Market

Where buyers and sellers meet

Where transactions take place

Where do transactions take place?
Demand
Ability to
pay for it
You cannot always
buy them just by Desire to Willingness
want/desire possess in utilizing it
because you face
constraints a thing

Demand
Opportunity Cost
• Every decision to buy one thing is a
choice NOT to buy the other. The
option not chosen is the
opportunity cost.
Law of Demand

Price

Demand

*Ceteris Paribus
Ceteris Paribus
• Ceteris Paribus is a Latin term for
all other things being equal or held
constant.
Validity and Justification of Law of Demand
Basic Analysis of Demand and Supply
 • Factors that
Determinants actually influence the
of Demand
quantity of demand.
Consum
Populati er’s
on Income
Change
Expectati
Consume on of
r Tastes Future
Prices
Occasio
Price of
nal/Seas
Related
onal
Products
Products
PC C
CT E
O P
 Consumers’ Income

PC C

CT E
O P *changes demand depending on the types of goods
 PC C

CT E
O P
 Determinants of Demand

Population Consumer’
Change s Income

Expectation
Consumer
of Future
Tastes
Prices

Occasional Price of
/Seasonal Related
Products Products
PC C
CT E
O P
 Determinants of Demand

Population Consumer’
Change s Income

Expectation
Consumer
of Future
Tastes
Prices

Occasional Price of
/Seasonal Related
Products Products
PC C
CT E
O P
 Expectations of Future Prices
• Prices expected in future periods

PC C
CT E
O P
 Prices of Related Products
• Changes in prices of related goods
• The direction in which demand would
change depends on the relationships
of products.

PC C
CT E
O
P
 Relationships of Products

Substitute Products Complementary Products

Goods that can be used in place of Goods that go together/cannot be
other goods used without the other
Gasoline and LPG Mini4WD and Accessories
PC C
CT E
O
P
 Determinants of Demand

Population Consumer’
Change s Income

Expectation
Consumer
of Future
Tastes
Prices

Occasional Price of
/Seasonal Related
Products Products
PC C
CT E
O P
 Occasional/Seasonal Products
• Demand increases in various events/seasons in a given year

PC C
CT E

O P
 Determinants of Demand

Population Consumer’
Change s Income

Expectation
Consumer
of Future
Tastes
Prices

Occasional/ Price of
Seasonal Related
Products Products
PC C
CT E
O P
 Consumer’s Tastes/Preferences

etc

Age Tradition

Culture

Religion

PC C
CT E
O P
 Determinants of Demand

Population Consumer’
Change s Income

Expectation
Consumer
of Future
Tastes
Prices

Occasional Price of
/Seasonal Related
Products Products
PC C
CT E
O P
 Population Change

PC C
CT E
O P
Basic Analysis of Demand and Supply
Demand Function
• Formula for showing the relationship between demand and its
determinants

• 𝑄𝑑 = 𝑓 (𝑃𝐺𝑆 , 𝐼, 𝐸𝑐 , 𝑃𝑅𝑃 , 𝑇𝑐 , 𝑃𝑜𝑝 )

• Where:
– PGS = Price of good/service
– I = Income
– Ec = Consumer’s Expectations
– PRP = Price of Related Products
– Tc = Consumer’s Tastes
– Pop = Population
Demand Schedule
• Table showing the relationship of price and demand

Points Price (Millions) Quantity Demanded

A 0 4000
B 1 3500
C 2 3000
D 3 2500
E 4 2000
F 5 1500
G 6 1000
H 7 500
Demand Curve
• Graph of the price and demand ceteris paribus
Price
8

0
0 500 1000 1500 2000 2500 3000 3500 4000 4500

Quantity Demanded