Chapter 1

Assessment:

1. List down at least three (3) items you have bought for yourself in the last 2 months. How much did
you spend on them? Were you satisfied with your purchases? What other things could you have bought
with the same amount of money?
- The last item I bought for myself was a meal, which cost almost a hundred fifty pesos and some cents.
What else could I have bought with five bucks and change? Hmmm. Two gallons of gas, which I didn’t
buy because my tank was still nearly full. Or a gallon of milk and a loaf of bread, which I didn’t buy
because I don’t currently have a way to store the milk. Or a toy for my dogs, which I didn’t buy because
they have toys already. There’s not a lot, honestly, that you can still get for less than six bucks. But I
spent it on a meal for myself because at that particular point and time a meal is what I needed most.

2.SCARCITY Cause and Effect

Listed below are some problems regarding scarcity of resources. For each problem (cause), list the
economic effects of such scarcity.
Water Scarcity in South Africa

- It is likely that the water crisis will have a short- to medium-term impact on the national economy.
Western Cape accounts for 13.3 per cent of national GDP. The province contributes about 21 per cent of
South Africa's agricultural output, and accounts for 45-60 per cent of agricultural exports.
Scarcity of Money Resources in the Government

- Scarcity leads governments to make the best economic decisions. Scarcity forces the government to
allocate the factors of production. Scarcity exists because people have unlimited wants and limited
resources. … Scarcity exists because people have unlimited wants and limited resources.
Scarcity of COVID-19 Vaccines in the Philippines

- Delays in vaccine administration require compensatory increases in the remaining policy levers to
maintain a minimal number of infections. For example, delaying the vaccines by 180 days (6 months) will
result in an 18\% increase in the cost of the optimal strategy.
After listing down the cause and effects of scarcity in the different situations cited above, evaluate the
economic effects of scarcity whether they are relative or absolute and why.
- They are absolute. The scarcity of resources may lead to widespread problems such as famine, drought
and even war. These problems occur when essential goods become scarce due to several factors,
including the exploitation of natural resources or poor planning by government economists.

3. If you were to decide for our country, how will you manage the government’s resources amid the
COVID-19 pandemic and why so? Explain.
- Preventive measures include physical or social distancing, quarantining, ventilation of indoor spaces,
covering coughs and sneezes, hand washing, and keeping unwashed hands away from the face. The use
of face masks or coverings has been recommended in public settings to minimise the risk of
transmissions.

4. When talking about the choices we make, do you agree that ignoring what is sacrificed to get one
thing that we want is a common mistake? Why or why not? Explain in detail.

- One of the most important aspects of life is 'decision making', and for every choices involves making
the right decision. Every choice that we had decided on doing can impact our lives either in a good or in
a bad way, it helps shapes us to identify who we are to ourselves and to other people

Chapter 2

Assessment:
1. Explain the link between scarcity of time or money.

- Time and money are currencies. The way you spend your time is much more valuable than the way you
spend your money, because time is a limited resource. You can always get more money, but you can't
get more time. Money is a man-made resource, so the scarcity of money is also man-made.
2. Why is it critical to acknowledge that there is no such thing as free medical care, free housing, or free
bridges (“there is no charge to cross it”) from the perspective of society?

- Economists are fond of saying that there is no such thing as a free lunch. This catchy phrase expresses
the idea that opportunity costs are incurred when choices are made. Perhaps this is an obvious point,
but consider how often people mistakenly assume there is a free lunch. For example, some parents
think education is free because they do not pay tuition for their children to attend public elementary
school. Sorry, but there is no such thing as a free lunch. Free implies no sacrifice, no opportunities
forfeited, which is not true in regard to elementary school education. Resources that could be used for
other things are used to provide elementary school education. Consider the people who speak about
free medical care, free housing, free bridges ( there is no charge to cross it ), and free parks. None of
these are actually free. The resources that provide medical care, housing, bridges, and parks could have
been used in other ways

Chapter 3

Assessment:

1. Rice is in short supply in some parts of the country, while there is a surplus in others. Why do various
regions have shortages and surpluses at the same time?

- There is a shortage of rice in some regions in the Philippines, and a surplus occurs in some other
regions. Why do shortages and surpluses exist at the same time in different regions?

Transportation costs are one reason. For example, a lot more Rice is grown in the outlying provinces
than is consumed there. Near the major cities cost of living is higher so Rice is not a profitable crop for
the farmers there. Because if this the more densely populated provinces consume many more times the
amount of rice that is grown in them. That means these provinces must buy their rice elsewhere and
ship it in. Because of the cost of transporting the rice cuts into the profitability rice buyers look for the
lowest prices to purchase large amounts of rice. The smaller growers in the province don't produce
enough volume individually to make it worthwhile to buy from them because the buyer would have to
visit dozens of remote locations to buy what he can from a single commercial grower. It is cheaper and
more expedient to deal strictly with large growers and co-ops (groups of farmers who sell their produce
together as a single entity).

Add to that the damage done to certain regions by seasonal storms that make their ability to provide a
specific quota and it becomes even less profitable to buy rice from those areas.

Now finally realize that by claiming a shortage in an area prices can be driven up without complaint from
the customers because they believe there isn't enough to go around. That drives the final decision NOT
to buy from the small farmers with a surplus. The rice merchants can easily recover any losses from
selling less rice by simply charging more, and even increase their profits that way.
2. Explain why the number of word processors and other computer software applications available on
the market increases from year to year using supply and demand concepts.

- The quantity or amount of a product or service that a supplier or seller is willing or ready to supply or
sell at a particular price or value in a particular time is known as supply. It generally means making the
product or service available to the consumers in the market.The quantity of word processing software
exchanged increases from one year to the next because of the enhancement of technology

Chapter 4

Assessment:

a) Assume the government decides to set a Php 50 per kilo pricing ceiling. Explain how the imposition of
this price ceiling has an impact on the data presented above.
- It will incure changes in prices and can be a reason for inflation.

b) For what reasons would the government impose the price ceiling?
- Government imposes a price ceiling to control the maximum prices that can be charged by suppliers
for the commodity. This is done to make commodities affordable to the general public.

c) Assume the government decides to set a Php 70 per kilo price floor. Explain how the establishment of
this price floor impacts the data in the previous section.
- When a price floor is set above the equilibrium price, quantity supplied will exceed quantity
demanded, and excess supply or surpluses will result. When government laws regulate prices instead of
letting market forces determine prices, it is known as price control.

d) For what reasons would the government impose the price floor?

- Governments use price floors to keep certain prices from going too low.

Chapter 5

Assessment:

1. According to a layperson, a planned government project should not be undertaken if its expenses
exceed 10 billion pesos. What differences might an economist's assessment of a proposed government
initiative have?
- Large public projects have both costs and benefits. While the costs can be obvious at times, it can be
hard to pin down the exact benefits that will be derived from a project. This is why every project
requires a thorough analysis.

2. Take a look at a hotel room that is empty. At 11 p.m., someone requests a room. How much should
the hotel bill? The hotel management refers to the typical rate for that room and refuses to accept any
offer that is less than that rate. What advice would you give the hotel manager?

- There is no one set factor for determining how much a hotel room will cost. Rather, hotel pricing is
determined by any combination of the following factors: location, seasonality, demand, star rating,
amenities, value of services and other hotel competition. It's the classic supply and demand.

Chapter 6

Assessment:

A. True or False.

True 1. The consumption line is upward sloping from the point of origin

True .2. Cross elasticity of demand can be positive or negative

True 3. A decrease in price may benefit the seller if demand is elastic

False 4. An increase in price may benefit the seller if demand is highly elastic
True 5. If demand is unitary elastic, neither an increase nor decrease in price will affect the seller’s total
revenues

False 6. Complementary goods are used together

False 7. Inferior goods are purchased more at higher income levels

True 8. The more substitutes there are for a good the more elastic the demand for it becomes

True 9. Superior goods are products that gain importance as income increases

False 10. If the income elasticity of demand is greater than one, the good is an inferior good

Chapter 7

Assessment:

1. The existence of external costs is not in itself a sufficient reason for government intervention in the
production of detergents. Why not?
- Government intervention is necessary to help ” price ” negative externalities. ... Graphically, social
costs will be lower than private costs because they do not take into account the additional costs of
negative externalities. As a result, firms may produce more units than is optimal from a societal
standpoint.

2. The existence of external benefits is not in itself a sufficient reason for government intervention in the
market for chicken pox vaccination. Why not?
- To help control prices and avoid negative externalities.

3. Logging, the activity or business of cutting trees for lumber, has both private and external costs and
benefits. What are the specific monetary and non-monetary costs and benefits (private and external) of
logging?
- Management restores health to forests in several ways. Logging opens up the ecosystem for new plant
growth. Removal of litter reduces the intensity of future fires by decreasing the fuel load so that
devastating crown fires that kill all plant life in their path can be avoided.

Monetary cost that which it costs a consumer, other than money, to buy a product; the non-monetary
price of purchasing a product includes the time devoted to shopping for it and the risk taken that it will
deliver the expected benefits