ADM Q1 SHS AppliedEconomicsV3-1 Check-1

Applied Economics
Quarter 1 – Module 1:
Nature and Scope of
Economics
DO_Q1_AppliedEconomics_Module1
Applied Economics
Alternative Delivery Mode
Quarter 1 – Module 1: Nature and Scope of Economics
First Edition, 2020
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Applied Economics
Quarter 1 – Module 1:
Nature and Scope of
Economics
TABLE OF CONTENTS
Lesson 1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Nature of Economics
Lesson 2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Utility and Application of Applied Economics to Solve Economic Issues
and Problems
Lesson 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Market Supply
Lesson 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Market Demand
Lesson 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Market Equilibrium
Lesson 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Implications of Market Pricing on Economic Decision
Lesson 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Market Structure
Lesson 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Contemporary Economic Issues Affecting Filipino Entrepreneurs
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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Lesson
1 Nature and Scope of Economics
What I Need to Know
In this lesson the students are expected to gain competence in differentiating

Economics as Social Science and Applied Science in terms of nature and
scope.
Expected Learning Outcome/s:
1. Explain the meaning of Economics.

2. Recognize the difference of Economics as Social Science and as Applied
Science in terms of nature and scope
3. Show appreciation on the importance of Economics in our daily life.
What I Know
Identify the following statements. Choose your answer from the table.
Applied Economics Economics Scarcity

Applied Science Limited resources Social Science
Econometrics Oikonomia Theory
Economics Natural Resources Unlimited wants needs
____________ 1. It is a branch of science that deals with the study of human societies
and its relationship among individuals within those societies.
____________ 2. It is the application of statistical and mathematical theories to

economics for the purpose of testing hypothesis and forecasting future
trends.
_____________3. This is done through the application of economic theories and

econometrics in specific settings.
_____________4. This is the proper allocation and efficient use of available resources
for the maximum satisfaction of human wants.
_____________5. This is a well substantiated explanation of some aspect of the natural

world.
_____________6. It means household management.
_____________7. It is a discipline that is used to apply existing scientific knowledge to

develop more practical applications.
_____________8. It seeks to explain how society deals with the scarcity problem.
1
_____________9. 9 and 10 - These are the two underlying conditions that leads to
household.
What’s In
The word Economics came from the Greek word Oikonomia meaning
household management. The problem of managing the household arises from two
basic conditions: First, resources are limited; second, wants and needs of members
of the household are unlimited. Thus, the one who manages the household must
allocate the resources efficiently so that the needs of the household will be met as
desired.
This lesson dwells on the definition of economics, and on the nature and scope
of Economics as Social Science and as Applied Science.
What’s New
Economics is defined as a Social Science concerned with the production,

distribution, and consumption of goods and services. It studies how individuals,
businesses, governments, and nations make choices on allocating resources to
satisfy their wants and needs, trying to determine how these groups should organize
and coordinate efforts to achieve maximum output. (Chappelow, 2019)
Social Science is the scientific study of society--of human behavior and of

social interactions. (Amos Web, 2020)
Applied Science is a discipline that is used to apply existing scientific

knowledge to develop more practical applications. (Aquino, 2017)
Applied Economics is the study of observing how theories work in practice.

This is done through the application of economic theories and econometrics in
specific settings. (Cullen, 2017)
Theory is a well substantiated explanation of some aspect of the natural
world, an organized system of accepted knowledge that applies in a variety of
circumstances to explain a specific set of phenomena. Some economic theories
include Consumerism, Keynesianism, Liberalism, Malthusianism, Monetarism and
others. (Mizpa, 2017)
Econometrics is the application of statistical and mathematical theories to

economics for the purpose of testing hypothesis and forecasting future trends.
(Cullen, 2017)
2
What Is It
Economics is considered a Social Science because it seeks to explain how
society deals with the scarcity problem. It is one of several disciplines that apply the
scientific method to the study of human behavior. The social part of this phrase
means the study of society, human behavior, and social interactions; while the
Science part means the use of the scientific method to describe and explain the world.
(Amos Web, 2020).
The term used to mean Economics as Applied Science is Applied Economics.
Applied Economics applies the economic theories and principles to real world
situations with the objective of predicting potential outcomes. Thus, it can lead to
making a list of possible steps to be taken to ensure stability in real world events.
The results of econometrics are compared and contrasted against real life examples.
The real life application of econometrics would be to study the hypothesis, like “as
the person’s income increases, spending increases.” (Cullen, H. 2017)
On the other hand, Applied Economics is the study of observing how theories
work in practice. This is done through the application of economic theories and
econometrics in specific settings. Thus, it can lead to making a list of possible steps
to be taken to ensure stability in real world events.
What’s More
Identify whether the following statements show the nature and scope of
Economics as Social Science or as Applied Science.
1. As price of gasoline increases, consumers reduce their consumption of gasoline.
2. The government formed the AITF to formulate measures to combat the CoVID 19
Pandemic.
3. With the influence of Korean culture, sangyeupsal restaurants are growing in the
market.
4. Price of alcohol, facemask and face shield increases due to increasing demand.
5. As the government announced the community quarantine due to CoVID 19
Pandemic, out of fear, a lot of buyers rushed to grocery stores to buy goods in bulk
quantity.
What I Have Learned
1. The word Economics came from the Greek word Oikonomia meaning
household management. The problem of managing the household arises from
two basic conditions: First, resources are limited, and second, wants and
needs of members of the household are unlimited.
2. Economics is considered a Social Science because it seeks to explain how

society deals with the scarcity problem. It is one of several disciplines that
apply the scientific method to the study of human behavior. The social part
of this phrase means the study of society, human behavior, and social
interactions. The science part means the use of the scientific method to
describe and explain the world.
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3. Applied Economics applies the economic theories and principles to real world
situations with the objective of predicting potential outcomes. Thus, it can
lead to making a list of possible steps to be taken to ensure stability in real
world events.
What I Can Do
Read and analyze the article below, then answer the given questions.
Article 1: On the report posted by The Asian Team on April 1 2020, they reported
that in La Trinidad, precautions against the spread of COVID-19 have made it tough
for farmers to deliver vegetables as they have to stop at several checkpoints before
queuing at two trading posts to wait for buyers. More time on the road leads to poor
quality of leafy vegetables, thus reducing their value. Local rice farmers in the
Philippines are encouraged to sell their harvest to village officials so rice distribution
would remain unhampered in their respective communities. (Source: https:/
/theaseanpost.com/article/virus-sparks-food-shortage-philippines)
Question: Explain the nature and scope of Economics as Social Science on the
above article.
Article 2: On the report written by Anna Malindog-Uy on The Asian entitled “Is the
Philippines Winning Its COVID 19 Fight?” dated May 31. 2020, she reported that the
government of the Philippine launched a multi-sectoral response to the COVID-19
pandemic through its Interagency Task Force (IATF) on Emerging Infectious Diseases
chaired by the Department of Health (DOH). The Philippine government has adopted
a suppression strategy through the use of non-pharmaceutical health (NPH)
measures (i.e. social distancing, wearing of face masks, quarantines, etc.) to control
the spread of the virus in the country. These measures are embodied in the Philippine
government’s National Action Plan (NAP) Against COVID-19 strategic framework,
which includes strategies such as TASK FORCE T3 (Test, Trace and Treat) and
PDITRA or Prevention, Detection, Isolation, Reintegration, and Adopting the New
Normal Program. (Source: https:// theaseanpost.com/ article/philippines-
winning-its-covid-19-fight)
Question: Explain the nature and scope of economics as Applied Science on the
above article.
Assessment
Modified True or False:

Instruction: Write the word TRUE if the statement is correct; otherwise, change the
UNDERLINED word. Write your answer on the spaces provided.
____________ 1. The social part of Economics is that it uses scientific method to

describe and explain the world.
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_____________ 2. Determining the demand for a certain commodity at a given price
level requires econometrics.
_____________ 3. Using Applied Economics, possible outcomes may be predicted.
_____________ 4. Economics is considered as Applied Science because if seeks to
explain how society deals with the scarcity problem.
_____________ 5. Scarcity took place because of human’s unlimited needs and wants
while resources are limited.
_____________ 6. Theory is a well substantiated explanation of some aspect of the
natural world.
_____________ 7. Using Applied Economics, household, business firms, organizations
and government could be able to draw measures to be taken to
ensure its stability.
_____________ 8. Economics is considered a Social Science because it seeks to explain
how society deals with the scarcity problem.
_____________ 9. The household has limited wants and needs, the reason why there
is a scarcity.
____________ 10. Being enrolled in an on-line class, acquiring a smartphone is
considered a want.
Additional Activity
My Family’s Budget
Draw a pie chart showing the distribution of your family’s income. Indicate
the amount or percentage allotted for each expense.
Answer the following:
1. In what expenditure do your family spend a) most and b) least? Why?
2. What problems did your family experience in allocating your budget?
3. How do your family settle your budgeting issues?
4. What factors do you consider in solving the problem?
5. Describe how the nature and scope of Economics as Social Science and as Applied
Science works within your family’s utilization of resources.
Lesson Utility and Application of Applied
2 Economics to Solve Economic

Issues and Problems
What I Need to Know
At the end of this module, learners are expected to gain competence in

examining the utility and application of Applied Economics in solving economic
issues and problems.
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1. Discuss the five basic economic problems.

2. Illustrate the scientific method of solving an economic problem.
3. Show appreciation on the importance of the application of applied economics
to solve economic problems.
What I Know
AGREE OR DISAGREE: Write the word AGREE if the statement is true; otherwise,
write the word DISAGREE.
_________ 1.
The method used in production affects production capacity.
_________ 2.
Economic advantage is the universal objective of every economy.
_________ 3.
One of the fundamental problems of economy is what to produce.
_________ 4.
Economic resources include capital, land, labor and entrepreneur.
_________ 5.The use of Applied Economics in solving economic problem becomes a
powerful tool to conceal the true and complete situation in order to
come up with things to do.
_________ 6. The central problem of economy is production.
_________ 7. When resources are scars, it is alright to keep some idle.
_________ 8. Scarcity and choice go hand in hand.
_________ 9. In solving economic problem once the result is negative it simply means
the solution will never work out therefore, the problem has no solution.
________ 10. Testing hypothesis is the most critical stage in scientific method of
solving economic problem.
What’s In
Scarcity of means for satisfying various needs is the central problem of our
economic life. It is scarcity that creates the need to make a choice. Thus, scarcity
and choice go hand in hand. In making an economic decision, one should apply the
concept of Applied Economics to ensure that resources are utilized effectively and
efficiently to avoid or at least eliminate wastage in providing the needs and wants of
every household.
In this lesson, the students will learn how to utilize and apply the concept of
Applied Economics in solving economic issues and problems.
What’s New
Scarcity is a tension between our limited resources and our unlimited wants
and needs. (Cullen H., 2017)
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What is It
Five basic economic problems of the economy

Source: https://www.economicsdiscussion.net/economic-problems/5-basic-
problems-of-an-economy-with-diagram/18173
1. What to produce and in what quantities? - Goods and services must be

based on the needs of the consumers.
2. How to produce these goods? - The system must select the proper combination
of economic resources (land, entrepreneurs, labor, capital and foreign exchange)
in producing the right amount of output.
3. For whom shall the goods and services be produced? - Once the goods are
produced, how shall they be distributed and allocated among the members of the
society?
4. How efficiently are the resources being utilized? - The society has to see
whether the resources it owns are being utilized fully or not. It has to find out
ways and means to utilize them fully.
5. Is the economy growing? - To achieve growth in productive capacity is a

universal objective. Economic growth takes place through higher rate of capital
formation which consists of replacing existing capital goods with new and more
productive ones by adopting more efficient production techniques or through
innovation.
All these central problems of an economy are interrelated and interdependent.
Economics, as a science, in order to study data, observe patterns, and predict

results of stimuli. Economics follows these steps in order to study data and build
principles.
Lumen Learning on Boundless Economics cites specific steps that must be

followed when using the scientific method
Source: https://courses.lumenlearning.com/ boundless-economics/chapter/

economic-models/
1. Identify the problem – it involves determining the focus or intent of the work.
2. Gather data – Economics involves extensive amounts of data. For this reason,
it is important that economists break down and study complex information.
The second step of the scientific method involves selecting the data that will
be used in the study.
3. Hypothesis – this involves creating a model that will be used to make sense
of all of the data. A hypothesis is simply a prediction. What does the economist
think the overall outcome of the study will be?
4. Test hypothesis – this is a critical stage within the scientific method. The
observations must be tested to make sure they are unbiased and reproducible.
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5. Analyze the results – does the data agree with the hypothesis? If the answer
is “yes,” then the hypothesis is accurate. If the answer is “no,” then adjust the
study accordingly. A negative result does not mean that the study is over. It
simply means that more work and analysis is required.
In solving economic issues and problem, the application of Applied Economics

is important to ensure the effectiveness and efficiency of the solution to be employed.
Cullen. H (2017) shared the following importance of Applied Economics application:
Source: https://www.slideshare.net/HannahCullen/lesson-2-economics-as-an-
applied-science
1. Applied Economics becomes a powerful tool to reveal the true and complete
situation in order to come up with things to do.
2. Applied Economics acts as a mechanism to determine what steps can reasonably

be taken to improve the current economic situation. Examining each aspect of
the current economic situation may help in identifying the areas that need to be
strengthened where performance is weak.
3. Applied economics can teach valuable lessons on how to avoid the recurrence of
negative impact.
What’s More
Identify the following statements. Choose your answer from the box.
Analyze the result Is the economy growing?

Economic growth Needs of the consumer
For whom shall the goods and services Scarcity
be produced? Simple consumer goods
Gather data Test hypothesis
How to produce these goods? Type and quality of goods
Identify the problem
_____ 1. In scientific way of problem solving, this stage requires observation.

_____ 2. The universal objective of every economy.
_____ 3. Small and less expensive machines and simple techniques is suited for
________ goods.
_____ 4. This is the basis for deciding on what goods and services to produce.
_____ 5. This is the root of all economic problems.
_____ 6. An economic problem where proper combination of economic resources
must be decided.
_____ 7. In scientific method of problem solving, this involves determining the
focus of the study.
_____ 8. The economic problem that has something to do with distribution of
goods and services.
_____ 9. In scientific method of problem solving this is where the economist
breaks down and study complex information.
_____ 10 These serve as basis for deciding the right method and techniques to be
. used in production.
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What I Have Learned
Scarcity of means for satisfying various needs is the central problem of our
economic life. Because of scarcity, the economy is facing different problems such as:
what to produce and in what quantities?; how to produce the goods?; for whom shall
the goods and services be produced?; how efficiently are the resources being
utilized?; and, is the economy growing?
The use of applied economics is important to determine what steps can
reasonably be taken to improve the current economic situation. Doing so, the
scientific way of solving a problem and issue is applied. The steps are: identify the
problem, gather data, present a hypothesis, test the hypothesis and analyze the
result.
What I Can Do
My Business Opportunity Amidst Covid 19 Pandemic

Assuming that you are an entrepreneur, what business opportunity would
you find worth investing in during the COVID 19 pandemic? Identify your business
opportunity by completing the diagram.
What is the name of good/service

good/service?
description of the How will you use
good/service the resources
efficiently? strategy of using the
How to produce resources efficienty
resources needed
the good/service? method and technique of How the product
may contribute to 1.
the economy? 2
For whom is the target customer
good/service?
how they will be
distributed
Question: How did you apply the concept of Applied Economics in identifying your
business opportunity?
Assessment
Multiple Choices: Choose the letter of the correct answer and write it down on the
space provided for in each item.
_______ 1. This economic problem has something to do with the allocation of goods
and services among the members of society.
a. What to produce and in what quantity?
b. How to produce the goods/services?
c. For whom shall the goods and services be produced?
d. How efficiently are the resources being utilized?
_______ 2. This is the central problem of our economic life?
a. Product/service b. Population c. Resources d. Scarcity
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_______ 3. In solving economic problem, this involves thinking about the overall
outcome of the study:
a. Identifying the problem c. Hypothesis
b. Gather Data d. Test hypothesis
_______ 4. Scarcity and ______ go hand in hand.

a. Choice b. Solution c. Problem d. Resources
_______ 5. The following are economic resources, EXCEPT one.
a. Land b. Capital c. Manpower d. Time
_______ 6. Which one is the factor that must be considered in identifying the goods
or services to produce?
a. required quantity c. price
b. product description d. availability of resources
_______ 7. The following describe the importance of applying Applied Economics in
solving an economic problem, EXCEPT one.
a. It creates problem and solution to a given situation.
b. It becomes a powerful tool to reveal the true and complete situation.
c. It acts as mechanism to determine what steps can reasonably be
taken.
d. It can teach valuable lesson on how to avoid the recurrence of a
negative situation.
_______ 8. What is the universal objective of every economy?
a. Increase the production c. Economic growth
b Efficient use of resources d. Elimination of scarcity
_______ 9. Clarisse conducted a research to determine the causes of the problem
and its environmental conditions. Which step of solving a problem will
Clarisse perform?
a. Identifying the problem c. Gather data
b. Analyzing data d. Test hypothesis
______ 10. If Zac is observing to find out the effectiveness of his economic model,
which step of problem solving is Zac doing?
a. Gather data c. Test hypothesis
b. analyze the result d. identifying the problem
Additional Activities
Job for Filipino People!
Unemployment is one of the economic problems of our county. Assuming
that you are a leader of our country how will you solve this problem? Recommend
a solution following the process of scientific method of solving economic problem.
Reflection: Complete the statement:
The application of Applied Economics is helpful in solving economic problem

because ….
As individual I can apply the concept of applied economics in my daily life by

means of …
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Lesson
3 Market Supply
What I Need to Know
In this lesson the learners will gain competency in analyzing the market
supply.
1. Define market supply.

2. Explain the law of supply.
3. Analyze the effect of factors that affect market supply.
4. Show appreciation on the importance of analyzing the market supply.
What I Know
Agree or Disagree: Write the word AGREE if the statement is correct and
DISAGREE if it is not.
1. Sellers are encouraged to sell more if the price of goods in the market is high.
2. The cost of inputs has something to do with the willingness of sellers to supply.
3. Sellers believe that offering goods at a higher price brings them a greater profit.
4. Related goods are goods of the same kind.
5. Government policies may affect the supply for goods and services.
What’s In
The law of supply is a fundamental economic law and it is tied up into

almost all the economic principles in some ways. Determining the factors that affect
supply is vital in analyzing the economic situation.
What’s New
Market Supply is the total quantity of a good or service all producers are willing to
provide at the prevailing set of relative prices during a defined period of time.
Law of Supply represents the direct relationship between price and quantity
supplied. It means that when the price of good or services rises, supply increases
and if the price of good or services falls, supply goes down.
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What Is It
Market supply is the summation of the individual supply within a specific

market where the market is characterized as being perfectly competitive. As stated
on the law of supply, there is a direct relationship between price and quantity
supplied meaning as price increases, quantity increases due to low barriers to entry,
and as the price falls, quantity decreases. Some firms may even opt out of the
market.
Listed below are the factors that affect market supply according to Lumen
Learning on Boundless Economics.
Source:
https://courses.lumenlearning.com/boundlesseconomics/chapter/supply/
Factors Affecting Market Supply
1. Good’s own price: An increase in price will induce an increase in the quantity
supplied.
2. Prices of related goods: Related goods refer to goods from which inputs are
derived to be used in the production of the primary good.
3. Conditions of production: The most significant factor here is the state of
technology. If there is a technological advancement related to the production
of the goods, the supply increases.
4. Seller’s expectations: Sellers’ expectations concerning future market
conditions can directly affect supply.
5. Price of inputs: If the price of inputs increases the supply curve will shift left
as sellers are less willing or able to sell goods at any given price.
6. Number of suppliers: As more firms enter the industry, the market supply
curve will shift out, driving down prices.
7. Government policies and regulations: Government intervention can take
many forms including environmental and health regulations, hour and wage
laws, taxes, electrical and natural gas rates and zoning and land use
regulations. These regulations can affect a goods’ supply.
What’s More
Fill in the blanks.

1. As price of goods and services rises, quantity supplied
_______________________.
2. _________________________ is the total quantity of a good or service all
producers are willing to provide at the prevailing set of relative prices during
a defined period of time.
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3. ________________________ represents the direct relationship between price and
quantity supplied.
4. There is a ___________________ relationship between price and quantity
supplied.
5. If there is a technological advancement related to the production of the good,

the supply _____________________________
What I Have Learned
Multiple factors can affect both supply causing them to increase or decrease in
various ways. None-price determinants of supply includes prices of related goods,
conditions of production, seller’s expectations, price of inputs, number of suppliers
and government policies and regulations.
What I Can Do
Situation Analysis:
Instruction: Identify the factor that may affect the supply for the underlined
goods on the following situation. Then analyze how it may affect the
supply and give your reason. Write your answer in the appropriate cell.
Factor that Effect on Reason

Situation affects supply
supply (increase or
decrease)
1. The government imposed
excise tax on alcoholic
beverages.
2. The price of wheat flour
used as main ingredient
for cakes and bread
increases.
3. Pork supply in the
market as African Swine
Fever strikes hog farms.
4. Supply of liquor as
demand for disinfectant
increases.
5. Supply of notebook as the
education system adapted
the distance learning
modality.
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Assessment
Multiple Choices: Write the letter of your choice on the spaces provided before the
number of each item.
_____1. Assuming that a typhoon devastated the rice farm in Central Luzon,
what will happen to the price of rice after few days assuming other
factors remain constant?
A. Price will decrease B. Price will remain the same
C. Price will increase D. No change in price
_____2. Products which are consumed together with the other product are
called _______ goods.
A. Alternative goods B. Substitute good
C. Combined goods D. Complementary goods
_____3. Which of the following may affect market supply?
A. Income B. Taste and preferences
C. Technology D. Number of buyers
_____4. What factor affecting supply made Marilou reduce her production
quantity as the price of main ingredient of her product rose?
A. Cost of production B. Number of suppliers
C. Technology D.Seller’s expectation to
future price
_____5. As price of commodity increases, suppliers are attracted to sell more
while buyers tend to ____________.
A. Increase their consumption B. Maintain their consumption
C. reduce their consumption D. Not to consume
Additional Activity
Instruction:
1. Cut out a news article related to supply of goods in the market at present and
paste it on a bond paper.
2. Give your reaction towards the issue.
3. Explain how the law of supply applies on the issue.
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Lesson
Market Demand
4
What I Need to Know
In this lesson the learners are expected to gain competence in analyzing

the market demand.
1. Define market demand,

2. Explain the law of demand.
3. Analyze the effect of factors that affect market demand.
4. Show appreciation on the importance of analyzing the market demand.
What I Know
Yes or No: Write the word Yes on the blank if the statement is correct and No if it
is not.
______
1. As price of good increases, buyers tend to buy more of it.
2. If the price of good is high, buyers may shift to its substitute.
3. The willingness of buyers to buy goods may change without changing its
price.
4. If seller will give a discount in the future, the demand for good increases at
present.
5. Demand for goods varies as population changes.
What’s In
Another fundamental economic law that is in some ways tied up into almost all the
economic principle is the law of demand. Determining the factors that affect demand
is vital in analyzing the economic situation.
What’s New
Market Demand is the sum of the demands of all consumers.
Law of Demand represents the inverse relationship between price and

quantity demanded. It means that when the price of good or services rises, demand
decreases and if the price of a good or services falls, demand goes up.
15
What Is It
Market demand is the number of good and services required by a group of

people in a given market. Price and demand are closely related: applying the law of
demand, the lower the price, the greater the demand and vice versa. However,
multiple factors can affect market demand causing them to increase or decrease in
various ways.
Source: https://inflateyourmind.com/macroeconomics/unit-2/section-6-demand-
determinants/
Determinants of Demand
1. A change in buyers’ real incomes or wealth: When buyers’ incomes change,
we distinguish between two products: normal goods and inferior goods. The
demand for normal goods increases if buyers experience an increase in real
incomes or wealth. However, some products may experience a decrease in
demand as buyers’ real incomes increase. These are inferior goods.
2. Buyers’ tastes and preferences: As a product becomes more fashionable or
useful, its demand increases. As some products gain in popularity, others
lose. Thus, the demand for the less popular products decreases.
3. The prices of related products or services: If the price of a substitute
decreases, then the demand for the other product decreases (and vice versa).
A related good can also be a complementary product. This is a product
consumed along with another product. If the price of a complementary
product decreases, the demand for the other product increases (and vice
versa).
4. Buyers’ expectations of the product’s future price: This increases current
demand. This will have the eventual effect of actually increasing the real price
in the short run (an increase in demand increases the price).
5. Buyers’ expectations of their future income and wealth: When buyers
expect their income or wealth to increase, they will increase their demand for
normal products and decrease their demand for inferior products, and vice
versa. Many people anticipate their future increased (or decreased) incomes
by changing their consumption habits now.
6. The number of buyers (population) If the population of buyers of a certain
product increases, we experience an increase in the demand for that product.
With the aging of the Baby Boomers we can anticipate a rise in the demand
for products that senior citizens typically purchase (insurance, health care,
travel, nursing care). If we experience another baby boom in the future, the
demand for baby products will increase again.
What’s More
Fill in the blanks.

1. When consumers think that product prices will increase in the future, the
demand for product at this time will _____________.
2. Goods that have reduced demand in spite of increasing incomes are known as
________________
16
3. ________________________ is the sum of demand for goods and services that
consumers are willing to pay at each price point.
4. The demand for a ________________________ increases if buyers experience an

increase in real income.
5. ___________________________ is a product consumed along with another
product.
What I Have Learned

Multiple factors can affect market demand causing them to increase
or decrease in various ways. Non-price determinants of demand includes: a change
in buyers’ real incomes or wealth, buyers’ tastes and preferences, the prices of related
products or services, buyers’ expectations of the product’s future price, and the
number of buyers
What I Can Do
Situation Analysis:
Instruction: Identify the factor that may affect the demand for the underlined
goods on the following situation. Then analyze how it may affect the
demand and give your reason. Write your answer in the appropriate cell.
Factor that Effect on Reason

Situation affects demand
demand
1. TV set - Marilou got
promoted in her job, as a
result, her salary
increased.
2. Shoe - There will be a mall
wide sale next month.
3. Automatic washing
machine is now available
in the market. Mary, a
busy working mom
considers buying it.
4. Chicken - African Swine
Flu strikes hog farms.
5. Plant pots - A lot of people
stayed at home due to
community quarantine.
17
Assessment
Multiple Choices: Write the letter of your choice on the spaces provided before the
number of each item.
1. 1. The law of demand refers to the:
A. Positive relationship between price and quantity demanded.
B. Positive relationship between quantity supplied and quantity
demanded
C. Inverse relationship between price and quantity demanded
D. Inverse relationship between quantity supplied and quantity
demanded
2. Which of the following is a factor that affects demand?
A. Number of sellers B. Cost of production
C. Taxes D. Income
3. There will be a Rainy Season Mall-Wide Sale at the end of this month.
What is the factor considered by Jane in her plan of buying a bag
during the sale period?
A. Season B. Expectation to future price
C. Quality of product D. Taste and Preferences
4. What may happen to the demand if buyers expect that their income
will increase?
A. the demand for normal good will increase
B. the demand of inferior good will increase
C. the demand for normal good will decrease
D. demand for goods will remain the same
5. If the price of butter, a complementary product of loaf, increase, the
demand for loaf may ______.
A. increase B. decrease C. remain constant D. none of these
Additional Activity
Instruction:
1. Cut out a news article related to demand for goods in the market at present and
paste it on a bond paper.
2. Give your reaction towards the issue.
3. Explain how the law of demand applies on the issue.
18
Lesson
5 Market Equilibrium
What I Need to Know

In This lesson the learners will gain competency in analyzing the equilibrium

1. Define surplus and shortage
2. Explain market equilibrium
3. Show appreciation on the importance of analyzing the market equilibrium in
making economic decision.
What I Know
True or False: Write the word TRUE if the statement is correct and FALSE
if it is not.
________1. If the demand for goods is greater than its supply, there will be an excess
supply.
________2. If the price of good is high, buyers may shift to other similar goods.
________3. The willingness of buyers to buy goods may change without
changing its price.
________4. Price is the first determinant of demand and supply.
________5. If the supply of good is greater than its demand, price will
decrease.
What’s In
When the price of good or services rises, supply increases; however, its
demand goes down. Supply and demand pull against each other until the market
finds an equilibrium price. In this lesson the learners will understand how the
market can be at the state of equilibrium.
What’s New
Market Equilibrium is a market state where the supply in the market is equal
to the demand in the market.
Equilibrium Price is the price of a good or service when the supply of it is

equal to the demand for it in the market
19
What Is It
If the price of goods or service in the market is above the equilibrium, there
will be more supply than demand resulting to an excess supply or surplus. In this
situation, sellers will tend to lower their price, slow down or reduce their production
or stop ordering from suppliers. The lower price attracts more consumers to buy,
however discourage the sellers to supply. This process will result in increasing
demand and decreasing supply until the market price equals the equilibrium price.
If the market price is below the equilibrium value, current demand is greater
than supply resulting to an excess demand or shortage. In this case, buyers will bid
up the price of the good or service in short supply in order to obtain it. As the price
goes up, enticed sellers will start to supply more of it. However, some buyers might
quit because they don't want to, or cannot pay the higher price. Eventually, the
upward pressure on price and supply will stabilize at market equilibrium.
Equilibrium Price and Quantity
Surplus = quantity supplied is greater than

quantity demanded
Equilibrium Quantity: 20
Equilibrium Price: P6
Shortage = quantity supplied is less

than the quantity demanded
Importance of Supply and Demand Analysis

Woodruff (2018) expressed that all business managers and consumers use
supply and demand analysis to make decisions. Business owners analyze the factors
that affect supply and demand curves to determine what volume to produce and how
to price their products. Consumers make buying decisions, either consciously or
instinctively, based on their wants and needs and perceived value received at
particular price points.
What’s More
Fill in the blanks.

1. ___________ is the price/quantity point where consumers and producers are
satisfied with their decision, and the market is in balance.
2. Low supply and high demand ______________ price.
3. If quantity supplied is greater than the quantity demanded there will be
____________.
20
4. If quantity demanded is greater than its supply the result is _______________.
5. _________is the price of a good or service when the its supply is equal to the
demand for it in the market.
What I Have Learned
The law of supply and demand is a theory that explains the interaction
between the seller and buyer of goods and services. Generally, low supply and high
demand increases price and vice versa. Supply and demand pull against each other
until the market find an equilibrium price.
What I Can Do
Price Demand Supply
50 500 2000
45 750 1800
40 1000 1750
35 1200 1500
30 1350 1350
25 1550 1200
20 1700 1050
15 1850 850
10 2000 600
5 2100 400
Instruction: Draw a demand and supply curve for the market demand and supply
schedule below. Then, answer the following questions
1. What is the equilibrium quantity?
2. What is the equilibrium price?
3. At what price does market start to have a surplus?
4. At what price does market start to have a shortage?
Assessment
Multiple Choices: Write the letter of your choice on the spaces provided
before the number of each item.
________1. Market equilibrium exists when quantity supplied is _________
than/to the quantity demanded.
A. Greater B. Equal C. Less D. Over
________2. What is the result if market demand is greater than market supply?
A. Surplus B. Shortage
C. Market Equilibrium D. Free Enterprise
21
________3. As price of commodity increases, suppliers are attracted to sell more
while buyers tend to ____________.
A. Increase their consumption B. Maintain their consumption
C. reduce their consumption D. Not to consume
________4. What is the result if market supply is greater than market demand?
A. Surplus B. Shortage
C. Market Equilibrium D. Free Enterprise
________5. Price of goods tends to ___________ if there is an excess supply.
A. rise B. drop C. remain constant D. either A or B
Additional Activity
Disinfectant Alcohol’s Demand, Supply and Price During Pandemic

Instructions:
1. Describe the interaction of demand, supply for disinfectant alcohol before and
now that there is a pandemic.
2. Explain the relationship of demand and supply to the price of disinfectant alcohol
before the pandemic, on the first month of lockdown, and as of this time.
Lesson
Implications of Market Pricing on
6 Economic Decision
What I Need to Know
Why is the study of market pricing important? Primarily, market pricing is one
of the first considerations for many customers and it determines the profit margin
on products. Secondly, pricing is an important decision-making aspect after the
product is manufactured. Finally , through knowledge and understanding, the
customer may base his final buying decision on the over all benefits offered by the
product.
As you read this learning pathways you will be equipped with informed
concepts in market pricing and be able to demonstrate understanding on different
conditions concerning the effects or possible results on market pricing on economic
decision.
1. Define market pricing

2. Explain the market pricing on economic decision
3. Demonstrate understanding of market pricing on economic decision
22
What I Know
Multiple Choice
Instruction: Encircle the letter of your best answer.
1. It is a way of finding a competitive price of a product or a service.

A. Marketing Strategy C. Finding Competitive
B. Pricing Strategy D. Market Demand
2. Choosing the right price of the product will allow you to ___
A. Maximize profit margins C. Decrease Profit Margin
B. Crippling your company D. Exceed Cost
3. A kind of pricing strategy used to impose high rates during initial phase then
lowers the price gradually as competitor goods appear in the market.
A. Economy Pricing C. Price Skimming
B. Geographical Pricing D. Premium Pricing
4. Mang Juan is taking advantage of selling leather jackets at a higher price during
cold days.
A. Economy Pricing C. Price Skimming
B. Geographical Pricing D. Premium Pricing
5. A kind of strategic pricing used to expand business across international line.
A. Value Pricing C. Captive Pricing
B. Geographical Pricing D. Psychological Pricing
What’s In
Market price is the economic price for which a good or service is offered in the
market place. It is of interest mainly in the study of microeconomics only under
conditions of market efficiency, equilibrium and rational expectations.
Market Efficiency measures information dispersion in a market. It does not tell the
value of an asset its true price. It only says that it is impossible to consistently
estimate whether the asset price will move up or down.
Equilibrium is a situation in which economic forces such as supply and demand

are balanced and in the absence of external influences the values of economic
variables will not change. In this case, market equilibrium is a condition where a
market price is established through competition such as the amount of goods.
Rational Expectations - In Economics, rational expectations are models of

consistent expectations as valid. To obtain consistency within a model, the
predictions of future values of economically relevant variable from the model are
assumed to be the same as that of the decision-makers in the model.
The economic theory in the law of supply and demand states that the market price
moves at a point where the forces of demands meet. Supply is defined as the
numerical quantity of a tangible item that business, organizations and other
institutions have for redistribution. Demand is the desire of the consumers for a
specific product.
23
What’s New
Importance of Pricing Strategies
When it comes to business market, prices are everything. Prices are

accountable for the decisions that producers and consumers make. Price is the value
that is put to a product or service and is the result of a complex set of calculations,
research and understanding and risk-taking ability.
Pricing strategy takes into account segments, ability to pay, market

conditions, competitor actions, trade margins and input costs.
Different kinds of Pricing Strategies
1. Premium pricing: Price at the high rate set as defining criterion. Pricing strategies
work in segments and industries where a strong competitive advantage exists for
the company.
2. Penetration Pricing: Artificially low price to gain market share quickly. This is
done when a new product is being launched. It is understood that prices will be
raised once the promotion period is over and market share objectives are achieved.
3. Economy Pricing: no-frills price. It targets the mass market and high market
share.
4. Price Skimming: high price is charged for a product till such time as competitors
allow it, after which prices can be dropped.
5. Psychological Pricing- Refers to techniques that marketers use to encourage
customers, to respond based on emotional impulses, rather than logical ones
6. Bundle Pricing: Sell multiple products for a lower rate than the consumers would
face if they purchased each item individually.
7. Geographical Pricing: Involves setting a price point based on the location where
its sold.
8. Promotional Pricing: Involves offering discounts on a particular product.
9. Value Pricing: Occurs when external factors, like a sharp increase in competition
or a recession, force the small business to provide value to its customers to
maintain sales.
10. Captive Pricing: Can increase prices so long as the cost of the secondary product
does not exceed the cost that customers would pay to leave for its competitor.
What Is It
Let’s take a closer look at just how prices can affect the decision making for
producers as well as consumers.
Robert Dodge (1995) cited the following critical factors for making a decision
1. Setting a high price creates bigger margins which leads to increase profits.
2. With low prices the opposite happens: margins are reduced and there is less
contribution from that particular product.
3. Premium prices may deflate demand resulting in less total profitability from sales
of that particular product.
4. Too high a price can create an umbrella under which competitors can enter the
market with lower prices and gain market share.
24
5. Too low a price compared with what the market is willing to pay can create what
is called an opportunity cost, which may define as the difference between the
higher price. ???
If you experience either of these scenarios, then you understand that prices
have major effect on producers and consumers and the decisions that they make.
What’s More
How prices can affect the decision making for producers as well as consumers
1. Prices and Producers

The law of supply states that the quantity of goods increases when the price
decreases. The law of supply is a primary example of how pricing can affect decision
making with producers.
For example, Mang Jose works for a company that produces smartphones.
The company he is working with has been made aware that a rival company will be
introducing a newer smartphone in four months, which has the same features but
at a lower cost. The company has chosen to lower the price of their current
smartphone along with trying to sell it to other retail stores to try and get ahead of
the competition. In anticipation of additional sales from the lowering prices, there
must be additional supplies purchased.
Price also affects producers because it relates to the cost of materials needed
to produce a good. For example, you are the manufacturer of bags and the materials
to create these bags are made from supplies such as cottons, yarns along with other
fabrics. If the cost of supplies is high, then it affects your decision making because
you must look on how many bags can be crafted.
2. Prices and Consumers

Price has a direct effect on consumers. The law of demand states that when
prices increase, the quantity of a good decreases. Prices affect consumer decisions
by often providing low-cost generic alternatives to name brands. Sandeep Heda
(2017) in his article entitled How Customers Perceive A Price Is an Important as the
Price Itself shows how industries used price to position themselves against
traditional competitors. According to him, what will boost their perceived value to
consumers is to reduce prices either by cutting the listed price or offering a discount.
A store with the same prices as a competitor would like to be seen as having
lower prices, and a retailer with average prices that are 10% higher than a key
competitor would love to be perceived as being only 5% higher.
What I Have Learned
Market pricing transactions in the market economy commonly functions

based on the law of supply and demand. Best economic outcomes can be achieved
through strategic market pricing. Pricing such as premium pricing, penetration
pricing, economy pricing, price skimming, psychological pricing, bundle pricing,
geographical pricing, promotional pricing, value pricing and captive pricing can be
used in appropriate forms in different types of situations.
25
What I Can Do
Vocabulary Enrichment
Instruction: Define the following words and phrase
1. Market Price________________________________________________________________________
2. Consumers_________________________________________________________________________
3. Producers__________________________________________________________________________
4. Law of supply ______________________________________________________________________
5. Market Economy ___________________________________________________________________
6. Supply ____________________________________________________________________________
7. Demand ___________________________________________________________________________
8.Market Efficiency___________________________________________________________________
9. Equilibrium________________________________________________________________________
10. Rational Expectations_____________________________________________________________
Assessment
Matching Type: Match the items in Column A with the items in

Column B.
Column A Column B
1 States that the quantity of a good increases when the price Penetration
decreases Pricing
2 When prices increase the quantity of a good decreases Skimming
Strategy
3 Involves offering discounts on a particular product. Market Price
4 Pricing strategies work in segments and industries where a Law of supply
strong competitive advantage exists for the company.
5 They control productive resources for profit Economy
Pricing
6 Price is set artificially low to gain market share quickly Premium
Pricing
7 Is the economic price for which a good or service is offered Market
in the marketplace Efficiency
8 It only says that it is impossible to consistently estimate Entrepreneurs
whether the asset price will move up or down.
9 High price is charged for a product till such time as Law of Demand
competitors allow it, after which prices can be dropped.
10 Is the economic price for which a good or service is offered Promotion
in the marketplace Pricing
26
Additional Activity
Multiple Choices
1. If customers are price sensitive, the company should;

a. Match the pricing of competitors b. Price above the competition
c. Justify the pricing by explaining the benefits d. Do it in a haphazard way
2. If the product has an extra feature over the competitor’s product, the company
could either;
a. Price it to the highest amount b. Price it slightly for the additional feature
c. Price a product base on a competition d. Price a product based on estimation
3.Aling Anita is a bag maker, her decision to produce was affected by the high-rate
cost of the materials she used to craft bags, what decision making to belong as a
duty???
a. Price and the Consumers b. Price and the Producers
c. Pricing Competitors d. Buyers and sellers
4. It is a technique in setting price based on emotional impulses than logical ones.

a. Psychological pricing b. Value pricing
c. Product base d. Premium Pricing
5. Price affects producers because it relates to;

a. Cost of materials needed to produce a good b. Income sharing of producers
c. High demand of production d. Pursue profit
Lesson
7 Market Structure
What I Need to Know
At the outset, students engage in a cognitive task upon which new

understanding can be developed. This will help them achieve greater intellectual
development in the form of deeper knowledge. It is also important that students
understand the concepts and principle of market structure. Also enhanced personal
efficacy occurs through action and reflection as students seek to achieve real
objectives for deeper understanding.

1. Define market structure.
2. Identify the different forms of market structure and its characteristics.
3. Understand the conditions for the existence of each market structure
27
What I Know
Multiple Choice
Instruction: Encircle the letter of your best answer.
1. This market structure means a single producer controls the whole supply of a
single commodity.
A. Monopolistic Competition B. Perfect Competition
C. Oligopoly D. Monopoly
2. This market has 25-75 firms, selling slightly differentiated products and some
prices are controlled.
3. This market structure has 2-24 firms slightly differentiated products with high
barriers to entry and high control over price.
4. The following are the characteristics of Oligopoly except;
A. Dominant B. Strict barriers
C. High Concentration D. Differentiated in nature
5. Markets like automobiles, cellphones, cable TV, and internet providers are
examples of which market structure?
6. Which of the following is a source of Monopoly power?
A. Smart Phones B. Lazada
C. Maynilad D. National Steel Corporation
7. This market structure has easy entry and exit of products;
8. These are labeled as public goods except;
A. Social Security System B. Public Highways
C. Education D. Restaurants
9. It has the same impact on the market as monopoly;
A. Duopoly B. Duopsony
C. Monopsony D. Oligopoly
10. Market failure happens when individuals create
A. Irrational self- interest B. Profits
C. Business D. Economically inefficient outcome
What’s In
What is market structure?
Market structure commonly used in economics to describe the interconnectedness

of an interaction between the buyers and sellers in a market. The term market
structure according to Viray and Jesusa (2018) is a classification system for the key
traits of a market, including the number of firms, the similarity of products they sell,
and the ease of entry into and exit from the market structure.
28
The following are the different types of market structures:
1. Perfect Competition is a market structure in which buyers and sellers consist of

great numbers of small firms.
2. Monopoly is a market structure which has a complete control of the entire supply
of goods or of a service in a certain area or a market.
3. Monopolistic Competition is a market structure which combines elements of
monopoly and competitive markets.
4. Oligopoly is a market structure with a small number of firms dominated by a
small group of large sellers.
What’s New
(1) Perfect Competition is a market structure by a large number of small

firms which offer a homogenous product. Prices are usually kept low by competitive
pressures. The role of the firm in perfect competition is to regulate scarce resources
to satisfy consumer demand in a profitable way.
Agricultural markets often get close to perfect competition. In some cases, there are
several farmers selling identical products to the market. Also through internet
services like Lazada, e-bay and Shopee are close to this type of market structure
where it is easy to compare the prices and buy the cheapest.
There is no need to spend money on advertising in Perfect Competition. Information
is shared evenly between all participants where the firm industries can sell all they
can produce. There is easy entry and exit of products.
(2) Monopoly market structure. The extreme opposite of perfect competition. It is
defined by a single seller or producer. The occurrence of transaction in the system
has only two choices either by the monopolist product or none at all. The product
has no close substitutes. It is said that the elasticity of demand with every product
is very low. This means a single producer controls the whole supply of a single
commodity. Monopoly firm can change the price and quantity of the good or service.
It maximizes profits due to the lack of competition. There is strict barriers to the
entry of new firms either in the market or to do production.
(3) Monopolistic competition occurs when an industry has many firms with
differentiated products. It means they are price makers because the goods are highly
differentiated. Examples of the monopolistic competitions are restaurants,
hairdressers, clothing and TV programs. It has freedom of entry and exit in the
market system.
(4) Oligopoly is a market form wherein a market or industry is dominated by a small
group of large sellers. Each oligopolist is likely to be aware of the others. Oligopolies
like monopolies frequently maintain their position of dominance. There are two types
of Oligopoly pure or perfect and differentiated or imperfect. Example of pure oligopoly
is aluminum industry which product is homogenous in nature while Talcum powder
industry is a product differentiated in nature. There are two major reasons Oligopoly
industries determine on how it can maximize profits. Some oligopolies have high
concentration ratio while other industries have much lower concentration making it
more difficult to do the pricing strategy. It has an open and close entry to the market.
29
What Is It
Special Types of Market Structure
(1) Bilateral Monopoly happens when a market has only one producer (i.e.,
monopoly) and one buyer (i.e., monopsony).
Examples of Bilateral Monopolies
● Coal Mining Monopsonist facing a Trade Union is the only employer of Labor.
But there is only one supplier of labor from the trade Union members.
● A monopsony would pay a wage of W2 and employ Q2 workers where
MRP=MC
● A trade Union could organize labor and bargain for higher wages of W3-
without causing a fall in employment.
(2) Strategically bilateral oligopoly market game with two commodities, it allows
strategic behavior one on the other sides of the market. When the sum of
purchasers is large, market condition with an effect degree of seller performed
like Oligopoly and a significant degree of buyer combination like Oligopsony.
(3) Duopsony is an economic state in which there are only two large buyers for a
particular product or service. These two buyers influence market demand, giving
them considerably strong bargaining power, assuming they are outnumbered by
firms.
(4) Duopoly is the simplest form of Oligopoly controlled by small companies. A
duopoly can have the same impact on the market as a monopoly if the two players
work on prices or output.
(5) Monopsony exists in a specific area, wherein only one buyer usually works along
with many sellers.
Market Failures, Public Goods and Externalities
According to Chappelow (2020) market failure is an economic situation defined by

an inefficient distribution of goods and services in the free market.
(1) Market failure happens when individuals playing in rational self-interest create a
less than optimal or economically inefficient outcome.
(2) Market failure can happen in a complete market where goods and services are
bought and sold outright, which we think of as an average market.
30
(3) Market failure can also occur in implicit markets as approvals and special
treatment are exchanged, such as elections or the legislative process.
(4) Market Failures can be answered using private market solutions, government-
imposed solutions, or voluntary collective actions.
Externalities happen when one person’s behaviors affect another person’s well-
being and the pertinent amount and profits are not reflected in market prices.
Decrease the social benefits of individual selfishness. If selfishness consumers do
not have to pay producers for benefits, they will not pay; and if selfish producers are
not paid, they will not produce. A valuable product fails to appear. As David Friedman
explains, “its not that one person pays for what someone else gets but that nobody
pays and nobody gets, even though the goods is worth more than it would cost to
produce.”
(1) Positive externalities are benefits that are infeasible to charge to provide. For
instance, if you walk to work, it will reduce congestion and pollution; this will
benefit everyone else in the city or a farmer who grows apple trees provides a
benefit to a beekeeper gets a good source of nectar to help make more honey.
(2) Negative Externalities are cost that are infeasible to charge not to provide. For
example, oceans are a public utility, and nobody holds private rights over them.
This means that ships and boats can pollute the sea since there are no property
rights in the deep seas. The pollution affects other ocean users, such as fishermen
who depend on the ocean water for their livelihood.
Cowen (2002) stated that most statements for government involvement supported
the idea that the marketplace cannot provide public goods or handle externalities.
Public health and welfare programs, education, roads, research and development,
national and domestic security, and a clean environment all have been labeled public
goods.
What’s More
TRUE OR FALSE. Write T if the statement is true. F the statement is false.
_______1. The exact number of firms cannot be determined in Perfect Competition.

_______2. Meralco is one example of a perfect competition.
_______3. Oligopoly is a market structure characterized by few sellers.
_______4. Monopolistic competitive market face high barriers of entry.
_______5. Perfect competition is a single firm with differentiated products.
What I Have Learned
Market structure refers to the nature and degree of competition in the market
for goods and services. On the basis of competition, a market can be classified in the
following ways (1) Perfect Competition (2) Monopolistic (3) Monopoly and (4) Oligopoly
31
What I Can Do
1. Quick Write. Using the concept of supply and demand, how would consumers
react to an economy based solely on a monopolistic market structure?
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
__________________________________________________________________________________
Assessment
Market Structure Chart: Let’s summarize important distinctions among the four
market structures.
Market #of Control Kind of Type Of Barriers

Structure firms Over Price Competitio Goods to Entry
n
Perfect
Competition
Monopolistic
Competition
Oligopoly
Monopoly
TRUE OR FALSE. Write T if the statement is true. F the statement is false.

______1. The exact number of firms cannot be determined in Perfect Competition.
______2. Meralco is one example of a perfect competition.
______3. Oligopoly is a market structure characterized by few sellers.
______4. Monopolistic competitive market face high barriers of entry.
______5. Perfect competition is a single firm with differentiated products.
Additional Activity
Arrange the letters to form the term being defined in each number:
1. PNCOOOMLSIIT MPTTIONCEIO-is a market structure which combines

elements of monopoly and competitive markets.
2. LYOOPOIGL- is a market structure with a small number of firms dominated by
a small group of large sellers.
3. ETKARM UCURETTSR- commonly used in economics to describe the
interconnectedness of an interaction between the buyers and sellers in a market
4. RPEETCF NETTMCOOIIP- is a market structure in which buyers and sellers
consist of great numbers of small firms.
5. NOOOMLPY- is a market structure which has a complete control of the entire
supply of goods or of a service in a certain area or a market.
32
Lesson
Contemporary Economic Issues
8 Affecting Filipino Entrepreneurs
What I Need to Know
In this lesson, learners are expected to gain competence and critically

analyze how contemporary economic issues and problems affect Filipino
entrepreneurs.

1. Cite economic issues faced by entrepreneurs.
2. Explain how the economic issues affect Filipino entrepreneurs.
What I Know
TRUE OR FALSE: Write the word TRUE if the given statement is correct, otherwise
write FALSE
__________ 1. Investment is an amount of money derived merely from savings.
__________ 2. Job and skill mismatch are one of the labor issues in the
Philippines
__________ 3. Minimum wage policy tends to reduce employment in small scale
firms.
__________ 4. Non-VAT business pays 3% tax based on sales.
__________ 5. Alcohol, tobacco, petroleum products, automobiles, and mineral
products are charged with excise tax.
__________ 6. Rate of interest is the sole determinant of investment.
__________ 7. One reason of educated unemployment is the graduate’s reservation
on wages and that they can afford to wait for better opportunities.
__________ 8. The tax liability for a corporation is determined by its residency
status and is based on the net income it obtains while carrying out
its business activity.
__________ 9. Tax imposed to a non-VAT business is also called percentage tax.
__________ 1 A 12% tax based on gross sales is imposed by government to a VAT
0. business.
What’s In
Entrepreneurship is vital in our economy as it creates wealth and so improves

the standards of living not only for the entrepreneurs, but for other people as
well. With entrepreneurs’ innovation, new and improved products enable new
markets to develop. Higher earnings can help boost national income and tax
revenue. However, like any endeavor, entrepreneurs are faced with challenges.
There are some economic issues that affect their growth and development.
33
What’s New
A contemporary issue refers to an issue that is currently affecting
people and that is unresolved. The fundamental economic problem faced by
society and business owners is how to allocate scarce resources to produce various
goods and services within the economy. Filipino entrepreneurs are currently faced
with different economic problems and issues that affect their business operations.
What Is It
Contemporary Economic Issues Affecting Filipino Entrepreneurs:
1. Capital/Investment and the Rate of Interest

Chen, J. (2020) defined "investment" as any mechanism used for generating
future income. She explained that investing is putting money to work to start or
expand a project or to purchase an asset or interest where those funds are then put
to work, the goal of which is to earn an income and increase its value over time.
Abrugar, V. (2014) stated that for starting entrepreneurs who are not yet
earning an operating income, getting financial aid from the government or obtaining
a loan from banks seems to be difficult. Applying for a bank loan requires too much
paperwork, while interest rates are also too high. To get a loan, an entrepreneur
must have a collateral or show some years of operating income.
Pettinger, T. (2019) added that with higher interest rates, it is more expensive
to borrow money from a bank. Interest rate is the amount a lender charges for the
use of assets expressed as a percentage of the principal. The interest rate is typically
noted on an annual basis known as the annual percentage rate (APR). Higher rates
increase the cost of borrowing and require investment to have a higher rate of return
to be profitable. This tends to discourage investment because of higher opportunity
cost. Interest rates are one important determinant of investment. However, it is not
the only factor, other factors include investor confidence, economic growth,
the willingness of banks to lend, and state of technology.
2. Labor
Labor refers to an economic group comprising those who do manual labor or
work for wages.
Unemployment, job and skill mismatch and educated unemployed are one of
the labor issues in the Philippines. Even with the high unemployment rate, there
are actually jobs that are not filled because there are no applicants who have the
right qualifications. From this job mismatch problem also arises for the educated
unemployed. In 2010, the unemployment rate among the college educated is about
11%. Some have difficulty in finding an appropriate job for the degree they have.
Others, have higher reservation wages and can afford to wait for better opportunities.
With the declining earnings, people are looking for additional hours of work
(underemployed), or going abroad (overseas employment) or choose to be self-
employed. This also shows how they are not content with the quality of employment.
In 2009, it was reported that 1.423 million Filipinos were deployed overseas. (Source:
https://en.wikipedia.org/wiki/Labor_policy_in_the_Philippines)
34
3. Minimum Wage
A wage is monetary compensation or remuneration paid by an employer to
an employee in exchange for work done. Payment may be calculated as a fixed
amount for each task completed (a task wage or piece rate), or at an hourly or daily
rate, or based on an easily measured quantity of work done.
Based on the findings of the study conducted by Lanzona, L.Jr. (2014) it is
explained that, the minimum wage policy reduces employment in small-scale firms.
Because of greater marginal cost it would be difficult for small-scale firm to grow and
become a larger-scale firm. Thus, it causes them to reduce their production workers.
4. Taxes
Taxes are imposed and collected pursuant to the National Internal Revenue
Code, the Tariff and Customs Code, and several special laws. There are four main
types of national internal revenue taxes: income, indirect (value-added and
percentage taxes), excise and documentary stamp taxes, all of which are
administered by the Bureau of Internal Revenue (BIR). At the local level, governments
have some autonomy to impose taxes on business and ownership of real property.
● Corporate Income Tax - In the Philippines, all companies – domestic or
foreign – are liable to pay corporate income tax (CIT). The tax liability for a
corporation is determined by its residency status and is based on the net
income it obtains while carrying out its business activity, normally during one
business year.
● Sales Tax - Sales tax is a tax imposed on the gross sales or gross receipts
of an entity. The tax rate ranges from 3% to 12% depending on the tax type,
such as VAT or NON-VAT.
When a business entity is VAT registered, it is subject to 12% sales tax on
its gross sales or receipts. Such sales tax is referred to as VAT or Output Tax. On
the other hand, if a business entity is NON-VAT, it is subject to 3% sales tax on
its gross sales or receipts. Such sales tax is referred to as Percentage Tax.
(Source: https://mpm.ph/vat-vs-non-vat/)
● Excise Taxes - Excise taxes are imposed on the following: alcohol, tobacco,
petroleum products, automobiles, mineral products, and non-essential goods
such as jewelry and precious stones, perfumes, yachts and other sport
vessels. (Source: https://oxfordbusinessgroup.com/overview/key-
points-detailed-look-tax-laws-businesses)
● Documentary Stamp Tax - A documentary stamp tax (DST) is required for
certain documents, transactions or instruments specified in the tax code when
the obligation or right arises from Philippine sources or when the property is
situated in the Philippines. . (Source:
https://oxfordbusinessgroup.com/overview/key-points-detailed-look-tax-
laws-businesses)
5. Rental
Every business requires space for its office, store, warehouse, shop or plant
for production. However, not all entrepreneurs have their own real property to place
the required facilities. Thus, most of businesses started with renting a space. Rent
is the grant of possession and enjoyment of property or machinery and etc. in turn
for the payment of rent from the tenant or lessee. This payment for rent is part of
business operation’s expenses and must be covered through its sales. Moreover, if
the rental terms and conditions that a business has to comply are unfavorable, that
brings another challenge for entrepreneurs.
35
What’s More
Identify the terms described below. Write your answers on the blank.
_________________________ 1. A tax imposed on the gross sales or gross receipts of

an entity.
_________________________ 2. A tax that is required for certain documents,

transactions or instruments specified in the tax code.
_________________________ 3. It refers to any mechanism used for generating future
income.
__________________________ 4. It refers to an issue that is currently affecting people

and that is unresolved.
__________________________ 5. A tax paid by all companies – domestic or foreign.

__________________________ 6. This is the amount a lender charges for the use of
assets expressed as a percentage of the principal.
__________________________ 7. This refers to an economic group comprising those

who do manual labor or work for wages.
__________________________ 8. This is imposed and collected pursuant to the National

Internal Revenue Code, the Tariff and Customs Code,
and several special laws.
__________________________ 9. It refers to the grand of possession and enjoyment of
property or machinery and etc. in turn for the
payment of rent from the tenant or lessee.
_________________________ 10. This is a monetary compensation or remuneration
paid by an employer to an employee in exchange for
work done.
What I Have Learned
1. Filipino entrepreneurs are faced with different economic issues and problem
that affect their operation.
2. investing is putting money to work to start or expand a project or to purchase
an asset or interest where those funds are then put to work, the goal of which
is to earn an income and increase its value over time. With higher interest
rates, it is more expensive to borrow money from a bank.
3. Unemployment, job and skill mismatch and educated unemployed are one of
the labor issues in the Philippines.
4. Because of greater marginal cost it would be difficult for small-scale firm to
grow and become a larger-scale firm. Thus, it causes them to reduce their
production workers.
36
5. Taxes are imposed and collected pursuant to the National Internal Revenue
Code, the Tariff and Customs Code, and several special laws.
6. Many businesses around the world are currently struggling to cover their
overheads, and most economic activity is being generated from people’s
homes.
What I Can Do
News clip. Cut or print out a news article discussing economic issues affecting
entrepreneurs nowadays. Place it in a bond paper. Answer the following questions:
1. What economic issue affects the Filipino entrepreneur on your selected news
article?
2. How does this economic issue affect the Filipino entrepreneurs?
3. What are your reactions towards the issue?
4. If you are a political or economic leader, how will you resolve the issue?
Assessment
Multiple Choice. Choose the letter of the best answer. Write the chosen letter on a
separate sheet of paper.
_______ 1. Mary Ann is paying 3% tax based on her gross sales. What type of tax is
she paying?
A. Excise Tax B. Value Added Tax C. Percentage Tax
_______ 2. The government grants additional cost of living allowance to workers.
What possible economic issue affects the small-scale production business
of Mang Jose?
A. Labor B. Wage C. Investment
______ 3. Interest rate on borrowing is high. How may this situation affect the
inclination of Mr. Martinez to borrow money for his micro business
enterprise?
A. Mr. Martinez might increase his borrowing to increase his fund.
B. Mr. Martinez might have a second thought of borrowing due to its
cost.
C. Mr. Martinez might borrow however lower his price in order to boost
greater sales.
________4. Which of the following taxes is being paid by all types of business?
A. Corporate Income Tax B. Excise Tax C. Sales Tax
________5. Which of the following is charged with excise tax?
A. Agriculture products C. Petroleum Products
B. Livestock Products
________6. Which of the following is a labor issue?
A. Underemployment B. Employment C. Labor Supply
________7. The following determines the tax liability of a corporation EXCEPT one.
A. Residency status
B. net income it obtains C. number of stockholders
37
________8. What is the reason of educated unemployed?
A. Difficulty in finding an appropriate job for the degree they have.
B. They simply do not want to apply for a job.
C. Have lower reservation wages
________9. What could be the result of sending our professionals and skilled workers
abroad?
A. Oversupply of professionals and skilled workers in local job market.
B. Undersupply of professionals and skilled workers in local job market.
C. No supply of professionals and skilled workers in local job market.
________10. If the cost of investment is high, what may entrepreneurs tend to do?
A. Offer the product at lower price.
B. Offer the product at higher price.
C. Neither A nor B.
Additional Activity
Instruction:
1. Construct a “hugot line” showing how contemporary economic issue affects
Filipino entrepreneurs during this Covid 19 Pandemic.
2. Identify the economic issue that you have cited.
3. Explain how the economic issue affects the Filipino Entrepreneurs.
References
Abrugar, V. (2014) 8 Things that Hinder the Success of Filipino Entrepreneurs

Retrieved from https://businesstips.ph/8-things-that-hinder-the-success-of-
filipino-entrepreneurs/
AnosWeb Encyclonomic Web.pedia. Economics Overview Types and Economics

Indicator, Retrieved from
https://www.amosweb.com/cgibin/awb_nav.pl?s=wpd&c=dsp&k
=social%20science (Accessed June 8, 2020)
Aquino, M. (2017) Why is economics an applied science.
Retrieved from https://www.quora.com/Why-is-economics-an-applied-
science
Cayabyab, MJ (2020) Day2: More Buses Ease Transport Woes.

Retrieved from:
https://www.philstar.com/headlines/2020/06/03/2018385/day-2-more-
buses-ease-transport-woes
Chen, J. (2020) Understanding Investment

Retrieved from: https://www.investopedia.com/terms/i/investment.asp
Chapellow, J. (2019). Economics Overview: Types and Economic Indicators

Retrieved from https://www.investopedia.com/terms/e/economics.asp
38
CNN Philippines Staff (2020) Workers brave Metro Manila roads as PH relaxes
COVID-19 lockdown rules Retrieved from
https://www.cnnphilippines.com/news/2020/6/1/ Metro-Manila-GCQ-
lockdown-COVID-19.html
Cullen, H., (2017) Lesson 2 Economics as an Applied Science

Retrived from https://www.slideshare.net/HannahCullen/lesson-2-
economics-as-an-applied-science
Enriquez, Hanna (2017) Revisiting Economics as Social Science.

Retrived from https://www. slideshare.net/HannahCullen/revisiting-
economics-as-a-social-science
Fullcoll.edu. Market Equilibrium Retrieved from

https://staffwww.fullcoll.edu/fchan/Micro /1MKTEQUIL.htm (Accessed
June 12, 2020)
Inflate Your Mind. Determinants of Demand, Retrieved from

https://inflateyourmind.com/ macroeconomics/unit-2/section-6-demand-
determinants/ (Accessed June 12, 2020)
Kwatiah, N. Five Basic Problems of the Economy Retrieved from

https://www.economicsdiscussion.net/economic-problems/5-basic-
problems-of-an-economy-with-diagram/18173 (Accessed June 9, 2020)
Lanzona L.Jr.A. (2014) Effects of minimum wage on the Philippine economy.

Philippine Institute for Development Studies (PIDS)www.pids.gov.ph/
Retrieved from: https://www.eldis.org/document/A74918
Lumen Learning, Economic Models Retrieved from

https://courses.lumenlearning.com/ boundless-
economics/chapter/economic-models/ (Accessed June 9, 2020)
Lumen Learning, Market Supply. Retrieved from

https://courses.lumenlearning.com/boundless-economics/chapter/supply/
(Accessed June 12, 2020)
Malindog-Uy, A. (2020) Is the Philippines Winning Its COVID 19 Fight?

Retrieved from https:// theaseanpost.com/ article/philippines-winning-its-
covid-19-fight
Mizpa, H. Applied Economics (2017)
Retrieved from https://www.slideshare.net/MizpaHerbuela/applied-
economics77458768?from_action=save
Pettinger , T. (2019) Investment and the Rate of Interest Retrieved from:

https://www.economicshelp.org/blog/425/interest-rates/investment-and-
the-rate-of-interest/
San Juan, . (2020) MRT-3 bus program implements strict 5-minute interval for
faster travel time. Retrieved from
39
https://news.mb.com.ph/2020/06/06/mrt-3-bus-program-implements-
strict-5-minute-interval-for-faster-travel-time/
Study.com. Market Demand, Retrieved from

https://study.com/academy/answer/explain-the-difference-between-
individual-demand-and-market-demand.html (Accessed June 12, 2020)
The ASEAN, (2020) Virus sparks food shortage in the Philippine

Retrieved from https:/ /theaseanpost.com/article/virus-sparks-food-
shortage-philippines
Wikipedia, Labor policy in the Philippines Retrieved from:

https://en.wikipedia.org/wiki/ Labor_policy_in_the_Philippines
Woodruff, J (2019) Analysis of Demand and Supply

Retrieved from https://bizfluent.com/how-7897646-explain-economics.html
Vat Taxes. mpm Retrieved from https://mpm.ph/vat-vs-non-vat/ (Accessed June

19,2020)
40
For inquiries or feedback, please write or call:
Department of Education - Valenzuela
Pio Valenzuela Street, Marulas
Valenzuela City
Telefax: 8-292-4340
Email Address: sdovalenzuela@deped.gov.ph
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Applied Economics

Published by the Department of Education

Development Team of the Module

Writers: Gina R. Nipas and Flory Vic C. Taneo

Printed in the Philippines by ________________________

Department of Education – NCR SDO Valenzuela

Office Address: Pio Valenzuela St., Marulas, Valenzuela City

Utility and Application of Applied Economics to Solve Economic Issues

Implications of Market Pricing on Economic Decision

Contemporary Economic Issues Affecting Filipino Entrepreneurs

1 Nature and Scope of Economics

What I Need to Know

In this lesson the students are expected to gain competence in differentiating

1. Explain the meaning of Economics.

Applied Economics Economics Scarcity

____________ 2. It is the application of statistical and mathematical theories to

_____________3. This is done through the application of economic theories and

_____________5. This is a well substantiated explanation of some aspect of the natural

_____________7. It is a discipline that is used to apply existing scientific knowledge to

Economics is defined as a Social Science concerned with the production,

Social Science is the scientific study of society--of human behavior and of

Applied Science is a discipline that is used to apply existing scientific

Applied Economics is the study of observing how theories work in practice.

Econometrics is the application of statistical and mathematical theories to

What I Have Learned

2. Economics is considered a Social Science because it seeks to explain how

Modified True or False:

____________ 1. The social part of Economics is that it uses scientific method to

Lesson Utility and Application of Applied

2 Economics to Solve Economic

At the end of this module, learners are expected to gain competence in

1. Discuss the five basic economic problems.

Five basic economic problems of the economy

1. What to produce and in what quantities? - Goods and services must be

5. Is the economy growing? - To achieve growth in productive capacity is a

All these central problems of an economy are interrelated and interdependent.

Economics, as a science, in order to study data, observe patterns, and predict

Lumen Learning on Boundless Economics cites specific steps that must be

Source: https://courses.lumenlearning.com/ boundless-economics/chapter/

In solving economic issues and problem, the application of Applied Economics

2. Applied Economics acts as a mechanism to determine what steps can reasonably

Analyze the result Is the economy growing?

_____ 1. In scientific way of problem solving, this stage requires observation.

My Business Opportunity Amidst Covid 19 Pandemic

What is the name of good/service

_______ 4. Scarcity and ______ go hand in hand.

Reflection: Complete the statement:

The application of Applied Economics is helpful in solving economic problem

As individual I can apply the concept of applied economics in my daily life by

What I Need to Know

1. Define market supply.

The law of supply is a fundamental economic law and it is tied up into

Market supply is the summation of the individual supply within a specific

Factors Affecting Market Supply

Fill in the blanks.

5. If there is a technological advancement related to the production of the good,

What I Have Learned

Factor that Effect on Reason

In this lesson the learners are expected to gain competence in analyzing

1. Define market demand,

Market Demand is the sum of the demands of all consumers.

Law of Demand represents the inverse relationship between price and

Market demand is the number of good and services required by a group of

_ 4. Scarcity and go hand in hand.