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Its basic idea is that health is considered as a capitalized good
Grossman model of intertemporal consumption of choice
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It refers to the quantity of goods and services that consumers are willing to buy/ purchase at a given price, place and at a given period of time
Demand
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Factors of demand
- Price factor
- Non-price factor
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They are those that actually determine the quantity of demand or the factors that influence how much of certain goods and services people are willing and able to buy
Determinants of demand
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It is the most obvious factor that people consider in buying a certain good or service
Price factor
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Non Price Factors
- Consumers' Income
- Changes in consumers' taste and preferences
- The size of population
- Price of related goods and services
- Consumers' expectation of future prices
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It is perhaps the most important non price factor underlying demand
Consumers' Income
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These are goods or services for which quantity demand at every price increases when the income increases
Normal Goods/Services
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These are goods/ services for which quantity demand falls when income rises
Inferior goods/services
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They are among the major non price factors determining the quantity of any good demanded
Change in consumers' taste and preferences
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An increase in preference and taste will incre the demand for the particular good
Change in consumers' taste and preferences
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An increase in population means more demand for goods and services
The size of population
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The quantity demanded for any good or service is affected by changes in prices of related goods and services
Prices of related goods and services
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These are goods or services that can be used in place of other goods/services. (Increase of price in one is increase of demand in the other)
Substitute goods/services
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These are goods that go or are consumed generally together (Increase of price in one is decrease of demand in the other)
Complementary goods
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It is the relationship between the quantity of a good or service demanded and the price of that good or service
Demand schedule
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shows graphically the relationship between the quantity of a good or service demanded and its corresponding price
Demand curve
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Price- high; demand- low
Price- low; demand- high
the law of downward slopping demand
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Mathematical expression of the relationship between price and demand
Demand function
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P- increases, Qd- decreases;
P- decreases, Qd- increases
..if other factors remain constant
Law of Demand
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"other determinants remain constant"
Ceteris Paribus
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Elements of demand
- Willingness to buy
- Capacity to buy
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When the price of goods or services decreases, the consumer can afford to buy more of it or vice versa
Income effect
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Effects of law of demand
- income effect
- substitution effect
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Movement of points along a demand curve because of price
Change in Quantity demanded
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Shifting from one demand curve to another cause by all determinants except price
Change in Demand
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amount or quantity of goods and services producers are willing and able to supply at a given price, at a given period of time
Supply
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Determinants of supply
- Price factor
- Non-Price factor
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Price of input- increases, Quantity supply- decreases;
Price of input- decreses, Quantity supply- increases
Cos of input used
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represents the knowledge of how inputs can be combined to produce outputs
Technology
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Financial aids given by the government
Subsidies
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it is the relationship between the quantity of a good or service supplied and its price
Supply schedule
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graphical relationship between the quantity of a good or service supplied and its price
Supply curve
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mathematical equation of the relationship between the quantity of a good or service supplied and its price
Supply Function
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Price increses, supply increases;
Price decreases, supply decreases
Law of supply
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