Applied Economics: Demand, Supply, Industry Analysis, and Entrepreneurship

Comprehensive practice flashcards reviewing market equilibrium, business opportunities, environmental scanning, SWOT analysis, profit maximization, Porter's Five Forces, and contemporary economic issues for Filipino entrepreneurs.

Demand

The quantity of a good or service that consumers are willing and able to purchase at different prices during a given period.

Law of Demand

The economic principle stating that, other things being equal (ceteris paribus), as price increases, quantity demanded decreases; when price decreases, quantity demanded increases.

Supply

The quantity of a good or service that producers are willing and able to offer for sale at different prices during a given period.

Law of Supply

The economic principle stating that, other things being equal (ceteris paribus), as price increases, quantity supplied increases; when price decreases, quantity supplied decreases.

Market Equilibrium

The market state achieved when quantity demanded equals quantity supplied ($Q_d = Q_s$).

Equilibrium Price

The specific price at which the quantity demanded by consumers matches the quantity supplied by producers.

Equilibrium Quantity

The amount of a good or service bought and sold at the market equilibrium price.

Shortage

A condition in the market where quantity demanded is greater than quantity supplied ($Q_d > Q_s$), exerting upward pressure on prices.

Surplus

A condition in the market where quantity supplied exceeds quantity demanded ($Q_s > Q_d$), exerting downward pressure on prices.

Determinants of Demand

Non-price factors that alter consumer purchasing behavior, including consumer income, prices of related goods, consumer preferences, the number of consumers, future price expectations, and seasonality.

Determinants of Supply

Non-price factors that shift market supply, including input costs, technology, the number of sellers, government policies, weather and natural conditions, producer expectations, and production capacity.

Business Opportunity

A favorable situation in which an entrepreneur can provide a product or service to meet consumer needs and wants while earning a potential profit.

Business Sector

A category of economic activity involving related products, services, or business operations, such as agriculture, manufacturing, or tourism.

Entrepreneurship

The process of identifying business opportunities, organizing resources, taking calculated risks, and establishing a business to create value.

Opportunity Cost

The value of the next-best alternative sacrificed or forgone when making an economic decision.

Feasibility

The practical viability of a proposed business concept and its reasonable likelihood of succeeding given market demand, resources, costs, and operating conditions.

Cost-Benefit Analysis

An economic decision-making technique that compares the projected benefits of a business choice against its expected costs.

Payback Period

A simplified financial metric calculated as initial investment divided by periodic net benefit ($\text{Payback Period} = \text{Initial Investment} \div \text{Monthly Net Benefit}$) to determine how long it takes to recover an expenditure.

Economies of Scale

The cost advantages experienced when the average cost per unit decreases as total output increases over a relevant production range.

Logistics

The management of planning, executing, and controlling the movement, storage, and distribution of goods and related information from origin to destination.

Environmental Scanning

The systematic process of collecting, monitoring, and analyzing information about internal and external factors affecting a business's current performance and future decisions.

Industry Analysis

The process of evaluating the conditions, competitors, customers, suppliers, and trends within an industry to understand its competitive intensity and attractiveness.

SWOT Analysis

A strategic framework used to evaluate a business by examining internal Strengths and Weaknesses, as well as external Opportunities and Threats.

Strengths (SWOT)

Internal advantages, resources, capabilities, or core competencies that give a business a competitive advantage over rivals.

Weaknesses (SWOT)

Internal limitations, resource shortages, or organizational disadvantages that hinder a business from achieving its objectives.

Opportunities (SWOT)

External situations, emerging trends, or industry conditions outside a business that can be leveraged to expand, improve performance, or gain revenue.

Threats (SWOT)

External conditions, economic shifts, or competitor actions outside a business that can negatively affect sales, profitability, or operational survival.

Internal Environment

Factors within an organization—such as employees, management, physical facilities, financial resources, and operational processes—that the firm can directly control.

External Environment

Factors outside an organization—such as economic conditions, government policies, demographic trends, and competitor actions—that the firm cannot directly control.

Total Revenue ($\text{TR}$)

The total money earned from selling products or services, computed as selling price multiplied by quantity sold ($\text{TR} = P \times Q$).

Total Cost ($\text{TC}$)

The total financial expenditure incurred by a business to manufacture, operate, or provide its goods and services.

Profit

The financial gain achieved when total revenue exceeds total cost ($\text{Profit} = \text{Total Revenue} - \text{Total Cost}$).

Marginal Revenue ($\text{MR}$)

The additional revenue received from the sale of one additional unit of output.

Marginal Cost ($\text{MC}$)

The additional cost incurred by producing one additional unit of output.

Profit Maximization Condition

The economic rule stating that a firm achieves maximum total profit at the output level where marginal revenue equals marginal cost ($\text{MR} = \text{MC}$).

Porter's Five Forces

A competitive analysis framework that evaluates five market forces: rivalry among existing competitors, threat of new entrants, bargaining power of suppliers, bargaining power of buyers, and threat of substitutes.

Rivalry Among Existing Competitors

The intensity of competitive struggle and maneuvers (such as price reductions, advertising, and service upgrades) among businesses already established in the same industry.

Threat of New Entrants

The likelihood that new firms will enter an industry, which is shaped by barriers to entry such as capital requirements, permits, and brand loyalty.

Bargaining Power of Suppliers

The degree of influence suppliers hold over businesses regarding input prices, delivery schedules, and ingredient availability.

Bargaining Power of Buyers

The leverage customers have to demand lower prices, higher quality, or enhanced services due to multiple choices, transparent pricing, and low switching costs.

Threat of Substitutes

The competitive pressure stemming from different products or services outside an industry that satisfy the same fundamental customer need.

Inflation

A general and sustained increase in the prices of goods and services over time, raising operating expenses and reducing consumer purchasing power.

Interest Rates

The price or percentage paid for borrowing funds, which directly influences loan costs and capital investment decisions for facility expansion or upgrades.

Labor Cost

The cumulative expense of compensating employees, which service-oriented businesses must manage through productivity and scheduling rather than indiscriminate staffing cuts.

Tourism Demand

The willingness and ability of visitors to purchase hospitality and travel services, determined by disposable income, travel costs, seasonality, and consumer confidence.

Exchange Rate

The value of one nation's currency compared to another, affecting the purchasing power of international travelers and the domestic cost of imported supplies.

Product Differentiation

A strategic approach where a business makes its offerings distinct through unique value, local cultural elements, or bundled service packages rather than price competition alone.