-it is a place where buyers and sellers meet to

exchange goods & services.

-it is considered as the fundamental concept of
supply and demand.
-the backbone of economy
 Demand refers to how much (quantity) of a
product or service is desired by buyers. The quantity
demanded is the amount of a product people are
willing to buy at a certain price; the relationship
between price and quantity demanded is known as
the demand relationship.

Supply represents how much the market can

offer. The quantity supplied refers to the amount of a
certain good producers are willing to supply when
receiving a certain price.
 - a scheduled of the willingness and capacity of a
consumer to buy a commodity at alternative prices at a given
point in time other things held constant.

-it illustrates the relationship between quantity

demand and the price of the commodity.

-a visual representation of how many units of a goods

or service will be bought at each possible price.

a higher price, the less quantity demand

The capacity to purchase on the other hand is
influenced by the income of the consumer.

-A higher level of income will give him

higher capacity to consume

-A lower income will give him limited

purchasing power
 The demand for a good or service may also be
influenced by prices of other good and services.
 If you believe that the price of gasoline will increase
tomorrow, there is a tendency for consumers to increase their
consumption today.
 Taste or preference is another important factor that
may influence the demand for a commodity.

*Cultural Values
 The size and characteristic of a market can
also influence the demand for a commodity.
Substitution effect describes the decision of a
consumer to substitute an expensive goods with
cheaper goods when there is a price change.

Income effect refers to the modification of the

consumption of a commodity due to the change in
the purchasing power of the consumer resulting from
a price change.
 the more you consume a good or use a service, the less
satisfied you will be with each successive use or consumption.
 -is defined as a schedule showing a direct or
positive relationship between the price of a
commodity and level of output that the seller is
willing to supply at a given point in time other things
help constant.

-shows how much sellers will supply at different

prices

a higher price , a greater quantity supplied

 The production of any commodity will require
the use of two major inputs:
-Intermediate Inputs
-Factor Inputs
 Business establishments are required to pay a number
of taxes to various levels of government.
 The manner in which various factor inputs process the raw
materials is done through the use of technology. Some firms may use
labor-intensive technology if the cost of labor is relatively cheap. On the
other hand, firms may use capital-intensive technology if wages are
very high.
 The expectation or anticipation on what is going
to happen on the price of the commodity can also
influence the amount supplied in the market.
 Desire to get higher
profit

Law of diminishing marginal

productivity
Increasing one variable while keeping other
the same
pizza restaurant wants to
improve profits
 but pizza has an optimal level of
cheese. Eventually, if the restaurant
keeps adding more, sales will decline as
the products quality suffers
(Movement along a supply curve and shift in supply
curve)
Movement along a supply
Shift in supply curve