economics prelim

where buyers and sellers reach an agreement, which buyers finding value and sellers covering expenses

market price

a table that shows how much of a product a household would be willing to buy at different prices.

demand schedule

happens when change in the price of a goods affects a consumer’s purchasing power that is how much they can buy with their income.

• example: price of rice

↑price - reduce purchasing power

↓price - increase purchasing power

income effect

occurs when a consumer replace a more expensive product with a cheaper alternative due to a change in relative prices.

• example: prices of beef → alternative chicken & ios (iPhone) → alternative android (cherry mobile)

substitution effect

• it is the overall impact of change in price on the quantity demanded of a good.

• it combines both the income effect and substitution effect.

• example: if the price of milk rises, people might buy less milk (price effect) because they switch to other drinks (substitution effect) and partly because they can afford less overall (income effect)

price effect

primary goal of bsp when adjusting the money supply & interest rates

1. monopoly

2. perfect competition

3. monopolistic competition

• exist when only one seller or producer controls the entire supply of a product or service and there are no close substitutes.

• because there is no competition, the firm can set the price. (consumer have no real alternatives)

• example: meralco, maynilad/manila water

monopoly

market has many buyers and sellers offering identical homogeneous products.

• example: public market (palengke)

perfect competition

• market has many sellers offering similar but not identical products.

• sellers compete through product differentiation (branding, packaging, service)

• example: fast food chains

monopolistic competition