1.Consumer Surplus is a in specific terms, consumer surplus is the difference of the total amount that we
are willing and able to pay and the total amount actually paid for the good or services. Example, I am
willing to buy a bag for 1000 but when I went to department store the bag's price is one 800. The
difference is the consumer's surplus
2.Marginal Utility is additional satisfaction that an individual derives from consuming an extra unit of
good or services. Total Utility is the total satisfaction that a consumer derives from the consumption of a
good and services from a given time and period. This implies that each extra unit consume add less
marginal utility than the previous unit as we satiated with the goods or service we are consuming.
3. Because they are the one who demand, purchase goods and services from the firm for
purposes of consumption and consumer is one of the factors that create competition among the
businesses in the market.
4. Floor Price legal minimum price imposed by the government. This is more resorted in order
to prevent bigger loss on the part of producers. Price ceiling maximum price imposed by the
government. Utilized by the government if there is a persistent shortage of goods.
5. Classification of Demand Elasticity
a. Price elasticity – responsiveness of consumer demand
b. Income elasticity – of demand is the responsiveness of consumers demand to a change in
their income.
c. Gross elasticity - responsiveness of demand for a certain good and relation in price of other
related good
NEW QUESTIONDue 29 Oct 1. Kindly explain the meaning of Consumer Surplus. Give an
illustrative example. 2. Differentiate Marginal Utility from Total Utility and explain why it is
an important concept of utility. 3. Why is Consumer said to be the King in a capitalist or free
market .Explain your answer. 4. Discuss briefly the different types of Price Control and when
it is imposed by the government. Explain your answer. 5. Enumerate and explain the
classification of Demand Elasticity according to the factors that causes the change. Open
Law of Supply – states that if the price of good or services goes up, the quantity supplied for
such good or service will also go up. If the rice goes down the quantity supplied also goes down.
Supply Schedule –listing the various prices of a product and the specific quantity supplied at
each of its prices. HYPOTHETICALSUPPLY SCHEDULE FOR CORN PER MONTH. Situation Price
Quantity/Kilogram A 5 When the price 5, Quantity supplied is 48 B 4 When the price 4,
Quantity supplied is 41 C 3 When the price 3, Quantity supplied is 30 D 2 When the price 2,
Quantity supplied is 17 E 1 When the price 1, Quantity supplied is 5 FORCES THAT CAUSE THE
SUPPLY TO CHANGE: 1. Optimization in the use of factors of production: land, labor, capital,
entrepreneurship. The use of factors of prod . An efficient use of resources in the business
parlant. Use all the factors in an efficient manner. 2. Technological change The intro of cost
reducing innovation and prod technology increases time. 3. Future Expectation 4. Number of
Sellers 5. Weather Condition 6. Government Policy - also affect he supply. Removing quotas and
tariffs boost import. Quota – number of product to be imported. Tariffs is a tax to be paid for
the imported product. The meeting of supply and demand result to market equilibrium or what
we referred to as state of balance. Equilibrium - generally pertains to a balance that exist when
quantity demanded equals quantity supplied or it is a general agreement of the buyer and
seller at a particular price and at a particular quantity. Equilibrium market price - is the price
agreed by the seller to offer its goods or service or sales and for the buyer to Specifically it is
the price at which quantity demanded of the good is exactly equal to the quantity supplied.
Market Disequilibrium – if there is market equilibrium, this can result to: 1. Surplus – a
condition in the market where the quantity supplied is more than the quantity demanded. If
there is a surplus the tendency of the seller to lower the price. “Its better to dispose the good
but the lower price where your loss is less rather than exposing your goods where your loss is
great” 2. Shortage – a condition in the market in which quantity demanded is higher than
supplied. When the market is experiencing shortage there is a possibility of consumers being
accused while the producers are enjoying higher prices for their own interest. SURPLUS AND
SHORTAGE IS NOT GOOD SO WHAT IS THE REMEDY? If market equilibrium persists now its
time for the government to intervene by imposing price control. price control.- is the
specification by the government of minimum and or maximum prices of goods and services. 2
TYPES OF PRICE CONTROL 1. FLOOR PRICE– legal minimum price imposed by the government.
This is more resorted in order to prevent bigger loss on the part of producers. 2. PRICE
CEILING – maximum price imposed by the government. Utilized by the government if there is a
persistent shortage of goods. QUANTITATIVE DEMAND ANALYSIS or the concept of elasticity.
Elasticity of demand – it is the ratio of the percentage change in one variable or the percentage
change in another variable. In short, elasticity means responsiveness. Demand Elasticity in
particular – is a measure of the degree of responsiveness of quantity demanded of a prod to a
given change in one of the independent variable which affects demand for the product. We can
classify demand elasticity according to factors that causes the change: 1. Price elasticity –
responsiveness of consumer demand 2. Income elasticity – of demand is the responsiveness of
consumers demand to a change in their income. If the income is less, people have to adapt to
their income which is to buy in less quantity. PRICE ELASTICITY OF DEMAND Is the
responsiveness of consumers demand to change in price of the goods sold. 3. Gross elasticity responsiveness of demand for a certain good and relation in price of other related good. HOW
TO GET ELASTICITY DEMAND: ED = quantity demanded over price Demand for a product is
said to be inelastic if consumer would pay almost any price for any product. “Walang
pagbabago” On the other hand, demand for the prod maybe elastic if consumer will only pay a
certain price or a narrow range of prices for the product. In ELASTIC DEMAND means, the
producer and seller can raise prices without much hurting demand for each product.
INELASTIC DEMAND means that consumer are sensitive to the price at which prod is sold and
will only buy it if the price rises from what they consider not too much. WHAT DETERMINE
ELASTICITY? 1. Ease of Substitution – if many substitute product in the market….. pinaka main
factor that affect elasticity is price but other than that is itong 4 2. Proportion of Total
Expenditures – spent for the product - if the expenditure for the product is very high, the price
increases then the elasticity is also high. 3. Durability of the product which may include:
possibility of postponing purchase, possibility of prepare, used product market and then; lent
of time period. “Kapag ang product is durable the tendency to buy a new one is postponed.” 4.
Lent of time period. Sa demand ang actor/actresses are buyer or consumer Sa supply ang actor
or actresses ay yung seller or producer SUPPLY ELASTICITY refers to the reaction or response
of the seller or producer to pricing supply change goods sold. It a measure of the degree of
responsiveness of supply to a given change in price. Moreover, it is the percentage change in
quantity supplied given a percentage change in price EoS = delta quantity supplied delta price
If a change in price result in more than proportionate change in quantity supplied than supply
then that is price elastic. Conversely, if a change in price produces less than proportionate
change in the quantity supplied than supply is called price inelastic. WHAT DETERMINE
SUPPLY ELASTICITY? 1. Time – is a determinant of supply elasticity as producer respond to
changes in prices from time to time given a certain period. Some producer change the number
of supply of their commodities depending on the movement of prices. 2. Time Horizon Involved
with which production could be increased – the degree of responsiveness in the supply change
in price is affected by time horizon involved in the production process. In eco 1 there is SHORT
RUN GROWTH/PRODUCTION LONG RUN GROWTH/PRODUCTION SHORT RUN – the prod only
for a period no less than a year. Supply can be increase or decrease and demand bar price by
working firm existing plant used more extensively but is usually add only marginally to total
market supply. And usually, the supply is inelastic. LONG RUN- firms able to enlarge their
supply capacities by building additional plant and extending existing one so that supply
condition in the long run tend to be more elastic or changeable.
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CONSUMER – one who demand, purchase goods and services from the firm for purposes of
consumption. 2 IMPORTANT FATOR IN CHARACTERIZING CONSUMER BEHAVIOR: 1.
Consumer Opportunity – it represents the possible good s and services consumer can afford to
consume. 1. Consumer Preferences – determine which of these goods will be consumed.
CONSUMER SOVEREIGNTY – the power to determine what goods to produce since the
consumer are the ultimate purchase of good and services. GOODS – refer to anything that
provides satisfaction to the needs, wants and desire of the consumer. We call it as tangible
goods – an economic product that contribute directly (Final goods) or indirectly (intermediate
goods) to the satisfaction of human needs and wants. SERVICES – any intangible economic
activity such as catering, insurance, banking, telecommunications, hairdressing, parlor, etc that
likewise contribute directly or indirectly to the satisfaction of human needs and wants.
CLASSIFICATION TANGIBLE GOODS: 1. Consumer Goods – goods that yield satisfaction directly
to any consumer. Ex. Food, clothing 2. Essential or Necessity Goods – are goods that satisfy the
basic needs of man. Goods that are necessary in our daily existence as human being. These are
also the goods that we cannot live without. Ex. Food, water, clothing, electricity, medicine 3.
Luxury Goods – those which men may do without but which are used to contribute to his
comfort and well-being. Ex. Jewelries, car 4. Economic Goods – both useful and scarce, it has
value attached to it and a price to be paid for its use. Ex. Water from the faucet 5. Free Goods –
if a good is so abundant that there is enough of it to satisfy everyone’s need without paying for
it. Ex. Sunlight, air TASTE AND PREFERENCES - are determined by age, income, gender,
occupation, custom and tradition as well as culture. - Some are simple others are extravagant
BRAND – are name/term or symbol given to a product by a supplier in order to distinguished
its offering from that of similar product supplied by competitors. Ex. Vans, apple MASLOW
HIERARCHY OF NEEDS - Identify the basic priorities of every consumer according from the
lowest to the highest PHYSIOLOGICAL NEEDS - SAFETY NEEDS – free of danger and a fee of
losing one’s work, property. LOVE AND BELONGING NEEDS – or social needs. This covers value
of the sense of belongingness, love, care, acceptance and understanding of family, relatives and
friends, to be accepted by others. ESTEEM NEEDS – explain the importance of self-esteem,
recognition, status of an individual. Ex. Power SELF-ACTUALIZATION NEED – explain the work
of a person, self-development, growth and realization, achievement according to Maslow this is
the highest need. Sometimes this cannot be realized because of unsatisfiable needs and wants.
HOW COSUMER CAN ABLE TO ATTEND MAXIMUM LEVEL OF SATISFACTION WHEN
CONSUMING GOODS AND SERVICES? 1. Utility – the satisfaction or pleasure that an individual
or consumer gets from the consumption of goods and services that he/she purchase. For
purposes of economic analysis, utility is also measured by how much a consumer is willing to
pay for a good or service. 2 CONCEPTS OF UTILITY: 1. Marginal Utility – additional satisfaction
that an individual derive from consuming an extra unit of good or services. Marginal means
additional or extra In economic, we use marginal analysis in the examination of the effect of
adding an extra eco unit from variables. 2. Total Utility – is the total satisfaction that a
consumer derives from the consumption of a good ans services from a given time and period.
Total utility usually increases as we consume more and more of a good or service but generally
the increase is at lower or declining rate. This implies that each extra unit consume add less
marginal utility than the previous unit as we satiated with the goods or service we are
consuming. Ex. HYPOTHETICAL UTILITY SCHEDULE FOR SIOPAO UNIT PURCHASE TOTAL
UTILITY MARGINAL UTILITY 1 40 40 2 90 50 3 170 80 4 270 100 5 350 80 The Hypothetical
Utility Schedule shows that when the unit purchased increases the total utility also increases.
Total Utility and Marginal Utility are in the opposite because Marginal Utility diminishes.
DIMINISHING…… CONSUMER SURPLUS – is a measure of the welfare we gain from the
consumption of goods and services or a measure of the benefit that we derive from the
exchange of goods. In specific terms, consumer surplus is the difference of the total amount
that we are willing and able to pay and the total amount actually paid for the good or services.
Ex. Marie Liz went to the department store, she saw a very beautiful dress and she wanted to
buy it. She don’t know the price but she is willing to pay for it for 3,000. When she asks the
saleslady the price was 2,500. 500 is the consumer surplus.