COLLEGE OF ST.

JOHN – ROXAS
Member: Association of LASSSAI- Accredited Superschools (ALAS)

SELF- LEARNING MODULE AND ACTIVITY SHEETS

Learning Area: ECON 101 Semester: SecondInclusive Dates: February 1 - 5, 2021 Learning
Content: Implications of Market Pricing in Making Economic Decisions LESSONS AND
COVERAGE:
In this module, you will examine this question when you take this lesson:
Determine the implications of market pricing in making economic decisions

EXPECTED
SKILLS
To do well in this module, you need to remember and do the following:
1. Invoke God’s presence by praying the Lasallian Prayer.

2. Read the instruction carefully before starting anything.

3. Complete all the activities and worksheets given.

3. Use dictionary and the like to find the meaning of the words that you do not
understand.

4. Use a notebook to compute your answers and record scores.

5. Review the criteria in the rubrics and evaluate your work using the provided checklist.

6. Make a timetable for your study. Do not force yourself to answer

everything if you are tired.

PARTS OF THE MODULE

•
Expectations - These are what you will be able to know after
completing the lessons in the module.
•
Pre-test - This will measure your prior knowledge and the concepts to
be mastered throughout the lesson.
•
Looking Back to your Lesson - This section will measure what
learnings and skills did you understand from the previous lesson.
•
Brief Introduction- This section will give you an overview of the
lesson.

•
1
 Activities - This is a set of activities you will perform with a partner.

•
Remember - This section summarizes the concepts and applications of
the lessons.
•
Check your Understanding - It will verify how you learned from the
lesson.

•
Post-test - This will measure how much you have learned from the
entire module

LESSON
4 Implications of Market Pricing in
Making Economic Decisions
EXPECTATIONS
Specifically, this module
will help you to:

1. determine the implications of market pricing in making economic decisions

2. explore the elasticity of demand and supply
3. solve problems on price elasticity of demand and supply
4. value the implications of market pricing in decision making

PRE -TEST

Are you excited to to learn new sets of knowledge? Let us check your knowledge
about the topic. Have fun learning!

Part I.Graph Analysis

Directions: Please analyze the graph and answer the questions below. Write your

A surplus in product occurs A shortage in the supply of

when the quantity supplied product occurs when the
exceeds the quantity quantity demanded is greater
than the quantity supplied.
demanded.

answer on the space/s provided for each question.

a) Surplus. A green horizontal breaking line above the graph represent surplus. It
happens when supplies are more than the demand.

b) Shortage. A horizontal straight green line below the graph represent the
shortage. It occurs when there is more demand than the supply.
2
 c) Equilibrium in price. A black small dot where supply and demand line intersect
represent the equilibrium in price. At equilibrium point, supply and demand are
balanced.

4. What is surplus, shortage and equilibrium price? Define the terms.

Surplus. An economic occurrence wherein quantity of supplies exceeds the quantity

demanded.

Shortage. An economic occurrence wherein quantity demanded is much in number than the
quantity of supply.

Equilibrium price. The price at which a producer can sell all the units he wants to produce and
a buyer can buy all the units he wants. It is when supply and demand are balanced.

Part II. Multiple Choice Questions

Directions: Please read the statements carefully. Encircle the correct answer.

1.In the market, the price elasticity for the demand of canned goods sold by Aling
Puring Grocery Store is the:

a) ratio of the percentage change in quantity demanded for the goods to the
percentage change in its price
b) responsiveness of revenue to a change in quantity of the canned goods
c) ratio of the change in quantity demanded divided by the change in its price of
the canned goods
d) response of revenue to a change in the price

2. If demand for sacks of rice in Aling Puring Grocery Store is price elastic, then a:
a) rise in the price of sacks of rice will raise total revenue of the grocery
b) fall in the price of sacks of rice will raise total revenue of the store
c) fall in the price of sacks of rice will lower the quantity demanded
d) fise in the price of sacks of rice won't have any effect on total revenues

3. If the cross-price elasticity between soap bar and liquid soap commodities is 1.5,
a) the two goods are luxury goods
b) the two goods are complements
c) the two goods are substitutes
d) the two goods are normal goods

4. The price elasticity of demand for a certain good tends to be:

a) smaller in the long run than in the short run
b) smaller in the short run than in the long run
c) larger in the short run than in the long run
d) unrelated to the length of time

5. If the price elasticity of supply of cup noodles is 0.60 and the price increase by
3 percent, then the quantity supplied for cup noodles increases by how by?
a) 0.60 percent.
b) 0.20 percent
PES= %CHANGE IN QUANTITY
3SUPPLIED / %CHANGE IN PRICE
= 0.60(60%)/3%= .2O OR 20%
 c) 1.8 percent
d) 18 percent

Show me your solution here

https://global.oup.com/us/companion.websites/9780199811786/student/chapt2/multiplechoice /

Great job! You finished answering the questions. You may now request your facilitator to

check your work. Congratulations and keep on learning!

LOOKING BACK TO YOUR LESSON

As we go further, let us try to recall the concepts of market demand,

market supply and market equilibrium. Please perform this.

PART I.TRUE OR FALSE

Directions: Write TRUE if the statement is correct and FALSE if tincorrect.

Write your answer on the space provided for each number.

1. __TRUE__ The equilibrium point is the level where the demand and supply
Curves intersect.

2. _FALSE__ if the price is above the equilibrium level, the quantity

demanded is greater than the quantity supplied.

3. _FALSE__ if the price is below the equilibrium point, the quantity

demanded is lesser than the quantity supplied.

4. __TRUE__ the law of demand applies during online sales of computers

when consumers rush to buy products at 30% discounts.

5. TRUE The law of supply applies when the producers supply more
masks at a higher price; selling at higher quantity at a higher price
increases revenue.

6. _TRUE__ if the price is below the equilibrium level, then the quantity demanded
will exceed the quantity supplied.

7. __TRUE__ Shortage will exist if the price is below the equilibrium point

8. __TRUE___ the law of supply and demand explains the interaction between the

4
 sellers of a product and the buyers.

9. ___TRUE____ the demand curve is always downward sloping due to the law of
diminishing marginal utility.

10. __TRUE___ the supply curve shows an upward slope.

PART II Make Meaning Internet Assisted Activity

Directions: Give the meaning of the following words/phrases. You may use the
internet to substantiate your ideas.
Price Elasticity. This measure on how consumers responds to the changes in
prices of products and services.
Price Elasticity of Demand. This measure how quantity of demand
changes/responds to a given change in the price of goods/products.
Price Elasticity of Supply. This measure the responsiveness of quantity supplied to a
given change in price.

Market Pricing on Making Economic Decisions

Please read this article on Demand, Supply and Elasticity of Clean Water in the
Philippines. This will help you understand better our new lesson. Enjoy reading!

Demand, Supply and Elasticity of Clean Water in the

Philippines 8/27/2015
According to an article created by Vice News, there are 55
people who die in the Philippines every day because of the
lack of clean water. As one can see clean water is greatly
needed by all people. As a student who is lucky to be given all
the necessities needed in life it would be normal not to think
of this because we normally do not notice it. However, we
need to. According to Katrina Arianne Ebora, who works for
UNICEF’s Water, Sanitation and Hygiene program in the
Philippines stated that “Over 30 million people in the
Philippines do not have access to improved sanitation
facilities.” Also, according to the PIS by 2050 the population
of the areas with poverty in Manila will reach over 9 million!
With the rising population of the Philippines there will be a
problem with the economy of clean water because there will
be too much demand for the supply of water. .

https://redmonteconomics.weebly.com/blog/demand-supply-and-elasticity-of-clean-waterin-the-philippines

The Marketing Price System

5
 Last module, we talked about the market demand, market supply and
market equilibrium. In our new topic, we will link more of these variables to the
market price system. For example, in the article above, the causes and effects of
the water shortage around the Philippines could be best explained if we could
understand the concepts of demand and supply elasticity of the clean water.
A shortage is when there is an excess demand for the quantity supplied.
While surplus is excess in supply.
For example, if there are 10 bottles of water and there are 20 students who want
drinking these, then there will be only 10 students whose demands are met while the
others will not be able to be given anything. There is shortage in the supply.

If producers make too many bottles of water and consumers cannot by them want
to buy them, there will be surplus.

Price System in a Market Economy

Let us find out more about the price system. We have learned that
demand is the willingness of the consumers to buy goods and services. In
economics, the willingness to buy goods and services should be accompanied by
the ability to buy, also called the “purchasing power”. This is referred to as an
effective demand (source: Investopedia).

EQUILIBRIUM CHARACTERISTICS
Equilibrium is a point of balance or The supply and demand are
a point of rest. It is also called balanced in equilibrium.
“market-clearing price”.

Equilibrium price is the price at The economic forces are balanced

which the producer can sell all the and in the absence of external
units he wants to produce and the influences, the (equilibrium) values
buyer can buy all the units he wants of economic variables will not
change.

Quantity demanded and quantities The amount of goods or services

supplied are equal. sought by buyers is equal to the
amount of goods or services
produced by sellers.

Are you enjoying the lesson? Let us proceed to the next topic.

Price System in a Market Economy: Its Characteristics

Let us learn more! The prices of goods that we encounter everyday to

the things we buy plays a crucial role in determining an efficient
distribution of resources in a market system. The p rices will help us to make
every day economic decisions about our needs and desires. They are the
indications of the acceptance of a product; the more popular the product, the
higher the price that can be charged.

Example is when a tables are for sale in your community today and is assumed
that they are not very important as compared to other products or commodities
that we need to survive especially that aour movements are very limited.

6
 Neither the producers
nor consumers can impact Price acts as a signal for shortages and
prices; consumers can buy surpluses which help firms and consumers
whatever they want; nor can respond to changing market conditions.
producers make and sell
whatever they want
• If a good is in shortage – price will tend to rise.
Prices are decided by Rising prices discourage demand, and encourage
interactions between the firms to try and increase supply.
producers and the consumers.
• If a good is in surplus – price will tend to fall.
Falling price encourage people to buy, and cause
firms to try and cut back on supply.

• Prices help to redistribute resources from goods

with little demand to goods and services

We explore more how equilibrium happens. Let

The market price is us analyze the chart below.
the point that the supply
and demand curves The chart shows a surplus – the quantity is
intersect. (Judge, S. 2020) greater than demand. When quantity is great erthan
.
demand it causes prices to go down

Figure 1.
The Equilibrium Point or the
Market Price Point
Figure 2. Surplus Point

https://study.com/academy/lesson/characteristics-of-the-price-system-in-a-market-economy.htm l

PRICES ARE MARKET DRIVEN

The producers can make what they

want and consumers are free to purchase
what they want. This means that customers
live in a market economy. When prices are
high, supply increases as many firms join the
market (Judge, S. 2020).

Let’s say the units of cellular phones. The

numbers of suppliers have increased because
of high prices of the cellular phones. When
smartphones were new in the market, there
were fewer producers and prices were high. Figure 3. Shortage Point
The high prices attracted the producers

7
to join the market (Judge, S. 2020). In shortage, quantity is less
than the demand; it causes prices to
go up due to scarcity
Example of which is the shortage in
masks and ethyl alcohol in the market.
https://study.com/academy/lesson/characteristics-of-the- There is shortage in the supply, thus,
pricesystemin-a-market-economy.html price tends to go up or tends to go
https://www.economicsonline.co.uk/Competitive_markets/Price_elasticity_of_dem
and.html
higher (Judge, S. 2020).

Law of Supply and Demand

The law of supply and demand explains the interaction between the sellers of a
product and the buyers. It shows the relationship between the availability of a
particular product and the desire (or demand) for that product has on its price.

The Law of Demand

Again, what is a demand? We said last The demand curve is always
time that it is the desire of a consumer to downward sloping due to the
purchase goods or services and willingness to law of diminishing marginal
pay a at for that product or services at a given utility.
price.
If all other factors remain equal, the higher
the price of a good, the fewer people will
demand that good.

“the higher the price, the lower the quantity

demanded” and vice versa. (source: Investopedia)
https://www.ducksters.com/money/supply_and_demand.ph p

The Law of Supply

The law of supply demonstrates the
quantities that will be sold at a given The law of supply says ……………….
price. The higher the price, the higher “as the price of a product increases,
The quantity supplied and vice versa. companies will produce more of the
Product”.

When graphing the supply vs. the

price, the slope rises.

https://www.ducksters.com/money/supply_and_demand.ph p

How Do Supply and Demand Create an Equilibrium Price?

Equilibrium price is the price at which a

producer can sell all the units he wants to produce and a
buyer can buy all the units he wants.

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Supply and demand are balanced, or in equilibrium

Thedemand curve is downward sloping. This is due to

the law of diminishing marginal utility.

The supply curve is a vertical line; overtime, supply curve slopesupward;

the more suppliers expect t to charge higher, the more they will be willing to produce
and bring products to market.
In the Equilibrium point,the two slopes will intersect. The market price
is sufficient to induce suppliers to bring to market that same quantity of goods that
consumers will be willing to pay for at that price.
https://www.investopedia.com/terms/l/law-of-supply-demand.asp https://www.thoughtco.com/calculating-economic-equilibrium-1147698
https://www.ducksters.com/money/supply_and_demand.php

PRICE ELASTICITY OF DEMAND AND SUPPLY

Can you guess what happened with this mom in a market? You
OMG! PRICES
NOW ARE TOO may write your reaction in the shape towards her.
HIGH!

Price elasticity measures the responsiveness of the

quantity demanded or supplied of a good to a change in its
price. Elasticity can be described as: a) elastic or very
responsive and b) unit elastic, or inelastic or not very responsive.
(source: Investopedia)
Effects of Change in Demand and Supply

Elastic demand or supply curve indicates that quantity

demanded or supplied respond to price changes in a greater
than proportional manner.

Inelastic demand or supply curveis one where a given

percentage change in price will cause a smaller
percentage change in quantity demanded or supplied.

Unitary elasticity means that a given percentage changes in price leads to an

equal percentage change in quantity demanded or supplied.

CATEGORIES OF PRICE ELASTICITY

According to Agarwal, P. (2018) and Judge, S. (2020), there are four categories of
price elasticity are the following:

I. The Price Elasticity of Demand

Price elasticity of demand is the responsiveness of quantity demanded, or how

much quantity demanded changes, given a change in the price of goods or services.

9
 *The mathematical value is negative. A negative value indicates an inverse
relationship between price and the quantity demanded. But the negativesign is ignored
in price(Judge, S. 2020).

https://www.economicsonline.co.uk/Competitive_markets/Price_elasticity_of_demand.ht
ml

Figure 4 Price Elasticity of Demand

Price Elasticity of Demand (PED)= % change in quantity demanded % Change
a) Elastic Demand (PED > 1) - the percentage change in price brings about a
more than proportionate change in quantity demanded.

When the percentage change in quantity demanded is greater than the percentage
change in price, and the coefficient of the elasticity is greater than 1.Example real
estate- housing - There are many different housing choices. People may live in a
townhouses, condos, apartments, or resorts. The options make easy for people to not
pay more than they demand.

b) Inelastic Demand (coefficient of the elasticity is less than 1) – is when an

increase in price causes a smaller % fall in demand.

When the percentage change in quantity demanded is less than the percentage change
in price, and the coefficient of the elasticity is less than 1.

Example Gasoline – gasoline has few alternatives; people with cars consider it as a
necessity and they need to buy gasoline. There are weak substitutes, such as train
riding, walking and buses. If the price of gasoline goes up, demand is very inelastic.

Other Examples: Diamonds, aircon, Iphone, Cigarettes

c) Unitary Elastic Demand - When the percentage change in demand is equal

to the percentage change in price, the product is said to have Unitary Elastic
demand.

Unitary elastic - PED or the price elasticity of demand is

1

d) Perfectly Elastic - a small percentage change in price brings about a change

in quantity demanded from zero to infinity.

Perfectly elastic - the coefficient of elasticity is equal to infinity

(∞ )

10
 e) Perfectly Inelastic - the PED is =0 any change in price will not have any
effect on the demand of the product.

Perfectly inelastic - the percentage change in demand will be equal to zero

(0)

POINT ELASTICITY
a) The midpoint elasticity is less than 1. (Ed < 1). Price reduction leads to
reduction in the total revenue of the firm.
b) The demand curve is linear (straight line), it has a unitary elasticity at the
midpoint. The total revenue is maximum at this point.
c) Any point above the midpoint has elasticity greater than 1, (Ed > 1).

II. The Income Elasticity of Demand (YED)

The income elasticity of demand is the relationship between changes in quantity

demanded for a good and a change in real income.
• YED = % 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑑𝑒𝑚𝑎𝑛𝑑 % 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑖𝑛𝑐𝑜𝑚𝑒

Normal Goods – are those goods for which the demand rises as consumer income rises;
positive income elasticity of demand so as consumers’ income rises more is demanded at
each price. These goods shift to the right as income rises.

YED is positive. As income rises, the proportion spent on cheap goods will reduce as
now they can afford to buy more expensive goods.

Example (the demand for units of air-conditioning increases as the income of the consumer
increases and the demand for electric fan decreases)

Normal good: units of air-conditioning; Inferior good: electric fan

The Inferior Goods – the demand decreases when consumer income rises; demand
increases when consumer income decreases)

---------- Shifts to the left as income rises. YED is negative. • As income rises, the
proportion spent on cheap goods will reduce as now they can afford to buy more
expensive goods. Examples: the demand for cheap/generic electronic goods (let say
electric fans) will fall as people income rises and they will switch to expensive branded
electronic goods (unit of air-conditioning)

III. Cross Price Elasticity of Demand or (XED)

Cross price elasticity of demand is he effect on the change in demand of one good as a
result of a change in price of related to another product.
• XED = % ℎ𝑐 𝑎𝑛𝑔𝑒𝑖𝑛𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦𝑑𝑒𝑚𝑎𝑛𝑑𝑒𝑑𝑜𝑓𝑔𝑜𝑜𝑑 % ℎ𝑋𝑛𝑔𝑒𝐶𝑖
𝑎 𝑛𝑝𝑟𝑖𝑐𝑒𝑜𝑓𝑔𝑜𝑜𝑑 • • If the𝑌value of
XED is positive - substitute goods • If the value of XED is negative – complements
goods
• If the value of XED is zero - two goods are unrelated

IV. Price Elasticity of Supply (PES)

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 • The measure of the responsiveness of quantity to a change in price. It is the
percentage change in supply as compared to the percentage change in price of a
commodity. PES = % ℎ𝑎𝑛𝑔𝑒𝑖𝑛𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦𝑆𝑢𝑝𝑝𝑙𝑖𝑒𝑑 % ℎ𝑎𝑛𝑔𝑒𝑖𝑛𝑃𝑟𝑖𝑐𝑒
If supply is elastic, producers can increase
output without a rise in cost or a time delay. If
supply is inelastic, firms find it hard to change
production in a given time

period.https://www.intelligenteconomist.com/price-elasticityof-supply
PES = % ℎ𝑎𝑛𝑔𝑒𝑖𝑛𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦𝑆𝑢𝑝𝑝𝑙𝑖𝑒𝑑 % ℎ𝑎𝑛𝑔𝑒𝑖𝑛𝑃𝑟𝑖𝑐𝑒
If Pes> 1 = supply is price elastic
Pes = 0 = supply is perfectly inelastic
Pes = infinity = supply is perfectly elastic
Pes < 1 = supply is price inelastic

PRICE ELASTICITY OF SUPPLY

ELASTIC SUPPLY INELASTIC SUPPLY

Perfectly Inelastic Supply Perfectly Inelastic Supply https://www.intelligenteconomist.com/priceelasticity-

of-supply

Determinants of Price Elasticity of Supply

Agarwal, P. (2020) said, price elasticity of supply can be influenced by the
following factors:

1. Marginal Cost- If the cost of producing one more unit keeps rising as output rises
or marginal cost rises rapidly with an increase in output, the rate of output production
will be limited. The Price Elasticity of Supply will be inelastic - the percentage of

12
quantity supplied changes less than the change in price. If Marginal Cost rises slowly,
supply will be elastic.

2. Time - Over time price elasticity of supply tends to become more elastic. The
producers would increase the quantity supplied by a larger percentage than an increase
in price.

3. Number of Firms - The larger the number of firms, the more likely the supply is
elastic. The firms can jump in to fill in the void in supply.

4. Mobility of Factors of Production- If factors of production are movable, the price

elasticity of supply tends to be more elastic. The labor and other inputs can be brought
in from other location to increase the capacity quickly.

5. Capacity - If firms have spare capacity, the price elasticity of supply is elastic. The
firm can increase output without experiencing an increase in costs, and quickly with a
change in price.

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 ACTIVITIES

Part I. Problem Solving and Critical Thinking Analysis

Directions: Please analyse the problems carefully. Answer the problems and
present your solutions. Inerpret the results.

1)If there are 10 bottles of water and there are 20 students who want to drink
these bottles of water, there will be only 10 students whose demands are
met while the others will not.

Analysis: We can conclude that there is __SHORTAGE_ in the supply.

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

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

PRICE ELASTICITY IN DEMAND= (%) CHANGE IN QUANTITY /

Solution:
(%) CHANGE IN PRICE
= 12% / 8% = 1.5%

Interpretation: This means it is elastic because the percentage change in

quantity demanded is greater than the percentage change in price, and the
coefficient of the elasticity is greater than 1

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 IN SUPPLY= (%) CHANGE IN QUANTITY / (%)

Solution: CHANGE IN PRICE
= 12% / 8% = 1.5%

Analysis of Price elasticity: If the PES measures greater than 1 then it is price
elastic, as to the case it is 1.5% so it is price elastic.
 Learning Module for Applied Economics
Part II. Solving Problem on Price Elasticity
Directions: Analyse each problem carefully. Answer the questions below.

1. Suppose the price of ethyl alcohol rises by 20 %. As a result, the demand for
substitute hand soap rises by 10 %.

A) What is the cross-elasticity of demand for hand soap with respect to the
price of ethyl alcohol? Encircle your answer. Present your solution.

A) + 2 B) + 0.5 C) - 0.5 D) – 2

% CHANGE ∈THE QUANTITY OF DEMAND

SOL: XED=
% CHANGE ∈PRICE

= 10% / 20%= +0.5

B) Analysis on price elasticity

To be considered Inelastic, the percentage change in
quantity demanded must be less than the
percentage change in price, and the coefficient of
the elasticity is less than 1. So it is inelastic given
its coefficient to be just .5 and the quantity is 10%
only compared to its price change that is 20%

C) Interpret your analysis on the kind of good.

Since the coefficient is +0.5 it is a substitute good
given that if XED is positive then it is considered
substitute goods

15
 Learning Module for Applied Economics
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:

A) Solution: PRICE ELASTICITY IN DEMAND= (%) CHANGE IN QUANTITY /

(%) CHANGE IN PRICE
= 35% / 20% = 1.75%

B) Analysis on price elasticity. The demand for the phone call is said to be
elastic, because the percentage change in quantity demanded is greater than the
percentage change in price, and the coefficient of the elasticity is greater than 1

REMEMBER

• A demand curve shows the relationship between quantity demanded and

price in a given market on a graph.
• The law of demand states that a higher price typically leads to a lower
quantity demanded.
• A supply curve shows the relationship between quantity supplied and price
on a graph.
• The law of supply says that a higher price typically leads to a higher quantity
supplied.
• The equilibrium price and equilibrium quantity occur where the supply and
demand curves cross.
• The equilibrium occurs where the quantity demanded is equal to the
quantity supplied.
• If the price is below the equilibrium level, then the quantity demanded will
exceed the quantity supplied.
• Excess demand or a shortage will exist. If the price is above the equilibrium
level, then the quantity supplied will exceed the quantity demanded.
• Excess supply or a surplus will exist. In either case, economic pressures will
push the price toward the equilibrium level.
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 Learning Module for Applied Economics

CHECK YOUR UNDERSTANDING

Part I. Identification

Directions: Please read the sentences carefully. Identify the the word or phrase
that is appropriate to each item.

1. A __DEMAND CURVE____ shows the relationship between quantities

demanded and price in a given market on a graph.
2. The ___LAW OF SUPPLY____ states that, higher the price, the higher the
quantity supplied.

3. __PRICE ELASTICITY means that a given percentage changes in price leads

to an equal percentage change in quantity demanded or supplied.

4. __PRICE ELASTICITY OF DEMAND___ means the effect on the change in

demand of one good as a result of a change in price of related to another product.

5. ___NORMAL GOODS___ those goods for which the demand rises as consumer
income rises.

6. ___INELASTIC DEMAND____ the coefficient of the elasticity is less than 1;

when an increase in price causes a smaller % fall in demand.

Part II. Enumeration on Price Elasticity of Goods

Directions: Please conduct a survey or observe the market in your vicinity. This
can make you aware of your environments. Give examples of goods considered as
elastic and inelastic. You may work with your parents and siblings.

ELASTIC GOODS INELASTIC GOODS

17
 Learning Module for Applied Economics
1 CLOTHING 1 TOBACCO
2 GADGETS/ELECTRONICS 2 TOOTHPASTE
3 CARS 3 SUGAR
4 JUNK FOODS 4 PRESCRIPTION DRUGS
5 SOFTDRINKS 5 ELECTRICITY

POST -TEST

Name: JOANA SHARMINE ARROBANG Year/Section: 12-ABM Date______

Teacher: MR. PIGIE DEONDO School: CPLLEGE OF SAINT JOHN ROXAS

Part I True or False

Directions: Read the sentences carefully. Write TRUE if the statement is correct
and FALSE if the statement is incorrect.

1. Elasticity of demand refers to the change in demand when there is a change in

another factor such as price or income. TRUE

2. If demand for a good or service is static even when the price changes, demand
is said to be inelastic. TRUE

3. Examples of elastic goods include gasoline, while inelastic goods are items like
canned goods and vitamin c tablets. FALSE

4. The law of demand states that “elasticity shows how much a good or service is
demanded relative to its movement in price”. FALSE

5. Inelastic demand is when a demanded quantity for masks changes by a greater

percentage compared to its percentage change in price. FALSE

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6. The opposite of a market economy is a planned economy, where investment and

production decisions are decided by the government. TRUE

7. Unit elastic is when a percentage change in demand equals the price. FALSE
8. A mango fruit with an elastic demand gets more sales when its price drops
slightly. When its price goes up, it stays longer in the box. TRUE

9. The demand curve shows how quantity demanded for apple responds to price
changes. The flatter the curve, the more elastic is the demand for an apple.
TRUE

10.The midpoint elasticity is greater than 1. FALSE

REFLECTIVE LEARNING SHEET

HOW DO YOU RESPOND TO PRICE ELASTICITY?

www.catholicmom.com

People have unlimited needs and wants for their personal satisfaction and because of
that the prices of products easily get changed.
Everyone is affected with the new normal in the market. The prices of products
have become very expensive since the outbreak of the pandemic, not only in our locality,
but in the whole world.

If your income or the income of your family is not enough to purchase the basic
commodities needed by your family, what goods would you buy, instead?
What economic or marketing strategies would you apply? How would you respond to the price
changes of these commodities?

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E-SITES

To further explore the concept learned today, and if it possible to connect the internet, you
may visit the following links:

https://www.youtube.com/watch?v=HHcblIxiAAk; https://www.youtube.com/watch?
v=nOlOf_KEnrw

REFERENCES

Articles:
Agarwal, P. (2018) Price Elasticity of Supply. Retrieved on June
04 2020 from https://www.intelligenteconomist.com/price-elasticity-of-supply

Amadeo, K. (2020) Elastic Demand with Its Formula, Curve, and Examples Retrieved on June 04 2020 from
https://www.thebalance.com/elastic-demand-definition-formula-curve-examples-3305836;
https://www.thebalance.com/inelastic-demand-definition-formula-curve-examples-3305935

Judge, S. (2020) Characteristics of the Price System in a Market Economy. Retrieved on June 04 2020 from
https://study.com/academy/lesson/characteristics-of-the-price-system-in-a-market-economy.html

Pettinger, T. (2019) Role and Function of Price in Economy Retrieved on June 04 2020 from
https://www.economicshelp.org/blog/1170/economics/role-and-function-of-price-in-economy/

Websites
https://www.slideshare.net/kalaiyarasidanabalan/a-level-economics-chapter-2-core
https://www.investopedia.com/ask/answers/012915/what-difference-between-inelasticity-and-elasticity
demand.asp https://www.sparknotes.com/economics/micro/elasticity/problems
https://www.investopedia.com/terms/l/law-of-supply-demand.asp
https://opentextbc.ca/principlesofeconomics/chapter/3-1-demand-supply-and-equilibrium-inmarketsfor-
goods-and-services/
https://global.oup.com/us/companion.websites/9780199811786/student/chapt2/multiplech
https://opentextbc.ca/principlesofeconomics/chapter/5-1-price-elasticity-of-demand-and-priceelasticityof-
supply http://faculty.fortlewis.edu/walker_d/practice_problems_-_elasticity.htm
https://www.economicsonline.co.uk/Competitive_markets/Price_elasticity_of_demand.html
https://redmontecon

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https://global.oup.com/uk/orc/busecon/economics/gillespie_econ4e/student/mcqs/ch05/
https://study.com/academy/answer/if-a-20-decrease-in-the-price-of-long-distance-phone-callsleads;https://
int.search.myway.com/search/AJimage.jhtml

WORKSHEET (ADDITIONAL ACTIVITY)

Problem Solving and Critical Thinking Analysis

Directions: Solve the following problems. Interpret the results.

1. Christine sells banana banana turon for Php 4.00 per piece. She sells 50
pcs, and decides that she can charge more. She raises the price to Php6.00
per piece and sells 40 pieces. What is the elasticity of demand for her
banana turon?

a) Solution:

b) Interpret the result of the demand elasticity: ________________________

2.Joy Lima manages a Sweet Chocolate Bar Store. She charges P100 per bar
for her chocolate. You, the economist, have calculated the elasticity of
demand for the chocolate in her town to be 2.5. a) If she wants to increase
her total income or revenue, what advice will you give her and why? b)
What economic principle apllies? Explain your answer.

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http://faculty.fortlewis.edu/walker_d/practice_problems_-_elasticity.htm

Date Accomplished: ________________________ Date Submitted: ________________________

PREPARED BY:

PIGIE D. DEONDO
Teacher

Class Code: trd4i3n

Google Meet link: https://classroom.google.com/c/MjUxNj

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