I woke up early in the morning to prepare my breakfast because the people working to repair our kitchen arrived very early. I am a bit exhausted because I finished watching anime on Netflix, 4 am, so I just slept 3 and half hours that day, still thankful because I have a class at that specific time. I waited for only 15 minutes and started to enter our virtual class. Our session started and our classmates started to report their topic and it went very well because their style of reporting is very creative and entertaining so it wakes me up to be attentive in class. It serves as my introduction about micro-economics. I really enjoy their presentation because it is catchy and the presenter is really energetic, but for me it still lacks information, they are able to explain some terms but not all. Their presentation is very creative but it compromises the content. They are able to give the definition but they are lacking in terms of explanation and example. All in all their presentation is good because of their creativity and they give me some insights about what we should study in Microeconomics.
Micro economics talks about how the purchasing power of the consumer affects the supply and demand of the product. Product is explained in 2 forms: it can be a need or want. If the product is definitely a necessity, the consumer really needs it in order to survive. If it is considered wants it is affected by the desire of the customer to buy that product. Consumers are the one who change the demand of the product that can affect the supply. If the demand is very high it will have a shortage in supply which can affect the price of the product. For example, in summer the demand on water consumption is very high because in this season temperature rises. This demand of water supply will have a shortage in supply that causes a high price. That is the relationship between the supply and demand relative into price.
Purchasing decisions of the consumer rely on the income they have. If the cost of living will get higher and higher because of inflation it will also affects the purchasing decision of the consumer. In our country there are lots of working on minimum wage. If the price of the product became high they will tend to have shortage in budget they will tend to buy more of necessities rather than they want, because they lack on financial aspect. This will results to low amount of sales in terms of gadgets, shoes, bracelets and lots of products that the consumer desire. These will results to change in demands. Like what happen in the global community because of the pandemic. Almost lots of store has been close, to stop the virus from spreading. People have focus buying necessities to survive. The unemployment rate became high because lots of businessmen closed their stores. And because of the delay in the deliveries of basic commodities, the distribution of supplies are delayed also that results to delayed on selling goods and services in the market. Some of us blame the government on what happens in our economy, but it is a matter of surviving the economy or the survival of the people. The session end with a question about investment what are we going to choose, between car and a house as investment. For me I would choose to invest first in a house because it appreciates. Its value will increase overtime. While the car value depreciates, its value will decrease, but I will still invest in a car because it makes me comfortable while travelling and it is less hassle than commuting. I will make it clearer I will first invest in a house before investing in a car.
In that presentation I realized how powerful the income of every customer is in terms of changes in demand of the product. The purchasing power of an individual is bound to the amount of their income, because it serves as the source of funding for every consumer. They explained why the income dictates the demand of the product, one example on that video is that the two siblings tend to buy food but they have to choose from a pricey one which is Starbucks or the cheap one which is Mc do. At first they choose MC Do, then immediately when they have more money they choose Starbucks. That's the power of an income to dictate the demand of the product. But it does not apply when it comes to inelastic demand, because the demand of the product stays the same whether the prices increase or not. This happens when the product is supplied only in a specific company therefore they have no other choices just to buy the product. The example they have given is the Jeepney driver. The jeepney driver reacts to the high price of the gasoline, but still he is tempted to buy because there is no alternative product to use. The elastic demand of the product explains using the figure of the mother. He finds an alternative rather than buying pricey diapers. She has a choice whether to buy a pricey diaper or buy an affordable one.
The next chapter is also discussing in an entertaining way using Tiktok. They explain how the consumers are taking risks. Whether they choose one product over another they will not know if it is useful until the result comes out. This shows how the risk also plays a part in controlling the demand. The result of the risk that has been made by the consumer will reflect the demand of the product. If the consumer is satisfied it is more likely to create a high demand, if he’s not it will result in low demand of the product. There are 3 types of risk takers, first is the Risk averse. There are people who don't take risks because they are afraid to lose something, they mostly rely on what’s favouring them. The Risk Neutral, they didn’t care when to take risk or the result of taking risk. Sometimes they just take the risk because they have nothing to do. And last is Risk loving, they always take risk even though it will have a small possibility of success. Production technology is how the amount of input is converted into the amount of output. It is mostly applicable to a firm that has quite a low amount of capital, they should focus on computing the cost of labour and the materials needed. Then you can generate a great income on your own. This concept of having the amount of input converted into output is relatively similar to how the income of the consumer affects the change of demand. This shows that the demand of the product depends on the purchasing power of the consumer, and the purchasing power of the consumer varies on the income itself.
They are able to discuss what perfect competition is all about, and how this competition affects the demand of the market. In this type of competition considered as healthy competition, it's like selling in a Public market where there are lots of businesses gathering around selling lots of goods with the same brand and same type of goods. Where they are not the one who controls the pricing system of their products. They are following the SRP or Suggested Retail Price given by the government. That the price of the product will be raised not much higher to their Purchase price to have a fair income and maintain the competitiveness in the market by maintaining the demand of the product. I really love how they maintain the entertainment and knowledge at the same time. This presentation also tackles the different types of cost that has been made by the business man. We all know that investing is really necessary in the business world. We must know where to liquidate all of our capital in order to make it useful and generate income. If we don’t allocate our money very well we can create a Sunk cost. This cost is all about the expense that cannot be replaced. For example we buy a machine for cleaning a car, but then you realize you don’t need it in your company, your sunk cost is the amount of the machine. Next cost is opportunity costs; it is a type of cost that happens because you didn’t grab the opportunity. That's why it is called opportunity cost. There are also fixed costs. The amount of the payment is not changing. There is also variable and amortization cost, it is kinda like her love, changing overtime.
I really like the idea of consumer and producer Surplus. I think it is the reason why the concept of markup, break even is created. The excess amount of product that the customer is enjoying “because the price of the product is less than what the consumer expected” is called consumer surplus. This is the reason why there are many products being sold at a low price to increase their demand. They do it to force selling a bunch of products. It is the concept focusing on increasing the demand using low prices. While the producer surplus, they are pricing their product as high as expected compared the expected price relative to the quality of the product. They are focused on increasing the price while decreasing the demand of a certain product. They both aim to increase the generating income of the business entity, they just differ in priorities. The consumer surplus focuses on increasing the demand, Producer surplus focuses on increasing the price, which both lead to the increase of income of the company.
They explain the factors affecting the market structure due to imperfect competition. There are 3 market structures, the Monopoly, Monopsony, and Oligopoly. Monopoly occurs when just one business has market power. Because they are the exclusive source of such products, power entails the capacity to regulate the prices of those items. Because they are the only seller of certain items, they have higher demand because there are no replacements. Meralco is a leading distributor of electricity and has the monopoly power to these power plants. This means they can dictate and influence the seller of the goods to set the price for them. The difference of this to Monopsony is that instead of sellers, the buyers are the one who has the power to control the market. Because of the purchasing power of the consumers, they have the capability to dictate prices.
Pricing discrimination occurs when companies charge different rates to various types of customers for the same items. Firms use this in order to capitalize on the elasticity of customer demand and generate a higher profit. Pricing discrimination may appear unjust to certain customers; nevertheless, it is not unlawful, and companies must justify why they charge different rates for their goods. This type of market structure has few vendors in an oligopolistic market. Despite the fact that competition is restricted, companies retain market power to control the pricing of their goods since there are only a limited number of providers for the needs. The price fixing process must be linked with the competition and must adhere to Nash Equilibrium. All tactics used by companies should be consistent with the plans of their rivals.
