Applied Economics q1 Weeks 56

Accountancy, Business, and Management
Supplementary Learning Materials

in
APPLIED ECONOMICS
Source: https://wallpaperaccess.com/economics
MODULE 3 - WEEK 5 and 6

(QUARTER 1)
CONTENT STANDARD: The learners demonstrate an understanding of economics as social

science and its utility in addressing the economic problems.
PERFORMANCE STANDARD: The learners shall be able to analyze and propose solution/s to
the economic problems using the principles of applied economics
MOST ESSENTIAL LEARNING COMPETENCIES:
Differentiate various market structures in terms of number of sellers, types of products, entry/
exit to market, pricing power, and others.
Oriental Mindoro National High School Page 1

J. P. Rizal St., San Vicente East, Calapan City/ (043) 288-8811/ ormdonhs@gmail.com
ormdonhs@gmail.com
Module 3: Market Structures
Learning Objectives
At the end of this module, the learners should be able to

1. define the different market structures, and
2. describe the characteristics and distinguish features of the market structures.
Did you know?

• According to analysis by GlobalData, Philippines has the most consolidated ice-
cream sectors in Asia Pacific when compared to four other large markets in the
regions -India, China, Japan and Australia.
• In the Philippines, consumption of ice cream is higher among females than males.
Furthermore, children aged up to 15 accounted for the highest consumption of ice
cream in 2018, with a 40.9% volume share.
Source: just-food.com (2020) https://www.just-food.com/analysis/just-the-facts-ice-cream-in-the-

philippines_id110524.aspx
Activity 1: Vocabulary Test

Directions: Identify the word or idea being defined in each given statement. Be guided by the scrambled
letters.
______________1. TIONCOMEPTI – A rivalry among various sellers in the market
______________2. TEKARM- a situation diffused, impersonal competition among sellers who compete to
sell their goods and among buyers
______________3. LYOPNOOM- exists when a single firm that sells in that market has no close substitutes
______________4. LYIOLOOGP- A market dominated by a small number of strategically interacting firms
______________5. PODUYLO- a special case of the theory of oligopoly in which there are only two sellers
Activity 2: Picture Analysis

Directions: Based on the given picture of a market, write your personal observation of the buyer
and the seller.
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
________________________________________________________
Source: https://www.dreamstime.com/illustration/buying-
market.html
Oriental Mindoro National High School

J. P. Rizal St., San Vicente East, Calapan City/ (043) 288-8811/ ormdonhs@gmail.com Page
ormdonhs@gmail.com 2210
Study Guide
Market Structures
After looking at the basic principles of demand and supply, it will also be helpful to learn
about the market structures in which sellers can operate. Each structure will be described in terms
of the nature of the product being sold, the number of buyers and sellers in the market, and the
ease of entering or exiting the market.
Market structure is best defined as the organizational and other characteristics of a market.
It is the competitive environment in which buyers and sellers operate. We focus on those
characteristics which affect the nature of competition and pricing – but it is important not to place
too much emphasis simply on the market share of the existing firms in an industry.
Traditionally, the most important features of market structure are:
1. The number of firms (including the scale and extent of foreign competition)
2. The market share of the largest firms (measured by the concentration ratio – see below)
3. The nature of costs (including the potential for firms to exploit economies of scale and also
the presence of sunk costs which affects market contestability in the long term)
4. The degree to which the industry is vertically integrated - vertical integration explains the
process by which different stages in production and distribution of a product are under the
ownership and control of a single enterprise. A good example of vertical integration is the
oil industry, where the major oil companies own the rights to extract from oilfields, they run
a fleet of tankers, operate refineries and have control of sales at their own filling stations.
5. The extent of product differentiation (which affects cross-price elasticity of demand)
6. The structure of buyers in the industry (including the possibility of monopsony power)
7. The turnover of customers (sometimes known as "market churn") – i.e. how many
customers are prepared to switch their supplier over a given time period when market
conditions change. The rate of customer churn is affected by the degree of consumer or
brand loyalty and the influence of persuasive advertising and marketing
Source: https://www.tutor2u.net/economics/reference/key-summary-on-market-structures
Competition is rivalry among various sellers in the market. As students, we are familiar with
the word competition. We are exposed to competition in school: spelling bees, quiz bees, and
sports fests. On the television, we watch beautiful girls from all over the world compete for the
Miss Universe or Miss World title. We see how the various teams of the PBA compete to win the
championship.
The market is a situation of diffused, impersonal competition among sellers who compete
to sell their goods and among buyers who use their purchasing power to acquires the available
goods in the market.
There are varying degrees of competition in the market depending on the following factors:
• Number and size of buyers and sellers
• Similarity or type of product bought and sold
• Degree of mobility of resources
• Entry and exit of firms and input owners
• Degree of knowledge of economic agents regarding prices, costs, demand, and supply
conditions

PERFECT COMPETITION
As the term suggests, perfect competition implies an ideal situation for the buyers and
sellers. The following are characteristics of a perfectly competitive market.
• There are so many buyers and sellers that each has a negligible impact on market price.
Change in output of a single firm will not perceptibly affect market price of the good. No
single buyer can influence the price since he/she purchases only a small amount. Buyer
cannot extract quantity discounts and credit terms.
• A homogenous product is sold by sellers, which means the products are highly similar in
such a way consumers will have no preference in buying from one seller over another. The
goods offered for sale are all exactly the same or are perfectly standardized.
• Perfect mobility of resources refers to the easy transfer of resources in terms of use or in
terms of geographical mobility.
• There is perfect knowledge of economic agents of market conditions such as present and
future prices, costs, and economic opportunities.
• Market price and quantity of output are determined exclusively by forces of demand and
supply.
In this market, there are large numbers of buyers and sellers. Sellers offer a standardized
product, a homogenous good that is not different from the others in the market. The sellers can
easily enter into or exit from the market as there are no barriers to entry to and exit from the
industry. The buyers and sellers are well informed about the prices and sources of the goods.
Because of the large number of buyers and sellers, no individual decision-maker can
significantly affect the price of the product by changing the quantity it buys or sells. Thus, the seller
is a price taker and has to follow the market price in selling his/her good.
The standardized product offered by sellers means that the buyers do not perceive
differences between the products of one seller from that of another. For example, rock salt will not
contain any obvious difference whether one buys it in Paranaque or in Last Pinas.
Easy entry into and exit from the market means there are no significant barriers or special
costs to discourage new entrants and likewise there are no barriers that will prevent the sellers
from exiting the market.
Well-informed buyers and sellers simply means that buyers and sellers have all relevant
information needed to make their decision to buy or sell.
So, is perfect competition realistic? The answer is yes, just like the market for wheat. The
model of perfect competition is powerful and many markets, while not strictly perfectly
competitive, come reasonably close.
IMPERFECT COMPETITION
In other markets one or more of the assumptions of perfect competition will not be met;
thus, the market becomes imperfectly competitive.
We shall discuss the different types of imperfectly competitive market, which are
monopoly, monopolistic competition, and oligopoly.

Monopoly
A monopoly exists when a single firm that sells in that market has no close substitutes. The
existence of a monopoly depends on how easy it is for consumers to substitute the products for
those of other sellers.
Consumers tend to have a bad image if a monopoly. They fear that monopolies tend to jack
up prices of their goods since consumers have no choice and cannot buy the goods from any other
seller. Because of the absence of competition, there is also the danger that consumers will suffer
from poor quality of the good and poor service delivered by the monopolist.
Monopoly can exist for the following reasons:
• A single seller has no control of entire supply of raw materials.
• Ownership of patent or copyright is invested in a single seller.
• The producer will enjoy economies of scale, which are savings from a large range of
outputs.
• Grant of a government franchise to a single firm.
While monopoly enjoys a lot of power in the market, it actually does not have unlimited
market power because it faces indirect competition for consumer’s money for all goods.
Monopolist’s quantity of output will be lower to enable him to set the price higher. Because
of this, to prevent abuses, there is a need for stricter government laws.
A monopoly can easily exist when there are barriers to entry that may cause other firms to
stay out of the market instead of entering and competing with firms already there. The reason
could be due to legal barriers like government restrictions, patents, and copyrights.
Because it is the only supplier in the market, the firm is free to determine its output level and
its price. Once the firm determines its output level, is also determines its price; it is thus a price
setter. Once the firm determines its price, it also determines its output level that will enable it to
maximize its profits.
The monopolist faces a downward-sloping demand curve; meaning, the lower the price,
the higher the quantity that will be bought by the consumer.
Monopolistic Competition
One imperfectly competitive market is monopolistic competition wherein products are
differentiated and entry and exit are easy.
As consumers, we love it when we have a wide variety of goods to choose from. An
expensive gadget that has all the latest features is preferred to an ordinary one with very simple
applications. When we shop for clothes, we look for those that are different and not mass-
produced, lest we wear exactly the same shirt as other people. Monopolistic competition allows
such variety of choices. Since many firms exist in the market, consumers also have the freedom
to choose from whom to buy the good. A successful executive, who is shopping for a car, may
choose to buy from Toyota, Honda, Mercedes- Benz, or Volkswagen. If he wants Toyota car, he
has a variety of choices such as Wigo, Vios, Altis, Innova, and Fortuner. We can differentiate one
car from the other not only by brand name but also by the model, the style, and the additional
convenience.

This market combines some characteristics of perfect competition and monopoly. Its
characteristics of perfect competition and monopoly. Its key characteristics are:
• a blend of competition and monopoly;
• firms sell differentiated products, which are highly substitutable but are not identical and
satisfy the same basic need;
• changes in product characteristics to increase appeal using brand, flavor, consistency, and
packaging as means to attract customers;
• there is free entry and exit in the market that enables the existence of many sellers; and
• it is similar to a monopoly in that the firm can determine characteristics of product and has
some control over price and quantity.
The firm under monopolistic competition faces a downward-sloping demand curve. This
means that it can sell more by charging less and can raise price without losing all customers. As
such, the firms in this market are given room to set different prices by their product differences. In
other words, a firm can set a higher price because it has something different to offer its buyers.
The firm tends therefore to engage in non-price competition. This refers to any action a firm
takes to shift the demand curve for its output to the right without having to sacrifice its prices. This
may include better service, product guarantees, free home delivery, more attractive packaging,
better locations, and advertising. The firm can either sell more by charging a lower price or it can
even raise its price without losing all of its customers because it has the capacity of developing
loyalty among its customers. Hence, the firms in this market structure are price setters. However,
the demand curve faced by the firm is more elastic than the demand curve faces by a monopolist.
Oligopoly
An oligopoly is a market dominated by a small number of strategically interacting firms. Few
sellers account for most of or total production since barriers to free make it difficult for new firms to
enter.
Its characteristics are:
• action of each firm affects other firms; and
• interdependence among firms.
These strategically interacting firms try to raise their profits by colluding with other to raise
prices to the detriment of consumers. Just take a look at the oil industry. Producers of oil from all
oil from all around the world can manage to raise prices by agreeing with each other on what prices
to charge the consumers. Thus, countries that use a lot of oil have no choice but to buy from these
producers at high prices.
Oligopolies may exist due to the existence of barriers which may include economies of
scale, reputation of the sellers, and strategic and legal barriers such as the grant of patents/
franchises, loyal following of customers, huge capital investments and specialized input, and
control of supply of raw materials by a few producers.
Cooperative behavior in oligopoly usually takes the form of price-fixing or output-setting
agreements such as the one maintained by the OPEC (Organization of Petroleum Exporting
Countries).

Source: https://www.tutor2u.net/economics/reference/key-summary-on-market-structures
SIGNIFICANCE OF THE MARKET STRUCTURE

The type of market structure in which the business operates will determine the amount of
market power or control the business owner will enjoy. Greater market power means a greater
ability to control prices, differentiate the products one offers for sale, thus, leading to opportunities
for more profits.
7
Activity 3: Comprehension Questions
1. What is a market structure?
2. What are the important features of a market structure?
3. What are the different types of market structure?
4. Name some similarities and differences between the following.
a. perfect and imperfect competition
b. monopoly and oligopoly
5. Aside from the ones stated in this lesson, cite some other factors (culture and norms in your
local community) that affect or influence the market structure. State a specific scenario that
illustrates your answer.
References
• Dinio, R. and Villasis, G. (2017). Applied economics. Rex bookstore. ISBN 978-971-23-7851-5
• Tutor2u. (2021). Economics. Retrieved from https://www.tutor2u.net/economics/reference/key-
summary-on-market-structures

To the Learners: Please detach this part together with the Performance Task/ Application sheet
(Pages 9-12) Use this in writing your answers and submit it to your subject teacher during the
retrieval of outputs. Remember to write your complete name, grade level, and section.
APPLIED ECONOMICS
Name: __________________________________ Year/Section: _________________

Week: ________________________ Date of Submission: ____________
Assessment
Directions: Read each given statement and write the letter of your choice on the space provided
before each number.
____1. It refers to the rivalry among various sellers in the market.
a. market b. competition c. strategy d. benchmarking
____ 2. This is the term given when products are differentiated and entry and exit are easy.
a. monopolistic competition b. monopoly c. oligopoly d. equilibrium
____ 3. This type of market structure exists when a single firm that sells in the market has no
close substitutes.
____ 4. This term implies an ideal situation for buyers and sellers. Here, there are so many
buyers and sellers that each has a negligible impact on market price.
a. perfect competition b. imperfect competition c. oligopoly d. monopoly
____ 5. It is a situation of diffused, impersonal competition among sellers who compete to sell
their goods and among buyers who use their purchasing power to acquire the available
goods in the market.
a. market b. trade c. open market d. auction
____ 6. This is the term given when products are differentiated and entry and exit are easy.
____7. This is a market dominated by a small number of strategically interacting firms; few
sellers account for most of a total production since barriers to free entry make it
difficult for new firms to enter.
a. perfect competition b. imperfect competition c. oligopoly d.
monopoly
____8. Which of the following is NOT a reason why monopoly exists?

a. The producer enjoys economies of scale, which are savings from a large range of
outputs.
b. A single seller has control of entire supply of raw materials.
c. Ownership of patent or copyright is invested in a seller.
d. Products are differentiated and entry and exit are easy.
____9. It refers to any action a firm takes to shift the demand curve for its output to the right
without having to sacrifice its prices.

a. non-price competition c. perfect competition
b. monopolistic competition d. imperfect competition
____10. Which of the following is true about monopolistic competition?

a. The firm faces a downward-sloping demand curve.
b. The firm faces an upward-sloping demand curve.
c. both A and B
d. none of the above
II. MODIFIED TRUE OR FALSE

Directions: Read the given statements and write T if they are TRUE. Otherwise, write F and
give the word or phrase that correctly replaces the underlined part.
_____11. Change in output of a single firm will not perceptibly affect market price of the good.
_____12. Market structure refers to the competitive environment in which buyers and sellers
operate.
_____13. In an imperfect competition, no single buyer can influence the price since he/she
purchases only a small amount.
_____14. In a monopolistic competition, market price and quantity output are determined
exclusively by forces of demand and supply.
_____15. A monopoly can exist when there are barriers to entry that may cause other firms to
stay out of the market instead of entering and competing with firms already there.
_____16. In a monopolistic competition, there is free entry and exit in the market that enables the
existence of many sellers.
_____17. In an oligopoly, the firm can either sell more by charging a lower price or it can even
raise its price without losing all of its customers because it has the capacity of
developing loyalty among them.
_____18. The absence of competition causes the customers to suffer from poor quality of the
good and the poor service delivered by the monopolist.
_____19. In a perfect competition, no single buyer can influence the price since he/she purchases
only a small amount. Buyer cannot extract quantity discounts and credit terms.
_____20. Monopolistic competition is an example of a perfectly competitive market.
Performance Task: Market Analysis

Directions: Depending on your preference, do any of the following activities that feature any market
in your community and its observable characteristics. Be guided by the given rubrics.
Activity (Pick one.) Instructions
A. Cartoon Sketch Draw a cartoon sketch of a specific market
scenario within your community.
Where to write: separate long bond paper

B. Five-minute Vlog (Video Blog) Produce your own five-minute vlog featuring
the characteristics of the type of market
structure that exists in your area.
Where to send output: Send your video/ link

to gleacelhanschristian2001@gmail.com
C. Poem or Song Composition Compose a short song or poem.

Where to write: separate long bond paper
D. Any other creative presentation Where to write: separate long bond paper
Category 2 3 4 5
Required Several required Missing one or more Includes all of the Goes over and
Elements elements are of required elements as above all the
missing from the the required elements stated in the required
project as stated in the directions/instructions elements stated
directions/instructions in the directions
& instructions
Understanding Does not show an Displays a somewhat Shows an Shows a
of Content understanding of limited understanding understanding of the sophisticated
the text. Misses of the book. May major themes of the understanding of
plot points and has have lesson the themes in the
quite a few a few work
misinterpretations misinterpretations
Creativity Shows little A few original Thoughtfully and Exceptionally
creativity, originality touches enhance the uniquely presented; clever and unique
and/or effort in project to show some clever at times in in showing deep
understanding the understanding of the showing understanding
material material understanding of the
material
Overall Output is Output is Output is somewhat Output is
Effectiveness incomplete and not disorganized and organized, complete engagingly
and easy to follow incomplete at times and holds the organized and
Completion and is somewhat able attention of the presents material
to hold the attention viewer that is captivating
of the viewer for the viewer
Source: https://www.westmarkschool.org/uploaded/photos/1617/Summer_Reading/Creative_Project_Assessment_Rubric.pdf
Prepared by:
GLEACEL M. HERNANDEZ

2

Applied Economics q1 Weeks 56

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Applied Economics q1 Weeks 56

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Accountancy, Business, and Management

Supplementary Learning Materials

MODULE 3 - WEEK 5 and 6

CONTENT STANDARD: The learners demonstrate an understanding of economics as social

Oriental Mindoro National High School Page 1

At the end of this module, the learners should be able to

Did you know?

Source: just-food.com (2020) https://www.just-food.com/analysis/just-the-facts-ice-cream-in-the-

Activity 1: Vocabulary Test

Activity 2: Picture Analysis

Oriental Mindoro National High School

Oriental Mindoro National High School

Oriental Mindoro National High School

Oriental Mindoro National High School

Oriental Mindoro National High School

SIGNIFICANCE OF THE MARKET STRUCTURE

Oriental Mindoro National High School

Name: __________________________________ Year/Section: _________________

____8. Which of the following is NOT a reason why monopoly exists?

Oriental Mindoro National High School

____10. Which of the following is true about monopolistic competition?

II. MODIFIED TRUE OR FALSE

Performance Task: Market Analysis

Where to write: separate long bond paper

Where to send output: Send your video/ link

Oriental Mindoro National High School

Oriental Mindoro National High School

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Name: __________________ Year/Section: _