MAN. ECON. DISCUSSION APRIL 28, 2022
(Rice
UNIT 1
ECONOMICS- Unang naiisip ay shortage, pag kulang we
need to allocate kaya may allocation.
Resources – mapagkukunan.
Richard Leftwich – isang famous economic authors.
- “Ang economics daw ay sumasaklaw sa social
relationship ng mga tao. Human beings hindi kasama dito
ang hayop. Social organization involve what we call
allocation of resources among alternative human wants
ang using thos resources wisely.
SAAN NAGMULA ANG SCARCITY?
- Sabi ni Paul Samuelson – it is the study on how society
use scarce resources. Pag sinabi mong economics dapat
alam ng tao kung paano gamitin yung kulang.
1. Economics is also a study on how people make a living.
Origin ng human wants ay survival.
2. It is Dictated by culture- may mga wants tayo nan aka
depende saan tayo lumaki. EX. Sa probinsya yung mga
pagkain don na wala sa city.
2 BRANCHES OF ECONOMICS
MICRO – where talking to specific people. It deals with
the problems and analysis of human behavior. When we
talk about consumers, we are referring to a household.
When we talk about sellers, we are referring to the firm.
Analysis of the owner of production and the firm.
MACRO – Deals with the problems of the whole
economy. So when we talk about aggregate it is the
summation of the economic performance and how
economics sectors or units behave and interrelated.
International trades. Gross Domestic Products.
HUMAN WANTS - the goods and services needed by a
human being.
Goods and Services – are those that yields satisfaction.
Pag sinabing goods lahat ng yan nagbibigay ng satisfaction
sayo.
CLASSIFICATION OF GOODS
Consumer Goods – it gives you direct satisfaction. Ex.
Nauuhaw ka uminom ka.
Luxury Goods- that contribute to your carrefour and well-
being. But you may live even without it.
Capital Goods- goods used to produce other goods.
cooker, frying pan, money)
Essential Goods- it’s a matter of life and death. Without
it you may die. (Food, clothing and shelter)
Scarcity – pag may nakikita nagiging impulsive.
CHARACTERISTICS OF HUMAN WANTS
1. Unlimited – hindi nauubos
2. Varied –
3. Insatiable – impossible to satisfy. Always wanting
more.
ORIGIN OF HUMAN WANTS
1. Survival – kailangan mo mabuhay.
2. Dictated by culture- may mga tao na hindi mabuhay
ng walang radio, o nangsasangla, taya sa weteng.
3. It is generated by activity necessary to satisfy other
wants.
GENESIS 1 – it talks about the creation or the beginning of
the world.
Genesis 2 – the creation of man and woman in the person
of adam and eve. (
Ang nagging kasalanan ay natukso at kinain ang forbidden
fruit.
Genesis 3 – Hinanap ni God si Adam. Nagtago si Adam.
Mahalaga ito sa economics dahil ito ang katuturan ang
biblical implication kung saan nagmula ang scarcity.
Sa lahat ng nilikhang hayop ng diyos sinumpa niya ang
ahas. Ang tao at ang ahas simual noon magkaaway na.
(sumpa, dito lumabas ang scarcity) Genesis 3:14 - So
the Lord God said to the serpent, “Because you have
done this,
“Cursed are you above all livestock
    and all wild animals!
You will crawl on your belly
    and you will eat dust
    all the days of your life.
GENESIS 3:19 – By the sweat of your face you shall eat
bread, till you return to the ground, for out of it you were
taken; for you are dust, and to dust you shall return.”
-Paghihirapan na antin ang lahat ng ating kakainin. Yun
ang minana kay eve at adam.
Ano ang resources?
Noon sa panahon nila eve ay libre lahat.Pag free
resources ay abundant nakukuha lang natin kung saan
saan. Because of their sin nagging economic resources na.
Economic resources– may price. Kaya ang micro-eco ang
other term ay price choice. Everything has aprice tag.
CLASSIFICATIONS OF RESOURCES
1. LAND – it pertains to all natural resources not man-
made.
2. Labor – two types of this is white collar job and blue-
collar job. Meron tayong tinatawag na menat at physical
labor. Pag professional- white collar job.
3. CAPITAL – is anything use to produce other goods and
services.
4. Entrepreneurship- refers to the skills of people who
are willing to risk their time and money to run a business.
CHARACTERITICS OF RESOURCES
1. LIMITED
2. VERSATILE – NAGBABAGO O NAGIIBA IBA
3. It can be combined in varying proportion to produce
goods and services – ang resources cinocombined mo.
Kung gustng ng madami, damihan. Kung konti, konti.
FEASIBILITY STUDY:
1. WHAT TO PRODUCE
2. HOW TO PRODUCE? HOW MUCH?
3. FOR WHOM TO PRODUCE? Sino target buyers o
consumers.
WHAT IS AN ECONOMIC SYSTEM?
-Pag system it is structure. It is the economic structure of
a given economy.
PHIL IS FREE ECONOMY
TYPES OF ECONOMY – dito nakabase kung pwede tayong
mag negosyo o hindi.
1. Traditional Economy – is basically is a subsistent
economy. Ibig sabihin you plant what u eat.
(MAGBUBUKID O NANGINGISDA)
2. COMMAND ECONOMY – where the leader dictates
what to produce, how to produce, for whom to produce.
Halos same ng communism.
3. Mixed Economy – combination of traditional and
command economy.
4. Pure Market Economy - NO government involvement in
economic decisions. Private firms account for all
production.
-Consumers decide WHAT should be produced. They do
this through the purchases they make.
-Businesses determine HOW the products will be
produced. They must be competitive.
-WHO buys the products? The people with the most
money are able to buy more goods and services.
MODELS OF ECONOMIC SYSTEM
1. Capitalism – features private ownership of businesses
and marketplace competition.
-It is the same as a free enterprise system.
-The political system most frequently associated with
capitalism is democracy.
2. Socialism – The main goal of socialism is to keep prices
low for all people and to provide employment for many.
-The government runs key industries, generally in
telecommunications, mining, transportation, and banking.
-Socialist countries tend to have more social services.
3. Communism – Have a totalitarian form of government;
this means that the government runs everything and
makes all decisions.
-Theoretically, there is no unemployment in communist
countries.
-The government decides the type of schooling people
will receive and also tells them where to live.
TOOLS OF ECONMIC
LOGIC -it refers to a reasoning and drawing of conclusion.
Mathematics
Statistics
ASS: Simplified modern of private enterprise or what we
call economic system. Yung relationship ng consumer at
business firm/.
-Ang private enterprise ay simpleng model where the
household is the ones who supplies the resources to the
business firm. The firm converts these resources into finish goods and services. Then bibilhin na naman siya ng household.

PAYMETNTS

-FACTORS OF PRODUCTION-LAND

-LAND – RENT

-LABOR – WAGES

-CAPITAL- INTEREST

-ENTREPRENEURSGIP – INTEREST

ADAMS SMITH – founder of economics.

David Ricardo – CONTRIBUTE LAW OF COMPARATIVE ADVANTAGE

Alfred Martial – founder ng micro economics

 John Maynard Keynes - founder ng macro economics

Unit 2 – DEMAND, SUPPLY AND MARKET EQUILIBRIUM

OVERVIEW:
In a market economy or a capitalist economy, the interaction of demand and supply of goods and services determine the
price of good and services. This unit will explain the law of demand and supply and determination of price.

LEARNING OUTCOME: After the completion of this unit, the students will be able to:

1. To define the theories of demand and supply.

2. To solve simple demand and supply equation.
3. To identify the conditions affecting the demand and supply of goods in the market.
4. To analyze and solve simple case study problems,
5. To determine the validity of theories in the past in relation to the current situation.

COURSE MATERIAL:
The Coca Leaves Production

“What does Mother’s Day flowers have to do with cocaine? Very little, most people would think. But as an economist, I
often explain to my students that the world is economically connected, often in strange ways. The flower business is one of
those strange economic connections.
Mother’s Day, which this year falls on May 10, is typically big for the American floral industry, which depends on it for
over a quarter of all holiday flower sales. It’s especially important to flower vendors this year as the coronavirus has
ravaged the industry, affecting both supply and demand. About a third of cut flowers purchased in the U.S. come from
California, while the rest are imported. About 80% of those come from Colombia or Ecuador. The story of how both
countries became such an important source of flowers for the U.S. can be traced back to the U.S. war on drugs.
In the late 2000s, the U.S. and Colombian government were looking for new ways to stem the flow of cocaine into the
U.S. Part of the strategy involved law enforcement: increasing interdictions to stop drugs before they crossed the border
and ramping up arrests of people selling drugs in the U.S.
Another part of this strategy, however, was to convince farmers in Colombia to stop growing coca leaves, a traditional
Andean plant that provides the raw ingredient for making cocaine, by giving them preferential access to U.S. markets if
they grow something else. The goal of the program was to give these subsistence farmers a legal crop that would be
roughly as profitable as growing coca leaves - whether flowers, honey or coffee. This is formally called crop substitution.
In theory, by cutting back the supply of coca leaves, the price of the key raw material in cocaine rises. This cost increase
is passed along the supply chain, raising the price of cocaine at every point. Why is raising the price of cocaine important? A
basic idea in economics is the “law of demand,” which says the higher the price of a product the less people buy, holding
everything else constant. Pushing up the price of cocaine should reduce the amount Americans consume.

Not just Colombia but also Ecuador, Bolivia and Peru – all coca-producing countries – get dutyfree access to U.S. markets in
exchange for clamping down on illegal drugs, under the Andean Trade Promotion and Drug Eradication Act.

Has crop substitution worked?

Well, not to eradicate the cocaine market. Only last year Colombia had a record coca crop, and the street price of
cocaine hasn’t budged. There are complicated reasons for this, including the persistence of U.S. demand for drugs,
regardless of source, the ingenuity of drug trafficking organizations, and the cultural significance of coca leaf in the Andean
region.

But this failed U.S. drug policy did lead to a surge in cut flower exports to the U.S. from both Colombia and Ecuador.
Colombia exported US$800 million worth of flowers to the U.S. in 2019, up from $350 million in 2000. Ecuador’s exports
tripled from $90 million in 2000 to $270 million in 2019. As a result of the increased supply, flower prices in the U.S. rose
less than average inflation. (Please click bit.ly/33Ua71O)

The students may group themselves into 5 and discuss among themselves the effect of huge demand for Coca leaves in
the life of the people. Find who are the people behind it and why the government had stick in this far product.

LEARNING ACTIVITY:

1. The students may group themselves into 5 and discuss among themselves the effect of huge demand for Coca
leaves in the life of the people. Find who are the people behind it and why the government has not stop the sale
of this product despite the on-going war.
2. Make a positon paper about this material which may be submitted in two weeks time. By watching the video below

The student may watch the video and write a position paper about this topic.

REFERENCES:
Understanding Economics by Payumo,
bit.ly/33Ua71O
ME https://youtu.be/FJzdrdVOfW0ASUREMENT:

Lesson 4 - Demand Market and its Determinants

Display the Slide 1 and discuss the coverage of the discussion for a week. Tell the class that the discussion for the week will focus on
the concept of demand economics. Here is the Circular Flow of Economy

Fig. 4.1

Ask the class to share their understanding on the concept of circular flow of sconomy based on their research
assignment from last week. Call on at least 3 students to answer. Display Slide 2 and discuss the definition of the circular
flow model. Refer to the information below for explanation.

Circular Flow of Economy Model – refers to a visual model of the economy that shows how money flows through
the markets among households and firms.

Explain to the class that in this model, there are two kinds of decision makers – households and firms. Explain to the
class that in this model. Display slide 3 and discuss the following:

• Firms – are the ones that produce goods and services using inputs, such as labor, land and capital. These
inputs are called the factors of production. Furthermore, the following are the definition of the factors of
production.
1. Labor - refers to the human input into the production process. Each individual has a different level
of skills, qualities and qualifications. This is known as the human capital.
2. Land - refers to the natural resources on the planet. It includes space on the ground, hills, seas,
oceans, etc.
3. Capital – refers to the man –made physical goods that are used to produce other goods and
services. It includes tools such as machines, computers etc.
• Households - refers to the ones who own the factors of production and consume all the goods and
services that firms produce.
 Furthermore, discuss to the class that households and firms interact in two types of markets Display Slide 4 and discuss
the following:

• Market for goods and services - households are buyers and firms are sellers. In particular, households buy
the output of goods and services that firms produce.

Market for the factors of production – households are sellers and firms are buyers. In these markets, household provide
firmss the inputs that the firms use to produce goods and services.

The circular flow diagram is a simple way of organizing all the economic transactions that occur between
hoseholds and firms in the economy.

The Circular Flow – this diagram is a schematic is a schematic representation of the organization of the
economy. Decisions are made by households and firms. Households and firms interact in markets for goods and
services and in the markets for factors of production. The outer set of arrows shows the flow of money, and the
inner set of arrows shows the flow of money, and the inner set of arrows show the flow of goods and services.

The Inner loop of the circular flow diagram - represents the flow of goods and services between households
and firms. The households sell the use of their labor, land and capital to the firms in the markets for the factors of
production. The firms then use these factors to produce goods and services, which in turn are sold to households
in the markets for goods and services. Hence, the factors of production flow from households to firms, and the
goods and services from firms to households.

The outer loop of the circular flow diagram – represents the corresponding flow of money. The households
spend money to buy goods and services from the firms. The firms use some of the revenue from these sales to pay
for the factors of production, such as the wages of their workers. What’s left is the profit of the firm owners, who
themselves are members of the households. Hence, spending on goods and services flows from households to
firm, and income in the form of wages, rent and profit flows from the firms to households.

Afterwards, explain to the students that the circular flow of economy above is only a simple model of the economy.
There are more complex circular flow model that includes the roles of the government and international trade. Yet
these details are not crucial for basic understanding of how the economy is organized.

Demand and Supply are two words that an economist use most often and for good reasons.
The two refers to the behavior of the people as they interact with one another in markets. Indeed, the law of supply
and demand is the core of economics. First the next slide will elaborate on the definition of market as the arena from
which demand and supply works its functions in the economy.

Market – is a group of buyers and sellers of a

particular good or service. The buyer as a group
determine the demand for the product and the
sellers as a group determine the supply of the
product. It is a place where buyers and sellers
interact together.

Demand refers to the quantity of a product or service that the buyer is willing and able to purchase at various possible
prices at any given time. Emphasize to the class that demand is the amount of a good that buyers are willing and able to
purchase. Ask then the students what factor/s s/he will consider before buying his/her desired item. Expect that the
students might give answers such as the price, or the quality or the amount of money that s/he have.
 Display the next slide, and explain to the class that these factors are known as the determinants of demand.

The Determinants of Demand

A. Price
• Price of good - refers to how much is the wanted product or service

B. Non-price
• Income of the buyer - this determinant answers the question, “for whom?”
• Population or number of buyers - the number of buyers has a direct effect on the quantity of goods and
services being purchased.
• Tastes and Preferences – this is influence mostly by advertisements.
• Prices of related goods o Substitute products - these refers to goods that directly compete with the good
based on the opinion of the buyer. For instance, orange juice can be a substitute to apple juice.
o Complementary products - use of the good based on the opinion of the buyer. For instance, MP3
players and headsets are complements as the use of the first product will also require the use of the
second product.

• Future expectations - a person’s expectations about the future may affect her demand for a good or service
today.
Ceteris Paribus of demand - refers to the Latin phrase which literally means, “all other things being equal.”
Economist use the term ceteris paribus to signify that all the relevant variables are held constant, except for the
price. Afterwards, show the next slide to the class to show the Demand schedule

The Demand Function, Demand Schedule and Demand Curve

Display the slide on the Law of Demand which shows the inverse relationship between price and quantity which
can be illustrated in three different ways through a demand function, demand schedule and a demand curve.

Demand function is expressed in term of mathematical equation Qd = 80-4P this shows that the slope of
coefficient of the price is -4 which means that for every peso increase in price quantity demanded decreases by
4 units. The constant term 80 is the maximum quantity the market can absorb, and that is when the price is free or
has a zero price.

Demand schedule is a list or table that shows the inverse relation between price and quantity demanded, all
other things constant.

Figure 4.2

The table shows that as price goes up from P10 to P15, quantity demanded decreases from 40 to 20 units.
 Demand curve is a locus of points that shows the inverse relation between price and quantity demanded, all
other things constant.

Figure 4.3 Demand Curve

Change in Quantity Demanded versus Change in Demand

A. Change in Quantity Demanded (ΔD)

 Display this slide to show that “a change in quantity demanded” occurs when there is a change in the price of
the good itself all other things constant.

Figure 4.4
Demand Curve showing the change in Price

 The above figure shows that increasing the price from 10 to 15 results to a decrease in quantity demanded as
shown by point A to point B. A change in quantity demanded is reflected by movement from one point to
another point along a given demand curve and this movement is due to a change in price of the good itself.

B. Change in Demand
 Display another slide to show that “a change in demand” occurs whenever any of the other determinants of
supply changes. An increase in demand is represented by either a shift from D1 to D2 (increase) or a shift from
D2 to d1 (decrease).
 Fig. 4.5

The illustration above shows a shift of the demand curve from D1 to D2 (increase) or D2 to D1 (which means
decrease in the demand). The students must examine closely the effect of every determinant in the market.

LEARNING ACTIVITY:

To do a seatwork by plotting the Demand and Supply Schedule in one (1) piece of graphing paper. (Display the slide)

(See answer on page 24, Introduction to Microeconomics by Mutya)

MEASUREMENT:

A thirty (20) point analysis quiz via Google Form.

Lesson 5 – Supply, Firm and its Determinants

From the assignment of the students, ask at least two students to give the meaning of the law of supply. Afterwards,
display Slide and discuss the following:

Law of supply – states that, the higher the price, the larger the quantity supplied and all other things held constant
(ceteris paribus).
 Supply shows the different quantities of commodities which producers are willing and able to produce and make
available for sale in the market at each specific price in a set of various prices during some specified time period. This
means that the higher the price, the higher the quantity supplied. Producers supply more at a higher price because it will
mean higher revenue.

Supply Function, Supply Schedule and Supply Curve

Supply function is expressed in term of mathematical equation
Qs = -10 + 5P shows the coefficient or the slope of the price is 5 and a constant term -10. The coefficient is
interpreted that for every peso increase in price, quantity supplied will increase by 5 units while the constant term -10
implies that if price is zero, no one will ever supply the good and is tantamount that no one will supply if price is below P2.

Supply Schedule below shows various combination of prices and quantity supplied by the firm. It also shows that at
higher prices the firm is inspired to supply more.

Fig 2.6

Fig. 5.1

Supply curve as shown in the Display slide, has an upward slope to the right reflecting that as price increases the
quantity supplied also increases.

Fig. 5.2

Explain to the students that the dots along the line shows the proportional increase in quantity as the price of
good increase successively.

The Determinants of Supply (This will be presented by the next slide)

A. Price Determinant
 • Resource price - has an inverse relation to supply. It is characterized with high payment for land, labor, capital
and entrepreneur which discourages seller’s hence there will be a decrease in supply.
C. Non- Price Determinant
• Technology - has a direct relationship to supply because an improved technology encourages producers
creating increase in the supply of goods.
• The price of related goods or price of competing products - it has an inverse relation to supply. Palay and corn
to farmers are competing products, so if the price of Palay increases farmers will plant Palay rather than corn
to take advantage of higher Palay price.
• Firm’s expectations about future prices – it has an inverse relation to supply. If the price of rice is expected to
increase, traders tend to hoard, hence, there will be a decrease in supply.
• Number of suppliers – has a direct relation to supply. The more the number of sellers, the higher the supply.
• Taxes and subsidy - has a direct relation to supply, respectively. Subsidy - has an inverse and direct relation to
supply respectively.

• Calamities - has a direct negative effect once typhoon, flooding and earthquake affect the supply of goods.

Change in Quantity Supplied versus Change in Supply

C. Change in Quantity Supplied (ΔS)

 Display this slide to show that “a change in quantity supplied” occurs when there is a change in the price of the
good itself all other things constant.

Fig. 5.3

 The above figure shows that increasing the price from 5 to 10 from point A to point B increases quantity
supplied from 15 to 40 units. A change in quantity supplied is reflected by movement from one point to
another point along a given supply curve and this movement is due to a change in price of the good itself.

D. Change in Quantity Supply

• Display another slide to show that “a change in supply” occurs whenever any of the other determinants of
supply changes. An increase in supply is represented by a shift of the supply curve to the right. Alternatively, a
decrease in supply is represented by a shift of the supply curve to the left.

Increase in Supply Decrease in Supply

 Fig. 5.4

• The illustration above shows a shift to the right of the supply curve, S1 to S2, represents an increase in supply,
while a shift to the left, S1 to S2, represents a decrease in supply.

LEARNING ACTIVITY:

For your homework study Unit 2 - Demand and Supply. Do the hypothetical analysis on the statements below. Be
ready with answers for discussion on the following week.

REFERENCES:

Payumo, page 35-51. Understanding Economics, 2014

Paraiso. Larano and Cuevas, page 15-25. Introduction to Microeconomics, 2011

Lesson 6 - Market Equilibrium and Demand Supply Equation

COURSE MATERIAL:

The students has to understand that demand and supply interact freely. Supply is represented by producers or sellers,
while demand is represented by buyers or consumers. The law of supply describes that producers are willing and able to
offer more goods at higher prices while the law of supply describes that the buyers or consumers are willing and able to
buy at lower prices. Clearly, it shows that there is a conflict between the two parties. One favors high price while the
Other favors low price.

Display the slide, and explain that demand and supply should eventually be analyzed as one since the market operates
within the forces of both demand and supply. Combining the demand and supply curves will show the point of market
equilibrium. The equilibrium is attained at the point when demand is equal to supply.
 Fig 6.1
The Equilibrium Equation:

On this slide, the students will learn to combine their demand and supply analysis as
Qd = Qs Solution:
Qd = 80-4P Qs = -10 + 5P
-4P- 5P = - 80 - 10
-9P = -90
P = -90/-9
P = 10
Is the price of P10 really the equilibrium price? Let the student substitute the price of P10.00 on the demand and
supply function.
Therefore:
80 - 4(10) = -10 + 5 (10)
80 - 40 = -10 + 50
40 = 40

Then we can conclude that Pe = 10 and Qe = 40 units

This means that any price above P10 will result to surplus in the market while any price below P10 will result to
shortage.
Violations of the Law of Supply and Demand

A common way of attempting to go against the law is the use of price controls, where price ceilings are set by the
government normally on basic goods. Basically some of the commodities from which price ceilings were set included
laundry soap, milk, poultry, rice, chicken and pork.

LEARNING ACTIVITY:

1. Research on price control and price flow

2. Seatwork on equation, copy the equation on the slide and answer in 20 minutes.

MEASUREMENT:

A short quiz on equilibrium equation with time limit will be given on-line with under time pressure A solution will be
submitted using a cam photo shot and will be uploaded in the group page.

UNIT 3 - THE THEORY OF CONSUMER BEHAVIOR

OVERVIEW:
This approach will make use of the concept of marginal utility or what we call additional satisfaction in
explaining the behavior of consumer’s demand. The students will be enlightened why an individual or a group of
people have different taste and preferences which must be satisfied per unit of consumption of a good. The
definition of words described here implies that utility or satisfaction can be measured. The satisfaction obtained or
acquired from successive units of a given commodity and from various commodities can be ranked and
compared.

LEARNING OUTCOME: After the completion of this unit, the students will be able to:

1. Identify the foundation of consumer behavior.

2. To differentiate utility from marginal utility
3. To analyze hypothetical data base on consumer satisfaction.

LEARNING MATERIAL:

1. Cultural Factors

Cultural factors exert the broadest and deepest influence on consumer behavior. The marketer needs to
understand the role played by the buyer’s culture, subculture, and social class.

a. Culture
Culture is the most basic cause of a person’s wants and behavior. Human behavior is largely
learned. Growing up in a society, a child learns basic values, perceptions, wants, and behaviors from the family
and other important institutions. A person normally learns or is exposed to the following values: achievement
and success, activity and involvement, efficiency and practicality, progress, material comfort, individualism,
freedom, humanitarianism, youthfulness, and fitness and health.

Every group or society has a culture, and cultural influences on buying behavior may vary greatly from
country to country. Failure to adjust to these differences can result in ineffective marketing or embarrassing
mistakes. For example, business representatives of a U.S. community trying to market itself in Taiwan found
this out the hard way. Seeking more foreign trade, they arrived in Taiwan bearing gifts of green baseball caps.
It turned out that the trip was scheduled a month before Taiwan elections, and that green was the color of the
political opposition party. Worse yet, the visitors learned after the fact that according to Taiwan culture, a man
wears green to signify that his wife has been unfaithful. The head of the community delegation later noted, “I
don’t know whatever happened to those green hats, but the trip gave us an understanding of the extreme  
differences in our cultures.” International marketers must understand the culture in each international market
and adapt their marketing strategies accordingly.

b. Subculture
 Each culture contains smaller subcultures or groups of people with shared value systems based on
common life experiences and situations. Subcultures include nationalities, religions, racial groups, and
geographic regions. Many subcultures make up important market segments, and marketers often design
products and marketing programs tailored to their needs. Here are examples of four such important subculture
groups.

c. Social Class
Almost every society has some form of social class structure. Social Classes are society’s relatively
permanent and ordered divisions whose members share similar values, interests, and behaviors. Social class is
not determined by a single factor, such as income, but is measured as a combination of occupation, income,
education, wealth, and other variables. In some social systems, members of different classes are reared for
certain roles and cannot change their social positions. Marketers are interested in social class because people
within a given social class tend to exhibit similar buying behavior. Social classes show distinct product and
brand preferences in areas such as clothing, home furnishings, leisure activity, and automobiles.

2. Social Factors
A consumer’s behavior also is influenced by social factors, such as the consumer’s small groups, family, and
social roles and status.

a. Groups
Many small groups influence a person’s behavior. Groups that have a direct influence and to which a
person belongs are called membership groups. In contrast, reference groups serve as direct (faceto- face) or
indirect points of comparison or reference in forming a person’s attitudes or behavior. Reference groups to
which they do not belong often influence people. Marketers try to identify the reference groups of their target
markets. Reference groups expose a person to new behaviors and lifestyles, influence the person’s attitudes
and self-concept, and create pressures to conform that may affect the person’s product and brand choices.

The importance of group influence varies across products and brands. It tends to be strongest when the
product is visible to others whom the buyer respects. Manufacturers of products and brands subjected to strong
group influence must figure out how to reach opinion leaders—people within a reference group who, because
of special skills, knowledge, personality, or other characteristics, exert influence on others.

b. Family
Family members can strongly influence buyer behavior. The family is the most important consumer buying
organization in society, and it has been researched extensively. Marketers are interested in the roles and
influence of the husband, wife, and children on the purchase of different products and services. Husband-wife
involvement varies widely by product category and by stage in the buying process. Buying roles change with
evolving consumer lifestyles Children may also have a strong influence on family buying decisions. For
example, it ran ads to woo these “back-seat consumers” in Sports Illustrated for Kids, which attracts mostly 8- to
14- year-old boys. “We’re kidding ourselves when we think kids aren’t aware of brands,” says Venture’s brand
manager, adding that even she was surprised at how often parents told her that kids played a tie-breaking role
in deciding which car to buy. In the case of expensive products and services, husbands and wives often make
joint decisions.

c. Roles and Status

A person belongs to many groups-family, clubs, organizations. The person’s position in
each group can be defined in terms of both role and status. A role consists of the activities people are
expected to perform according to the persons around them.

3. Personal Factors

A buyer’s decisions also are influenced by personal characteristics such as the buyer’s age and lifecycle stage,
occupation, economic situation, lifestyle, and personality and self-concept.

a. Age and Life-Cycle Stage

 People change the goods and services they buy over their lifetimes. Tastes in food, clothes, furniture, and
recreation are often age related. Buying is also shaped by the stage of the family life cycle—the stages through
which families might pass as they mature over time. Marketers often define their target markets in terms of life-cycle
stage and develop appropriate products and marketing plans for each stage. Traditional family life-cycle stages
include young singles and married couples with children.

b. Occupation
A person’s occupation affects the goods and services bought. Blue-collar workers tend to buy more rugged
work clothes, whereas white-collar workers buy more business suits. Marketers try to identify the occupational
groups that have an above-average interest in their products and services.

A company can even specialize in making products needed by a given occupational group. Thus, computer
software companies will design different products for brand managers, accountants, engineers, lawyers, and
doctors.

c. Economic Situation
A person’s economic situation will affect product choice. Marketers of income-sensitive goods watch trends
in personal income, savings, and interest rates. If economic indicators point to a recession, marketers can take
steps to redesign, reposition, and reprice their products closely.

d. Lifestyle
People coming from the same subculture, social class, and occupation may have quite different lifestyles.
Life style is a person’s pattern of living as expressed in his or her psychographics. It involves measuring
consumers’ major AIO dimensions—activities (work, hobbies, shopping, sports, social events), interests (food,
fashion, family, recreation), and opinions (about themselves, social issues, business, products). Lifestyle
captures something

e. Personality and Self-Concept

Each person’s distinct personality influences his or her buying behavior. Personality refers to the unique
psychological characteristics that lead to relatively consistent and lasting responses to one’s own environment.
Personality is usually described in terms of traits such as self-confidence, dominance, sociability, autonomy,
defensiveness, adaptability, and aggressiveness. Personality can be useful in analyzing consumer behavior for
certain product or brand choices. For example, coffee marketers have discovered that heavy coffee drinkers
tend to be high on sociability. Thus, to attract customers, Starbucks and other coffeehouses create
environments in which people can relax and socialize over a cup of steaming coffee.

4. Psychological Factors

A person’s buying choices are further influenced by four major psychological factors: motivation, perception,
learning, and beliefs and attitudes.

a. Motivation
A person has many needs at any given time. Some are biological, arising from states of tension such as
hunger, thirst, or discomfort. Others are psychological, arising from the need for recognition, esteem, or belonging.
Most of these needs will not be strong enough to motivate the person to act at a given point in time. A need
becomes a motive when it is aroused to a sufficient level of intensity. A motive (or drive) is a need that is
sufficiently pressing to direct the person to seek satisfaction. Psychologists have developed theories of human
motivation. Two of the most popular—the theories of Sigmund Freud and Abraham Maslow—have quite different
meanings for consumer analysis and marketing.

b. Maslow’s Theory of Motivation

Abraham Maslow sought to explain why people are driven by particular needs at particular times. Why does
one person spend much time and energy on personal safety and another on gaining the esteem of others?
Maslow’s answer is that human needs are arranged in a hierarchy, from the most pressing to the least pressing.
Maslow’s hierarchy of needs is shown in Figure. In order of importance, they are physiological needs, safety
needs, social needs, esteem needs, and self-actualization needs. A person tries to satisfy the most important
need first. When that need is satisfied, it will stop being a motivator and the person will then try to satisfy the next
most important need. For example, starving people (physiological need) will not take an interest in the latest
happenings in the art world (self-actualization needs), nor in how they are seen or esteemed by others (social or
esteem needs), nor even in whether they are breathing clean air (safety needs). But as each important need is
satisfied, the next most important need will come into play.

c. Perception
A motivated person is ready to act. How the person acts is influenced by his or her own perception of the
situation. All of us learn by the flow of information through our five senses: sight, hearing, smell, touch, and taste.
However, each of us receives, organizes, and interprets this sensory information in an individual way. Perception
is the process by which people select, organize, and interpret information to form a meaningful picture of the
world.

d. Learning
When people act, they learn. Learning describes changes in an individual’s behavior arising from experience.
Learning theorists say that most human behavior is learned. Learning occurs through the interplay of drives,
stimuli, cues, responses, and reinforcement.

e. Beliefs and Attitudes

Through doing and learning, people acquire beliefs and attitudes. These, in turn, influence their buying
behavior. A belief is a descriptive thought that a person has about something. Buying behavior differs greatly for a
tube of toothpaste, a tennis racket, an expensive camera, and a new car. More complex decisions usually involve
more buying participants and more buyer deliberation. Figure shows types of consumer buying behavior based on
the degree of buyer involvement and the degree of differences among brands.

The students has to understand that using a demographic profile in conducting research is important to determine
the taste and preferences of every consumer.

REFERENCES:
Introductory Microeconomics, Third Edition by Pagoso, Dinio & Villasis, 2006

LEARNING ACTIVITY:
To create an individual portfolio of goods consumed for this quarter and upload in your google drive not later than
midnight of May 25, 2021.
MEASUREMENT:
Quiz on Optimum Combination Analysis

REFERENCES:
Click https://bit.ly/3lHqW6X (Impulse Buying)
Click https://bit.ly/2QHGut4 (Satisfaction)
Introductory Microeconomics by Pagoso
Introduction to Microeconomics by Mutya

Lesson 7 – Utility and Behavioral Factors

What is Utility?
Utility refers to the degree of satisfaction per unit of consumption of a good. It is a technical term for
satisfaction. Basically, there are two theories regarding consumer behavior namely, the cardinal utility theory and
the ordinal utility theory.
The Cardinal Utility Theory is a theory which states that utility is measurable. However, Utils is the unit of
measurement for satisfaction. Note this example below
Table 4.1

Tell the students to plot the data inside the table and find out the sha[e of the curve, Analyze the points base
on the barrio.
Formula: MU = ΔTU/ΔQ
where: MU - Marginal Utility
TU - Total Utility
Q - Quantity

The Ordinal Utility Theory is also known as the Indifference Theory which states that utility is not measurable
but can only be rnked or compared.
Utils is the unit of measurement for satisfaction
The Law of Diminishing Marginal Utility
The law states that as one consumes more and more of a particular good, additional or extra satisfaction
decreases. According to Payumo,a fiipino author, this is more of a psychological particular good

Lesson 8 – The Indifference Curve, Budget Line and Optimum Combination

COURSE MATERIAL:

The Indifference Curve

The Indifference curve shows different combinations of two goods that can be consumed that yield the same
level of satisfaction or utility. A series of indifference curve is called an indifference map.
Characteristics of indifference curves:
1. More goods are preferrable to fewer goods; this points to upper right preferred points in lower left of utility
curve diagram.
2. More goods are substitutable; hence, utility curves slope downward to the right.
3. Diminishing marginal rate of substitution between goods implies utility curves always convex to the origin.
4. Indifference curve are everywhere dense, i.e. one through every point.
5. Indifference curves cannot cross because if they did, then individual would not be following a rational
ordering.

Fig. 7.1

Budget Line
A budget line is a locus of points that shows different combinations of two goods that can be purcahsed given
the same money income or budget. In constructing a budget line , one has to determine the price of good x (Px)
and price of y (Py), and of course, with the corresponding budget (B).
Example: Px = 10,Py = 20 and Budget (B) = 200
Budget = Px Qx + Py Qy
200 = 10 Qx + 20 Qy
Given Px = 10, Py = 20 and Budget (B) = 200. The combination of good X and
Y that can be purchased is determined by the above equation, otherwise known
as a Budget Function.
 Table 7.1

Display slide to describe line AE as the given budget line. If the consumer spends all of his income on
Good Y, he could purchase 10 units. This is point A. If all income is spent on Good X, he could purchase
20 units of that good. This is point E. By joining both points, we can now draw the budget line AE.

Fig. 7.2

Any point like F and G which are to the right of the budget line represent unattainable combinations that
require more than P200 budget, while at any point to the left of the budget line like point K, the consumer spends
less than 200. All combinations on the budget line are maximum and attainable or can be purchased with the
given budget.

LEARNING ACTIVITY/HOMEWORK:
Case Study: International Convergence of Taste

MEASUREMENT:
Quiz via Google Form

REFERENCES:
Introductory Microeconomics, Third Edition by Pagoso, Dinio & Villasis, 2006

Unit 4 - The Theory of Production

OVERVIEW
Production theory is the study of production, or the economic process of producing outputs from the inputs
used. Production uses resources to create a good or service that are suitable for use or exchange in a market
economy. This can include manufacturing, storing, shipping, and packaging. Some economists define production
broadly as all economic activity other than consumption. They see every commercial activity other than the final
purchase as some form of production.
Production is a process, and as such it occurs through time and space. Because it is a flow concept,
production is measured as a “rate of output per period of time”. There are three aspects to productions
processes:
1. The quantity of the good or service produced.
2. The form of the good or service created.
3. The temporal and spatial distribution of the good or service produced.
A production process can be defined as any activity that increases the similarity between the patter of demand
for goods and services, and the quantity, form, shape, size, length and distribution of these goods and services
available to the market place.

LEARNING OUTCOME: After the completion of this unit, the students will be able to:

1. Differentiate Fixed and Variable Inputs and their value to the firm.
2. Apply the Law of Diminishing Return principle in actual firm case analysis.
3. To compute and plot total input and total product output

COURSE MATERIAL:
 Watch a documentary of General Motors

 A print soft copy of General Motors Case Study, with questions to be answered as part of the student’s
assignment

General Motors Case Study Analysis

MEASUREMENT:

Twenty (20) points Multiple Choice Quiz

REFERENCES:

https://www.khanacademy.org/economics-finance-domain/ap-microeconomics/production-cost-and-the-perfect-
competition-

Lesson 9 - The Production Function and Stages of Production

Display slide, to define few words such as:
Production is the creation of goods and services using the inputs of production.

Production Function is the physical relationship between inputs and outputs of goods and services

Inputs of production refers to the factors of production which include land, labor, capital and entrepreneurship.
Inputs are classified as follows:

 Fixed inputs - they are those that remain constant regardless of the volume or quantity of production.
This means that whether you produce or not, the factors of production is unchanged. Ex. Land,
building

 Variable inputs - these are those that vary in accordance to the volume or quantity of production. If
there is no production; then, there is no variable inputs.
Ex. Labor, raw materials
The Law of Diminishing Returns
Display slide to define, It states when successive units of variable input is combined with a fixed input, the total
product (TP) or output (Q) will increase, but beyond some points the resulting increases in output will become
smaller and smaller.

 Total Product (TP) refers to the total production or output (Q).

 Marginal (Physical) Product (MP) is the additional output produced by employing one additional unit input
(X) holding the level of usage of all other inputs constant.
ΔQ
MP = ΔTP/ Δx or using Q to denote TP MP = -------
Δx

 Average (Physical) Product (AP) is the output produced per unit of the input
AP = TP/x or using Q to denote TP AP = Q
-----
X
Display Slide, to show the total product (in cavans) schedule of rice production with workers as variable
inputs (x). Applying the formula we can find the solution below.

On another slide, below is the graphical presentation of the schedule, showing the increasing rate of
production as inputs (workers) were added, thus, total product and marginal product increases at a certain
point.

Table 10.1

Display slide, to see the plotted data below and explain to the students the theory in this drawing.

Fig. 10.1

The Three Stages of Production

Display the slide, present the table and the illustration above to explain the 3 stages of production as follows:
 1. Stage of Increasing Returns - this stage shows that as additional variable input is used, Total Product (TP)
increases at an increasing rate.

2. Stage of Decreasing Returns - This is the stage where the producer continuously employs more labor
input to a fixed land, Total Product (TP) continuously increases but at a decreasing rate.

3. Stage of Negative Returns - it is the stage of over-utilization of the fixed input. Note that as labor input
increases, Total Product is then decreasing so the contribution of additional labor input is already negative.

LEARNING ACTIVITY:
 Group the students into 4 and let the students choose a local business. Make an evaluation of its
existence since date of operation until 6 months, one year, two years or more.
Choose the line of business below:
1. Real Estate
2. Fast Food Chain
3. Beauty Salon and Spa
4. Eatery or Carinderia
5. Funeral Parlor
6. Mineral Water Supply
7. Parcel Service
8. Transport Business
 Follow Format as designed

MEASUREMENT:
Twenty (20) points Multiple Choice via Google form
REFERENCES:
https://people.wou.edu/~leadlej/Old/Winter%202011/EC%20460/Perloff_Chap6.pdf
https://www.google.com/search?q=stages+of+production&oq=Stages+of+Production&aqs=chrome.0.0l7.5878j0j7&sour
https://study.com/academy/lesson/law-of-diminishing-returns-definition-examples-quiz.html

Lesson 11 – Production Isoquants and Isocost

Display slide, to explain that Isoquants represent the various combinations of two inputs that can be used to
produce the same level of output.
 Characteristics of Isoquants
1. They slope downward to the right for those combinations of inputs that firms will want to use.
2. They do not intersect.
3. They are convex to the origin.
Display slide, and explain that Isocost line contains all combinations of inputs that the same budget can
purchase at constant prices.
Below is an example of isoquant and isocost schedules and graphs.
Table 9.1 Isoquant Schedules

The point of tangency of the Isoquant and Isocost curves shows the best combination of inputs (labor and
capital) given the capital outlay of P16,000.00. The firm must employ 20 units of labor and 15 units of capital in its
production process. The maximum output that the firm can produce is 1000 units.
Table 9.2 Production Input Combination Schedule

Theory of Cost and Profit

Display slide on cost concepts.
 Cost of production - refers to the total payment by a firm to the owners of the factors of production.
 Factors of Production Factor Payment
Land Rent
Labor Wage or Salary
Capital Interest
Entrepreneurship Profit

The price of resources is measured in terms of opportunity cost.

 Opportunity cost - is the value of alternative product foregone

 Explicit cost (Visible cost) is the actual expenditures made by the firm (that is usually thought of as its only
expenses).

 Implicit cost (Invisible cost) is the cost of self-owned, self-employed resources frequently overlooked in
computing the expenses the company keeps

 Short run and Long run viewpoints

Short run is the planning period of the firm so short that some resources can be classified as fixed
while some are considered variable, while Long run is the planning period pf the firm so long that all
resources eventually become variable.

Short Run Cost Curves

In the short run, the total costs of a firm depend on the firm’s size and on the level (or volume) of production.
The component parts of Total Costs (TC) are Total Fixed Costs (TFC) and Total Variable Cost (TVC).
TC = TFC + TVC
Fixed cost is the kind of cost which remains constant regardless of the level (or volume) of production. The
summation of all the fixed costs incurred by a firm in its production is the Total Fixed Cost (TFC).
Variable cost is the kind of cost which changes in proportion to the level (or volume) of m production. Total
Variable Cost (TVC) is the totality of all the variable cost spent by the firm in its production.,
Average and Marginal Cost Curves

 AFC = TFC/ Q
 AVC = TVC/ Q
 AC = TC/Q
 AC = AFC + AVC
  MC = ΔTC/ΔQ

Fig. 11.1

Profit, Loss and Break-even

Profit maximization involves the comparison of TR and TC. The mathematical formula to derive profit (r) is by
getting the difference between total revenue (TR) and total cost (TC).

Profit = TR -TC

LEARNING ACTIVITY:
Illustrate a Production Office and Warehouse in one (1) short Bond Paper

MEASUREMENT:
Case Study Analysis on “Self Managed Teams: A Case of New Productivity Breakthrough.”

REFERENCES:
Manual for Mathematical Economics with Work Exercises by Silon, 2009
Understanding Economics by Payumo, Maniago and Camba, 2014
http://www.darshan.ac.in/Upload/DIET/Documents/CE/Theory%20of%20production_05012015_060332AM.pdf