LEARNING MODULE

Program Outcomes:
By the time of graduation, the students of the program shall be able to:
1. Articulate and discuss the latest developments in the specific field of practice.
2. Effectively communicate orally and in writing using both English and Filipino
3. Work effectively and independently in multi-disciplinary and multi-cultural teams.
4. Act in recognition of professional, social, and ethical responsibility.
5. Preserve and promote "Filipino historical and cultural heritage".
6. Perform the basic functions of management such as planning, organizing, staffing, directing and
controlling.
7. Apply the basic concepts that underlie each of the functional areas of business (marketing, finance,
human resource management, production and operations management, information technology, and
strategic management) and employ these concepts in various business situations.
8. Select the proper decision making tools to critically, analytically and creatively solve problems and
drive results.
9. Express oneself clearly and communicate effectively with stakeholders both in oral and written forms.
10. Apply information and communication technology (ICT) skills as required by the business
environment.
11. Work effectively with other stakeholders and manage conflict in the workplace.
12. Plan and implement business related activities.
13. Demonstrate corporate citizenship and social responsibility.
14. Exercise high personal moral and ethical standards.
15. Analyze the business environment for strategic direction.
16. Prepare operational plans.
17. Innovate business ideas based on emerging industry.
18. Manage a strategic business unit for economic sustainability.
19. Conduct business research.
20. To participate in various types of employment, development activities, and public discourse
particularly in response to the needs of the communities one serves.

Course Title: Basic Microeconomics

Course Description
This course provides the basic microeconomics background for students. Study the application of
analytical tools and microeconomic concepts to corporate resource allocation, demand and cost
determination, industry positioning, and pricing mechanisms. This will focus on defining an economic
vocabulary, a general understanding of economic principles and their applications.

Course Outcomes:
In this course, you should be able to:
1. Define economics and explain the concepts of scarcity, choice, and opportunity cost.
2. Explain the economic way of thinking and how economists develop theories and use models to
analyze the economy.
3. Contrast the decision-making process across industries characterized by pure competition,
monopolies, and oligopolies.
4. Describe the conditions that may lead to market failure and government’s intervening role.
5. Comprehend current economic issues and trends and analyze how these affect our country and
the whole world.

Module 1 – Science of Economics

Introduction:

Today, the current economic situation seems to interest everybody in the society: the provider, the
laborer, the bank teller, the accountant, the college professor, and even the student. While some of these
people have no actual background in economics, it comes as a challenge for a college student to
familiarize himself with what economics is all about. He gets to learn how to analyze economic theory
and to explain why things are happening in the economy.
Economics is probably not what you think. It is not primarily about money or finance. It is not
primarily about business. It is not mathematics. What is it then? It is both a subject area and a way of
viewing the world. Over the past years, the study of economics has widened to encompass a wider scope
of topics.

Module Learning Outcomes:

In this module, you should be able to:
1. Define economics and various economic concepts.
2. Differentiate law of demand and supply.
3. Analyze various economic situations.

Lesson 1
Introduction to Economic Theory

I. Learning Outcomes:
In this lesson, you should be able to:
1. Define economics and the elements involved in the objective of satisfying man’s wants.
2. Differentiate economic analysis and economic policy.
3. Classify the characteristics of microeconomics.
4. Present an overview of the circular flow in the economy.
5. Differentiate the types of economic systems.

II. Pre-Assessment:

1. It is considered as a basic consuming unit.

a. firm b. household
c. resource d. mixed economy

2. The economic system in which production decisions are made according to customs and traditions.
a. Traditional b. Market
c. Command d. Mixed

3. The system that works under the principle that the interest of society should prevail over that of the
individual.
a. Traditional b. Market
c. Command d. Mixed

4. The system in which market prices serve as signal to the producers about what goods to produce and
how much of these goods should be produced.
a. Traditional b. Market
c. Command d. Mixed
5. “The brains” behind the business.
a. land b. labor
c. entrepreneur d. capital

6. An economy where individuals exercise free enterprise.

a. Traditional b. Market
c. Command d. Mixed

7. It corresponds to the price of capital.

a. rent b. profits
c. wages d. interest

8. The payment for the use of labor.

a. rent b. profits
c. wages d. interest
9. The payment for the use of land.
a. rent b. profits
c. wages d. interest

10. Man’s needs required for survival.

a. basic needs b. luxury goods
c. wants d. none of the above
III. Lesson Map:

Economic
s
Consider the ff:

Price Theory and Basic Economic Types of Economic

Basic Economic Activity Consumption
Economic Theory Problems sytem

What to produce Traditional Economy

Human Wants
Household How much to produce Command Economy
Use of Resources
Business Firm How to produce Market Economy
Production Technique
For whom to produce Mixed Economy

IV. Core Content:

ENGAGE: INTRODUCING ECONOMIC SITUATION

Activity 1: Picture Analysis

1. What does the picture imply?

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2. In your opinion, are there negative economic impact brought by COVID-19? If yes, give at least two
and discuss shortly.
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EXPLORE: EXPLORING THE CURRENT STATE OF OUR ECONOMY
Activity 2
1. Provide terms that you think are connected to microeconomics.

MICRO-
ECONOMI
CS

EXPLAIN:

I. Definition of Economics
 A social science that deals with proper utilization of our scarce productive resources (land, labor,
capital, and entrepreneur) in order to produce outputs or goods, and distribute these to satisfy
unlimited human needs and wants.
 Studies how prices of land, labor, and capital are determined, and how these prices are used to
allocate scarce resources.
 Looks into the behavior of financial market and how it allocates capital to the rest of the
economy.
 Looks into the distribution of income and into ways of helping the poor without causing harm to
the country’s economic performance.
 Studies the impact on growth of government spending, taxes, and budget deficits.
 Examines the movements in income and employment during the different stages of the business
cycle with the goal of developing government policies that will improve economic growth.
 Looks at trade patterns among nations and analyzes the impact of trade barriers.
 Examines the growth in developing countries and suggests ways to encourage the efficient use of
resources.

Activity 3.1: Self-Assessment Question

1. Based on the definitions given above, how will you define economics?
______________________________________________________________________________
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___________________________________________________________________________________.
2. What are the elements involved in the objective of satisfying man’s wants
_________________________________________________________________________________
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II. Economic Activity

Man’s basic economic activity consists of efforts to satisfy human wants with the use of goods
and services. Three elements are involved in this objective of satisfaction as discussed below:
 Human wants – the best description that can be made of human wants is that they are unlimited
and vary from the needs of survival, otherwise known as basic needs (e.g., food, clothing and
shelter) to higher needs for a comfortable and more meaningful life. In addition, man is subject to
create wants, develop them due to the effects of advertising and demonstrative effects of
consumption.
 Use of resources– These items are available in limited amounts, man has to learn to allocate them
properly in order to maximize the number of wants that can be satisfied. The economy should pay
the owners of these basic factors of production for the use of their resources (land - rent, labor -
wage, capital - interest and entrepreneur - profit)
  Technique of production – shows how resources are used and combined in production. Thus
production is described as capital-intensive( rely on machinery) and labor-intensive (rely heavily
on human effort)


III. Consumption
 Household – basic consuming unit in the economy. Since human wants are unlimited, humans
maximize their satisfaction through the proper allocation of mix expenditures within the context
of budget limitations. Example, a student has an allowance to budget usually for a given week.
o Opportunity cost – the value of a foregone alternative of a specific resource. Example:
You have a 500.00 peso meal allowance for a week. However, you were required to
photocopy two chapters of the book by you teacher, the satisfaction that will be gained
from your photocopy will outweigh the satisfaction of your meal that was foregone.
 Business firm – serves as the economy’s producing unit to satisfy human wants with goods and
services.
Some Economic Problems
 Unemployment;
 Economic instability that causes highs and lows in production and investment levels;
 Low levels of growth and development, which make them more difficult for underdeveloped and
developing nations to rise from their low levels of income and employment;
 Inequality in income distribution resulting in the concentration of the nation’s wealth in the hands
of a few; and
 Determination of the type of economic system to be adopted to meet the country’s peculiar
conditions and needs.

Economic Analysis - the process of directing economic relationships by examining economic behavior
and events and determining the causal relationships among the data and activities observed. Tools in
economic analysis include the following:
 Logic – when analyzing relationship among economic variables, one must learn to draw
conclusions using inductive & deductive reasoning.
 Statistics – quantitatively describe economic behavior and serves as a basis in hypothesis testing.
 Mathematics – enables an analyst to foresee and assess a hypothesis for empirical validation.

Economic Policy - consists of courses of action taken by the government or other private institutions to
manipulate the results of economic activity. The government may adopt economic policy: monetary,
fiscal, or trade.

Activity 3.2 Self-Assessment Question

1. Differentiate economic analysis and economic policy.
IV. The Construction of Economic Theory
To make a useful, systematic study of economic activity, one must use economic theory.
Economic theory, like the theory of any other science, consists of sets of principles or causal relationships
among the important facts or variables that surround the economic activity. We look first at the
constructions and functions of sets of economic principles. Any set of principles or theories must have a
fundamental starting point, consisting of propositions or conditions that are taken as given, that is being
without investigation. We call these the premises or postulates. Here are the following steps:
1. Specification and definition of its postulates
2. Observation of facts concerning the activity about which we want to theorize
3. Application of the rules of logic to the observed facts
4. Hypothesis formulation
5. Testing the hypothesis

Functions of Economic Theory

The principal functions of economic theory fall into two categories:
 To explain the nature of economic activity enables us to understand the economic environment in
which we live – how one part relates to others and what causes what.
 To predict what will happen to the economy – we would also like to be able to predict with some
degree of accuracy what is likely to happen to the key variables that affect our well-being and to
be able to do something about them if we dislike the predicted consequences.

V. Price Theory and Economic Theory

Price theory (microeconomic theory) and the theory of the economy as a whole (macroeconomic
theory) constitute the basic analytical tool kit of the discipline of economics. Both theories are essential to
a thorough understanding of economic activity.
Microeconomics
 Concerned primarily with the market activities on individual economic units such as consumers,
resource owners, and business firms.
 Concerned with the flow of goods and services from business firms to consumers, the
composition of the flow, and the prices of establishing relative prices of the parts of the flow.
 Concerned with the flow of resources from resource owners to business firms.
Macroeconomics
 Treats the economic system as whole rather than individual economic units of which it is
composed.
 Focuses with the value of the overall flow of goods (net national product) and the value of the
overall flow of resources (national income).

Characteristics of Microeconomics
1. Looks at the decisions of individual units. It focuses on the choices made by individual decision
units such as households, producer, and firms.
2. Often called as price theory, looks at how prices are determined in various types of market
structures.
3. Concerned with social welfare. It examines the efficiency, relative desirability, and choice of
alternative methods by which resources are utilized to alleviate scarcity.
4. Has limited focus
5. Develop skills such as: logical reasoning, construction and use of models, and employing useful
techniques in a variety of situations.

Economic Models
Microeconomics makes extensive use of modeling, comparative statics, and mathematics.
Economic models are composed of a series of statements of assumptions or given statements of
implications or deductions. The statement describes the essential features of an item or process and the
interrelationships between factors or variable models.
Among the best-known economic models is the competitive market or “supply and demand”.
The supply and demand situations developed and explained in economic books are actually examples of
economic models.

Comparative Static vs. Dynamic Analysis

 Comparative Static – focuses on the shift in equilibrium positions (statics) for an individual
decision unit, a market, or an economic system. Equilibrium refers to a state in which there is a
balance of internal forces and no tendency for the situation to change unless outside forces
intervene.
 o Example: Let us say in a competitive market, supply and demand for commodity reach
equilibrium at the price of P20 per unit. If demand exceeds supply because of an increase
in population and an effective advertising program, it is possible that the price would go
up to P22 per unit. Comparative statics is applicable here because there is a shift in
equilibrium brought about by an increase or shift in demand. From P20 to P22.
 Dynamic analysis – focuses on the pattern and rate of change for some variables between points
in time. In the static model, the initial price of P20 was predicted to go up to P22 without
informing the consumer when or how much time it would take for the price to increase.

Partial vs. General Equilibrium

 Partial equilibrium analysis – compares equilibrium changes for one decision unit or one market
independent of related changes in the economic systems.
 General equilibrium analysis – recognizes the interdependence of all decision units and all
markets in the economic system. All variables are allowed to adjust in response to the initial
change.

Activity 3.3 Self-Assessment Question

1. Illustrate the characteristics of microeconomics through a diagram.

VI. An Overview of the Economy

The Circular Flow of Economic Activity

Within the economy, the basic activities of production, consumption, employment, and income
generation take place through the interrelationship existing between the basic consuming unit, which is
the household, and the basic producing unit, which is the firm.
A simplified model of this circular flow of economic activity is presented below.

The top loop of the diagram shows that the business firms provide goods and services to
households and in return for the goods and services, the household must pay the business firm of what is
being received.
On the other hand, the business firm has to use economic resources or factors of production such
as land, labor, capital and entrepreneur to be provided by the households in order to produce goods and
services. In exchange of these resources, households will receive the corresponding payments in forms of
rent, wages, interests, and profits coming from the business firms.

Basic Economic Problems

 What to produce? – a question of the types of goods society desires. Will a country produce rice,
coconuts, bananas, or manufacture bags, shoes, and garment? Since resources are scarce, no
economy can produce every product desired by the members of society.
  How much to produce? – refers to the quantity of each good that the economy will have to
produce to make up the total output needed to satisfy the needs and wants of the consumers.
 How to produce? – a question on the technique of production and the manner of combining
resources to come up with the desired output. What materials to be used? Will production involve
the use of more labor or machinery?
 For whom to produce? – refers to the market to which the producers will sell their products. It
refers to how much of the wants of each consumer is to be satisfied. Will products be sold to high
income groups or to low income buyers? Will market be males, females, or children?

VII. Types of Economic System

 Traditional economic system

o Production decisions are made according to customs and traditions. A farmer engaged in
the production of rice does exactly what his father did when he planted rice 20 years ago.
o This system, while simple and easy, does not allow progress to be in introduced in the
production techniques.
o The producers simple employ methods that have been used years before his ancestor.
o This is usually practiced in underdeveloped regions and in mountainous areas where
transportation and communication are practically nonexistent.

 Command economic system

o The answers to the basic economic problems are dictated by the government through the
head of nation or anyone designated by the head to make decisions.
o This system is socialistic as the government owns and controls the factors of production.
o The government plans what to produce and how resources should be allocated.
o The system works under the principle that the interests of society should prevail over that
of the individuals.
o Consumer’s freedom of choice is curtailed and the system does not enable him to
participate in the decision-making process.
o Consumers buy what is available and may have to do without what they want what they
need.

 Market economic system

o Best described as a free enterprise where individuals enjoy the right of private property.
o Deals with the economic problems by considering consumers’ choices.
o Market prices serve as signals to the producers about what goods to produce and how
much of these goods should be produced. High prices indicate that goods are in demand
and serves as go signals for production. However, prices tend to fall when goods are not
in demand and serve as a red light to decrease or limit production.
o The consumer is free to buy goods of his choice as long as he has the purchasing power
to do so.
o It places value on individual freedom and allows self-interest to be the motivating force.
o Individuals are free to offer resources to be used by other people in order to earn income.

 Mixed economic system

o The questions of what to produce and how to produce, answered predominantly through
the price mechanism, are modified through government intervention in the form of direct
controls, taxes, and subsidies.
o The economy will produce those commodities that will satisfy the wants of those people
who have the money to pay for them.
o The Philippine economy is a mixture of the above mentioned economic systems.

VII. References

 Avila-Bato et al, Microeconomics Simplified: National Book Store, 2016 M221

 Gabay et al, Economics, Concepts and Principles: Rex Book Store, Inc., 2012
 Manapat et al, Economics, Taxation and Agrarian Reform: C & E Publishing, Inc., 2014
 https://www.scmp.com/week-asia/economics/article/3084642/coronavirus-threatens-
philippines-economic-lifeline-ofw
 Lesson 2
Demand and Supply

I. Learning Outcomes:

In this lesson, you should be able to:

1. Relate to the concepts of demand and supply.
2. Explain the Law of Demand and the Law of Supply.
3. Identify the determinants of demand and supply.
4. Apply the Law of Demand and the Law of Supply to different economic situations.

II. Pre-Assessment:

1. A market is a mechanism of interaction between buyers and sellers for trade or exchange. The
consumer sells and the seller buys.
True False

2. The demand for a product is the quantity of a good that the buyers are willing to buy at a certain price.
True False

3. A demand function shows how the quantity demanded of a good is dependent on its determinants, the
most important of which is the price of the goods itself.
True False

4. One of the non-price determinants of demand is taste. Taste or preferences may vary from person to
person.
True False

5. The consumers’ income does not influence the demand for goods and services.
True False

6. An increase in population results in a greater demand since there will be more consumers as population
increases.
True False

7. The supply of a product is the quantity of goods that sellers are willing to sell. The supply schedule
shows the different quantities that will be sold.
True False

8. The demand curve is upward sloping to the right while the supply curve is downward sloping to the
left.
True False

9. When the income of the consumer increases, it can shift the demand curve upward to the right,
representing increase in demand.
True False

10. Expectations as to future income and prices may cause shifts in the demand curve.
True False
III. Lesson Map:

Demand
and Supply

Demand Supply
As price increases, demand As price increases, supply
decreases; as price decreases, increases; as price decreases,
demand increases supply decreases

Demand Schedule Demand Curve Supply Schedule Supply Curve

IV. Core Content

ENGAGE

Additional coal supply in Covid-era Philippines will increase

electricity costs for consumers, experts say

The Philippine National Oil Company-Exploration Corporation's Malangas coal reservation in Zamboanga Sibugay in the island group of Mindanao. Image: Babess Acosta

The state-run Philippine National Oil Company-Exploration Corporation is seeking new coal.
Energy observers explain why consumers will be saddled with higher bills.
New coal projects being planned by a subsidiary of the state-run Philippine National Oil Company
(PNOC) will mean higher electricity prices for Filipino consumers, energy experts have warned.
The PNOC-Exploration Corporation, its oil and coal exploration arm, will be developing more coal mines
in the Malangas Coal Reservation in Zamboanga Sibugay in the Mindanao region, its chief Rozzano
Briguez said at a webinar organised by the non-profit Philippines Energy Independence Council earlier
this month.
Two underground mines will be developed before 2025 to take advantage of the “high quality of
coal” in the area, Briguez said.Also in the pipeline is a coal power plant project sited near a mine in
Isabela province in Cagayan Valley, Luzon. The plant is a 50-megawatt project that was stalled in 2006
after protests by communities over its potential environmental and health effects.
The government-owned company’s coal appetite stems from the Philippine Energy Plan, which
proposes an expansion of the fossil fuel in the energy mix from 22 per cent in 2016 to 41.6 per cent by
2040 to support the country’s industrialisation.
But amid changes in electricity demand induced by the Covid-19 pandemic, environmental activists
and analysts say consumers will pay a high price for the new coal capacity.
“With the pandemic and its economic impact to the country, it might really be problematic to
pursue setting of these coal developments and new mine-mouth coal plants. Any additional coal plant will
be detrimental to electricity costs for the consumer,” said Gerry Arances, convenor of Power for People
Coalition, a network of civil society organisations, consumers and communities campaigning for a shift to
renewable energy. Coal is the most polluting of fossil fuels.
Arances said at virtual press conference on Tuesday (21 July) that existing deals between coal
power producers and utilities that distribute electricity are take-or-pay contracts. Under such contracts,
utility firms are required to buy fixed amounts of energy, even if the power grid is unable to
accommodate the full capacity or consumer demand is low.
With the pandemic and its economic impact to the country, it might really be problematic to pursue
setting of these coal developments and new mine-mouth coal plants. Any additional coal plant will be
detrimental to electricity costs for the consumer.
With energy demand in the country plunging due to the shuttering of businesses during the
pandemic, consumers will end up paying higher electricity prices due to the extra capacity that may not be
used, Arances added.
Analyst Sara Jane Ahmed of the global energy finance think tank, Institute for Energy Economics
and Financial Analysis (IEEFA), said that the recent spike in electricity bills will worsen if the country
locks itself into larger coal-power contracts with producers.

Activity 1: Writing Activity

The article presented above is a current economic situation in the midst of COVID-19 Pandemic.
After reading the article, you are expected to answer the following:

Guide Questions:
1. What does the article imply?
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2. How does an additional coal supply amidst this pandemic increases electricity costs for
consumers?
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3. In your opinion, is Covid-19 pandemic has something to do with the supply and/or price of
electricity? Why or why not?
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EXPLORE

Activity 2: Article Analysis

Based on the article above about the current economic situation for coal supply and electricity
cost. Answer the following:

Guide Question:
1. What does the article above imply?
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_____________________________________________________________________________________
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_____________________________________________________________________________________

2. From your point of view, what do you think are the long-term effects of Covid-19 pandemic in
coal supply and electricity cost?
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EXPLAIN

In an economy where prices are continuously rising, people have always wondered what factors
cause prices to fluctuate.

The Market Mechanism

A market is a mechanism through which buyers and sellers interact in order to determine the price
and quantity of a good or a service. Price is the value of a good in terms of money. In the market system,
prices serve as signal to both the producers and the consumers. If a consumer wants more goods, this will
cause the price of that good to increase,
Rising prices encourage producers to increase the supply of the good. High prices are therefore a
green light to producers since they normally mean higher profit margins. However, if a good is
overstocked, supplies of this will lower their prices so they can dispose of their excess supply. These low
prices will attract consumers to buy the good. What will ensue is the restoration of balance or equilibrium
between the buyers and sellers.

I. Demand

Demand Schedule and Demand Curve

 The demand for a product is defined as the quantity that buyers are willing to buy.
 Demand Schedule shows the quantity of the product demanded by a consumer or an aggregate of
consumers at any given price.
 Demand schedule must specify the time period during which the quantities will be bought.
 Demand Function shows how the quantity demanded of a particular good responds to price
change.
 Demand Curve is a graphical representation of the demand schedule and therefore contains the
same prices and quantities presented in the demand schedule.

Based on the figure above, the normal demand curve slopes downward from left to right. Any
point on the demand curve reflects the quantity that will be bought at a given price. Thus the
LAW OF DEMAND states that:

As price increases, the quantity demanded decreases, BUT

As price decreases, the quantity demanded increases.

Changes in Quality Demanded and Movements along the Demand Curve

Looking back at the figure above, the consumers are willing to pay for more quantity when price
drops. A drop in the price to “4” will attract the consumers to increase their purchase to “6kilos”. This
movement is described as a change in quantity demanded.

Ceteris Paribus Assumption

 Defined by J. Bruce Linderman, is Latin for “all else being equal.”
 An assumption that nine of the independent variables changes.
 They (all else) are equal (unchanging)
Non-price Determinants of Demand
1. Income;
2. Expectation on future prices;
3. Quality of the product;
4. Promotion and/or advertisement;
5. Customs/traditions;
6. Prices of substitutes & complements;
7. Size of the population
8. Taste and preferences;
9. Religion;
10. Fad or Fashion

Therefore, the functional relationship between price and quantity demanded is essential since
these non-price factors are assumed as constant.
The following changes in the non-price factors may cause the corresponding change in the
demand curve:
Increase in income -demand curve shifts to the right
Decrease in income -shift to the left
Greater taste/preference -shift to the right
Less taste/preference -shift to the left
Increase in population -shift to the right
Decrease in population -shift to the left
Greater speculation -shift to the right
Less speculation -shift to the left

Activity 3.1 Self-Assessment Questions

Guide questions:
1. Give five (5) non-price determinants of demand.

2. Select two (2) non-price determinants and restate the law of demand when your chosen
determinants are concerned.
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_____________________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
____________________________________________________________________________________

II. Supply
Supply Schedule and Supply Curve

 The supply of a product is defined as the quantity that sellers are willing to sell.
 The Supply Schedule shows the quantities that are offered for sale at various prices.
 If the quantities offered are only of one seller, then it is an individual supply schedule.
 The aggregate supply quantities of a group of sellers are presented as a market supply schedule.
  The Supply Curve contains the exact prices and quantities in the supply schedule.

From the given schedule, we can see that higher prices serve as incentive for the sellers to offer
more goods for sale, while low prices discourage them from offering more quantities to sell. Above is an
example of a market supply schedule. After analyzing the relationship between price and quantity
supplied, we can state that the LAW OF SUPPLY:

As price increases, the quantity supplied increases; and

As the price decreases, quantity supplied decreases.

Changes in Quantity Supplied and Movements along the Supply Curve

Let us study a point from the figure above. Consider the price of an egg at 6 pesos per piece. At
this price, the sellers will offer for sale 6 pieces of eggs. Should there be an increase in price to 8 pesos;
quantity supplied will increase to 8pieces. This is reflected as a movement along the supply curve and is
referred to as a change in the quantity supplied.

Non-price Determinants of Supply

1. Cost of production; 2. Price expectation
3. Number of firms in the market’ 4. Availability of economic resources;
5. Technology applied; 6. Producer’s goals;
7. Taxes and subsidiaries; 8. Price of the product

Under the ceteris paribus assumption, these factors are again assumed constant to enable us to analyze
the effect of a change in price on quantity supplied.
The following changes in the non-price factors may cause the corresponding change in the supply
curve:

Increase in the number of sellers -supply curve shifts to the right

Decrease in the number of sellers -shift to the left
Decrease in the cost of production -shift to the right
Goals of the firm -it depends

Activity 3.2 Self-Assessment Questions

Guide questions:
1. Give five (5) non-price determinants of supply.
 Non-price
Determinants
of Supply

2. Select two (2) non-price determinants and restate the law of supply when your chosen
determinants are concerned.
______________________________________________________________________________
_____________________________________________________________________________________
_____________________________________________________________________________________
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Market Equilibrium
 Demand and supply should eventually be analyzed as one since the market operates within the
forces of both demand and supply. This is exactly what the British economist, Alfred Marshall,
had in mind when he combined the Law of Demand and the Law of Supply into one law.
 Combining the demand and supply curves will show the point of market equilibrium.
 This equilibrium is attained at the point where demand is equal supply.
 There is only one point in the graph where demand is exactly equal to supply.
 This point of equality is the equilibrium point

V. Topic Summary
 Market is a mechanism through which buyers and sellers interact in order to determine the price
and quantity of a good or a service.
 Price is the value of a good in terms of money.
 Demand Schedule shows the quantity of the product demanded by a consumer or an aggregate of
consumers at any given price.
 Demand Function shows how the quantity demanded of a particular good responds to price
change.
 Demand Curve is a graphical representation of the demand schedule.
 The supply of a product is defined as the quantity that sellers are willing to sell.
  Supply Schedule shows the quantities that are offered for sale at various prices.
 Supply Curve contains the exact prices and quantities in the supply schedule.
 Law of Demand – As price increases, the quantity demanded decreases; as price decreases, the
quantity demanded increases.
 Law of Supply – As price increases, the quantity supplied increases; and as the price decreases,
quantity supplied decreases.

VII. References
 Avila-Bato et al, Microeconomics Simplified: National Book Store, 2016 M221
 Gabay et al, Economics, Concepts and Principles: Rex Book Store, Inc., 2012
 Manapat et al, Economics, Taxation and Agrarian Reform: C & E Publishing, Inc., 2014
 https://www.eco-business.com/news/additional-coal-supply-in-covid-era-philippines-will-
increase-electricity-costs-for-consumers-experts-say/