers Expectation of Future Prices
B) Demand of Schedule
C) Demand Curve
D) Demand Function
Law of Demand
A) Validity of the law of demand
B) Justification for the law of demand
1. Income effect
2. Substitution effect
Demand Terminology
A) Change in Quantity Demand
B) Change in Demand

What is Supply?
Amount or quantity of goods/services
producers are willing and able to supply at
a given price, at a period of time.

Determinants of Supply
1. Price Factor sellers would tend to
supply more of the good at higher prices.
Therefore, more goods are found in the
market at higher prices.
Ex. More students take up nursing due to
higher salary

Determinants of Supply
1. Non-Price Factor
A.Cost of input used an increase in the price of
an input or the cost of production decreases the
quantity supply bec. the profitability of certain
business decreases.
B.Change in Technology machines that use
technology increase quantity supply of good w/c
causes the reduction of cost of production

Determinants of Supply
C. Government Regulations and Taxes
higher degree of regulation will translate to
lower supply in the market
D. Government Subsidies financial aids
given by the government reduce cost of
production which encourages more supply
E. No. of firms in the market increase in
the no. of firms in the market leads to an
increase in supply of health goods

Determinants of Supply
F. Expectation of future price when
producers expect higher prices in the
future, the tendency is to keep their health
products and release them when the price
rises
G. Change in the price of related goods
changes in the price of goods/services
have a significant effect in the supply of
such good/services.

Supply Schedule
The relationship bet. the quantity of a
good/service supplied and its price (other
factors are held constant).
Price (Php)

Quantity Supply

10

20

30

40

50

Supply Curve
Shows graphically the quantity of a good
supplied at each price, with other factors
held constant.
6
5
4

Price

3
2
1

10

20

30

40

50

Quantity

Supply Function
A mathematical expression of the Law of Supply
or the relationship between price (P) and
quantity supply (Qs).
Equation: Qs = f (P,Ci,Pi,Gt, Gs,N)
Qs = quantity supplied
P = price of goods and services
Ci = change in technology
Pi = cost of inputs used
Gt = govt taxes
Gs = govt subsidies
N = no. of firm in the market

Supply Function
Taking into account that all factors are
constant (except price), the supply
function can be expressed as:
Qs=m + nP +oCi + pPi + qGt + rGs + sN
Where m is the intercept and n is the slope
of the function
All fixed variables will be added to the
supply function expressed as: Qs = m +
nP + x

Supply Function
Unlike the demand curve, supply curve
has a positive slope where x is the sum of
oCi + pPi + qGt + rGs + sN and assumed
to be constant having 0 value
Using the supply schedule of skin
whitening prod. , supply function is
estimated as:
Qs = 0+10P
Let us use 2 as the value of price, hence

Supply Function
Hence,
Qs = 0 + 10P
Qs = 0 + 10(2)
Qs = 10(2)
Qs = 20

Law of Supply
States that as prices increases, quantity
supplied also increases; and as price
decreases, quantity supplied also
decreases.

Validity of the Law of Supply

Just like the law of demand, the law of supply is
only correct if the assumption is ceteris paribus
(determinants remain constant).

Ex. The price of anti-rabies vaccine increases from

1,000Php to 3,000Php and w/ the cost of
production remaining constant, the producer
gets more profit and is induced to produce more

Supply Terminology
Change in quantity supplied movement along
the supply curve. Due to a change in the price of
goods/services
Change in supply shifting from one supply
curve to another
* Shifting of the supply curve to the right
indicates that there is an increase in supply
* to the left indicates decrease in supply

Determination of Market
Equilibrium
State which implies a balance between
the opposing forces, a situation in which
quantity demanded and quantity supplied
are equal.

 Market Equilibrium (tabular approach)

Market Equilibrium (graphical approach)
Market Equilibrium (mathematical
approach)

Market Shock

Anything which moves a market out of

equilibrium.

Supply
A) Determinants of Supply
1. Price Factor
2. Non-price factor
a. Cost of Input Used
b. Change in technology
c. Govt regulations and taxes
d. Govt subsidies
e. No. of firms in the market
f. Expectation of future price
B) Supply Schedule
C) Supply Curve
D) Supply Function
Law of Supply
A) Validity of the law of supply
Supply Terminology
A) Change in quantity supply
B) Change in supply
Determination of Equilibrium
A) Market Equilibrium
1. tabular approach
2. graphical approach
3. mathematical approach