Nikki Jean P.
Florague
BSA-2
1. What is market?
A market is a place where buyers and sellers come together to exchange goods and services.
It can also refer to the overall demand for goods and services within a particular industry or
sector of the economy. Markets can take many forms, from physical locations like a
traditional marketplace or shopping mall to virtual spaces like online marketplaces and
trading platforms.
2. Define demand. Give 3 factors or determinants of demand.
Demand can be defined as the quantity of a product or service that consumers are willing
and able to purchase at a particular price during a specific period. There are several factors or
determinants that can influence the level of demand for a product or service.
Three key factors or determinants of demand include:
1. Price of the product itself: Generally, as the price of a product decreases, the quantity
demanded increases. This is known as the law of demand. Consumers are more likely to
buy a product if it is priced lower, as it becomes more affordable and attractive.
2. Consumer income: When consumers have more disposable income, they are more likely
to spend on goods and services, leading to an increase in demand. On the other hand, if
consumer income decreases, their purchasing power may be reduced, causing a decrease
in demand for certain products.
3. Consumer preferences and tastes: If a product becomes more popular or trendy,
demand for that product is likely to increase. Alternatively, if consumer preferences shift
towards healthier or more sustainable products, demand for traditional or less
environmentally-friendly products may decline.
3. Define supply. Give 3 factors or determinants of supply.
Supply is defined as the amount of a good or service that producers are willing and able to
offer for sale at a given price in a given time period. It is influenced by a variety of factors,
known as determinants of supply, that can impact the quantity of goods or services a
producer is willing to provide in the market.
Three key factors or determinants of supply include:
1. Cost of production: The cost of producing a good or service directly affects the supply
of that product. If the cost of raw materials, labor, or other inputs increases, producers
may be less willing to supply a product at a given price, as it becomes less profitable to
do so. On the other hand, if production costs decrease, producers may be willing to
supply more of a product, as it becomes more profitable.
2. Technology: Technological advancements can also impact supply by influencing the
efficiency and productivity of production processes. Improved technology can lower
production costs, increase output, and ultimately lead to an increase in supply.
Conversely, outdated or inefficient technology can hinder production and limit supply.
3. Expectations of future prices: Producers’ expectations about future prices can also
influence their current supply decisions. If producers anticipate that prices will rise in the
future, they may choose to withhold supply from the market in the present in order to sell
at a higher price later. Conversely, if producers expect prices to fall, they may increase
supply in the present to sell before prices decrease.
4. Describe and explain the law of demand and supply.
The law of demand and supply is a fundamental concept in economics that explains the
relationship between the price of a product and the quantity of that product that consumers
are willing to buy, as well as the quantity that producers are willing to sell.
According to the law of demand, as the price of a product decreases, the quantity demanded
by consumers increases, and vice versa. This is because consumers generally want to buy
more of a product when the price is lower, and less of it when the price is higher. This
relationship is usually depicted on a graph as a downward-sloping demand curve.
On the other hand, the law of supply states that as the price of a product increases, the
quantity supplied by producers also increases, and as the price decreases, the quantity
supplied decreases. This is because producers are more willing to produce and sell a product
at a higher price, as they can make more profit per unit sold. This relationship is typically
shown on a graph as an upward-sloping supply curve.
The interaction of these two laws in a market determines the equilibrium price and quantity
of a product. When the demand for a product exceeds its supply, prices tend to rise,
encouraging producers to increase production. Conversely, when supply exceeds demand,
prices tend to fall, leading to a decrease in production.
Overall, the law of demand and supply helps to explain how prices are determined in a
market economy and how changes in price can influence consumer behavior and producer
decisions. It is a vital concept for understanding the dynamics of markets and how they
function.
