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ADM Q1 SHS AppliedEconomicsV3-1 Check-1
ADM Q1 SHS AppliedEconomicsV3-1 Check-1
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
and Problems
Lesson 3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Market Supply
Lesson 4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Market Demand
Lesson 5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Market Equilibrium
Lesson 6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Lesson 7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Market Structure
Lesson 8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
References. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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Lesson
What I Know
Identify the following statements. Choose your answer from the table.
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
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.
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.
3
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
4
_____________ 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.
5
Expected Learning Outcome/s:
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)
6
What is It
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.
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.
7
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.
1. Applied Economics becomes a powerful tool to reveal the true and complete
situation in order to come up with things to do.
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.
8
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
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
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.
10
Lesson
3 Market Supply
In this lesson the learners will gain competency in analyzing the market
supply.
Expected Learning Outcome/s:
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
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.
11
What Is It
Listed below are the factors that affect market supply according to Lumen
Learning on Boundless Economics.
Source:
https://courses.lumenlearning.com/boundlesseconomics/chapter/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
12
3. ________________________ represents the direct relationship between price and
quantity supplied.
4. There is a ___________________ relationship between price and quantity
supplied.
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.
4. Supply of liquor as
demand for disinfectant
increases.
5. Supply of notebook as the
education system adapted
the distance learning
modality.
13
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.
14
Lesson
Market Demand
4
What I Need to Know
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
15
What Is It
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
16
3. ________________________ is the sum of demand for goods and services that
consumers are willing to pay at each price point.
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.
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.
18
Lesson
5 Market Equilibrium
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.
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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 Quantity: 20
Equilibrium Price: P6
What’s More
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.
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
Lesson
Implications of Market Pricing on
6 Economic Decision
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.
22
What I Know
Multiple Choice
Instruction: Encircle the letter of your best answer.
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.
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
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
25
What I Can Do
Vocabulary Enrichment
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
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
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Additional Activity
Multiple Choices
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
Lesson
7 Market Structure
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.
A. Monopolistic Competition B. Perfect Competition
C. Oligopoly D. Monopoly
3. This market structure has 2-24 firms slightly differentiated products with high
barriers to entry and high control over price.
A. Monopolistic Competition B. Perfect Competition
C. Oligopoly D. Monopoly
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?
A. Monopolistic Competition B. Perfect Competition
C. Oligopoly D. Monopoly
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;
A. Monopolistic Competition B. Perfect Competition
C. Oligopoly D. Monopoly
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
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The following are the different types of market structures:
What’s New
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.
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What Is It
(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.
(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.
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(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
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
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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.
Additional Activity
Arrange the letters to form the term being defined in each number:
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Lesson
Contemporary Economic Issues
8 Affecting 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
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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
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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.
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What’s More
Identify the terms described below. Write your answers on the blank.
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.
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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
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________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
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
San Juan, . (2020) MRT-3 bus program implements strict 5-minute interval for
faster travel time. Retrieved from
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https://news.mb.com.ph/2020/06/06/mrt-3-bus-program-implements-
strict-5-minute-interval-for-faster-travel-time/
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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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