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*highly developed
* less developed
National Income- defined as
a measure of the money
value of the total flow of
goods and services produced
in a economy over a specified
period of time.
Factors causing variations in National
Income
1. population
2. investments
3. saving
4. consumptions
Investment- process of
spending an amount with the
end view of getting a profit.
GNP GDP
Production is Production is
within the within the
Philippines by Philippines by
Filipinos Filipinos
Production is Production is
outside the within the
Philippines by
Philippines by
GDP – Expenditure Approach
It involves calculating the sum of all the
expenditures incurred in the production of
final goods.
GDP=W + I + P + R
Given
W = P200
I = P20
P =P15
R=150
Elasticity is a measure of
how much buyers and
sellers respond to the
changes in market
conditions
The Elasticity of Demand
Consumers usually buy more of a
good when the prices are lower,
when their incomes are higher,
when the prices of the
substitutes for the good are
higher, or when the prices of the
complements of the good are
lower.
The Price Elasticity of Demand and Its
Determinants
The law of demand states that a
fall in the price of a good raises
the quantity demanded.
The price elasticity of demand
measures how much the
quantity demanded responds to
a change in price.
Demand for a good is said to
be elastic if the quantity
demanded responds
substantially to changes in
price. Demand is said to be
inelastic if the quantity
demanded responds only
slightly to changes in price.
The price elasticity of
demand for any good
measures how willing
consumers are to buy less of a
good as its price rises. Thus,
the elasticity reflects the
many economic, social, and
psychological forces that
Inelastic is an economic term
referring to the static quantity of a
good or service when its price
changes. Inelastic means that when
the price goes up, consumer’s
buying habits stay about the same,
and when the price goes down ,
consumers’ buying habits also
remain unchanged.
Elastic is a term used in
economics to describe a
change in the behavior of
buyers and sellers in
response to a price change
for a good or service
Three general rules that determines
the price elasticity of demand.
1. Availability of close
substitutes
* the more substitutes, the more elastic the
demand will be
Demand is:
< 1 Inelastic
> 1 Elastic
= 1 Unit Elastic
= 0 Perfectly Inelastic
Costs of Production
Identify the costs at Mr. A’s Cookie
Factory
TC=FC + VC