Applied Economics

Name: Angelica Berbal

Section: Grade 12-Ayala
Week 4

WHAT’S NEW
1.A
2.A
3.C
4.B
5.C

WHAT I KNOW
1. TRUE
2.FALSE
3.TRUE
4.TRUE
5.FALSE
6.TRUE
7.TRUE
8.FALSE
9.FALSE
10.TRUE

WHAT IS IT

price elasticity of supply

elasticity supply- Supply elasticity is a measure of the

responsiveness of an industry or a producer to changes in demand
for its product. The availability of critical resources, technology
innovation, and the number of competitors producing a product or
service also are factors.

inelastic supply- Inelastic goods are often described as necessities.

A shift in price does not drastically impact consumer demand or the
overall supply of the good because it is not something people are
able or willing to go without. Examples of inelastic goods would
be water, gasoline, housing, and food.

perfectly inelastic supply- Perfect inelastic supply is when the PES

formula equals 0. That is, there is no change in quantity supplied
when the price changes. Examples include products that have limited
quantities, such as land or painting from deceased artists.
WHAT’S MORE
1.if there are 10 bottles of water and there are 20 students who
wants to drink these bottles of water, there will be only 10
students whose demands are met while the others will not
Answer:
Yes, as you have noticed there will be a shortage of supply, the
demand is much higher than the supply, as you can see the supply is
very low,  there  are only about 10 bottles of water while there are
about 20 students who want to drink the bottled water. Clearly, that
there will be a shortage of 10 bottles, you need to supply another 10
bottles to cater your remaining demand of 10 students. This is more
about understanding the law of supply and demand. In this case, the
demand is higher than a supply, immediately, price will increase. Why
because the supply is low.

2.If price of canned good in the grocery store increases by 8%

and thequantity demanded decreases by 12%, what is price
elasticity of demand? Is it elastic, inelastic or unitary elastic?

Shown the Analysis.

Let’s say original: x

Then x (1+8%) (1-12%)
=x 1.08 *0.88
=0.9506x <x
80 unitary elastic

3.If a 4% increase in price of 1 pack of bread leads to an increase

in the quantity supplied of 8% describe the price elasticity.

Price elasticity.

Q = 8%
P 4% =2

Analysis of price elastticity: if price increasing 1 unit. Quality supply

will increasing 2 units.

We can calculate the price elasticity

= 8%
4% =2
WHAT’S MORE

1. Suppose the price of ethyl alcohol rises by 20 %. As a result,

the demand for substitute hand soap rises by 10 %.

A. B +0.5
B. Less than 1
C. Substitute

A. 10% ÷ 20% =0.5

B. The price elasticity is less than 1
C. For the XED is positive. So its substitute good

2. If a 20% decrease in the price of international calls lead to a

35% increase in the quantity of calls demanded, we can
conclude that the demand for phone calls is.

Answer: 1.75
PED = % change in Qd÷ % change in price
PED =35%÷20%
= 1.75
therefore it is elastic demand.

ASSESSMENT
1. demand curve
2. law of supply
3. Unitary elasticity
4. The income effect
5. A normal good 
6. Inelastic

WHAT I CAN DO

ELASTIC GOODS INELASTIC GOODS

Cerial Gas
Soft Drinks Post secondary education
Clothing cigarettes
Cars electricity
Electronics Life saving medication

WHAT OTHER ENRICHMENT ACTIVITIES CAN I ENGAGE IN

(ADDITIONAL ACTIVITIES)

To find the elasticity of demand, we need to divide the percentage change in

quantity by the percentage change in price. a) Solution
% Change in Quantity = (40 - 50)/(50) = -0.20 = -20%
% Change in Price = (6.00 - 4.00)/(4.00) = 0.50 = 50%
Elasticity = |(-20%)/(50%)| = |-0.4| = 0.4

Answer: The elasticity of demand is 0.4

b) Elastic
WHAT I HAVE LEARNED

Applied economics is the application of economic theory to determine

the likely outcomes associated with various possible courses of
action in the real world. By better understanding the likely
consequences of choices made by individuals, businesses, and
policy makers, we can help them make better choices.

WHAT I CAN DO (ASSESSMENT)

1. TRUE
2. TRUE
3. FALSE
4.TRUE
5. TRUE
6.FALSE
7.TRUE
8.FALSE
9.TRUE
10.FALSE

D. REFLECTION

The budget items that are included in the basic family budgets are:
housing, food, child care, transportation, health care, other
necessities, and taxes
family budgets for a modest standard of living have seven
components: housing, food, child care, transportation, health care,
other necessities such as clothing and entertainment, and taxes. The
EPI notes that expenses rise as family size increases.