The Marketing Price System

Last module, we talked about the market demand,

market supply and market equilibrium. In our new
topic, we will link more of these variables to the
market price system. For example, in the article
above, the causes and effects of the water
shortage around the Philippines could be best
explained if we could understand the concepts of
demand and supply elasticity of the clean water.
The Marketing Price System
Price System in a Market Economy
Let us find out more about the price system. We
have learned that demand is the willingness of the
consumers to buy goods and services. In
economics, the willingness to buy goods and
services should be accompanied by the ability to
buy, also called the “purchasing power”. This
is referred to as an effective demand (source:
Investopedia).
Price System in a Market Economy: Its Characteristics

Let us learn more! The prices of goods that we

encounter everyday to the things we buy plays a
crucial role in determining an efficient distribution of
resources in a market system. The prices will
help us to make every day economic decisions about
our needs and desires. They are the indications of
the acceptance of a product; the more popular the
product, the higher the price that can be charged.
CATEGORIES OF PRICE ELASTICITY
According to Agarwal, P. (2018) and Judge, S. (2020), there are four
categories of price elasticity are the following:
I. The Price Elasticity of Demand
Price elasticity of demand is the responsiveness of quantity
demanded, or how much quantity demanded changes, given a
change in the price of goods or services.
*The mathematical value is negative. A negative value indicates an
inverse relationship between price and the quantity demanded. But
the negative sign is ignored (Judge, S. 2020).
Price Elasticity of Demand (PED)= % change in quantity demanded
% Change in price
The Income Elasticity of Demand (YED)
The income
elasticity of
demand is the
relationship
between changes in
quantity demanded
for a good and a
change in real
income.