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Module 8-in-ABM-Applied Economics

Bachelor of Science in Psychology (University of San Jose - Recoletos)

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Applied SENIOR
HIGH
Economics SCHOOL

Self-Learning
Module

Market Supply 8
666
Quarter 3

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Applied Economics
Quarter 3 – Self-Learning Module 8: Market Supply
First Edition, 2020

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Applied SENIOR
HIGH
SCHOOL
Economics

Self-Learning
Module

8
Quarter 3

Market Supply

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Introductory Message

For the facilitator:

Welcome to the Senior High School – Applied Economics Self Learning Module
on Market Supply!

This Self-Learning Module was collaboratively designed, developed and

reviewed by educators from the Schools Division Office of Pasig City headed by its
Officer-in-Charge Schools Division Superintendent, Ma. Evalou Concepcion A.
Agustin, in partnership with the City Government of Pasig through its mayor,
Honorable Victor Ma. Regis N. Sotto. The writers utilized the standards set by the K
to 12 Curriculum using the Most Essential Learning Competencies (MELC) in
developing this instructional resource.

This learning material hopes to engage the learners in guided and independent
learning activities at their own pace and time. Further, this also aims to help learners
acquire the needed 21st century skills especially the 5 Cs, namely: Communication,
Collaboration, Creativity, Critical Thinking, and Character while taking into
consideration their needs and circumstances.

In addition to the material in the main text, you will also see this box in the
body of the module:

Notes to the Teacher

This contains helpful tips or strategies that
will help you in guiding the learners.

As a facilitator you are expected to orient the learners on how to use this
module. You also need to keep track of the learners' progress while allowing them to
manage their own learning. Moreover, you are expected to encourage and assist the
learners as they do the tasks included in the module.

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For the learner:

Welcome to the Applied Economics Self Learning Module on Market Supply!

This module was designed to provide you with fun and meaningful
opportunities for guided and independent learning at your own pace and time. You
will be enabled to process the contents of the learning material while being an active
learner.

This module has the following parts and corresponding icons:

Expectations - This points to the set of knowledge and skills

that you will learn after completing the module.

Pretest - This measures your prior knowledge about the lesson

at hand.

Recap - This part of the module provides a review of concepts

and skills that you already know about a previous lesson.

Lesson - This section discusses the topic in the module.

Activities - This is a set of activities that you need to perform.

Wrap-Up - This section summarizes the concepts and

application of the lesson.

Valuing - This part integrates a desirable moral value in the

lesson.

Posttest - This measures how much you have learned from the
entire module.

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EXPECTATIONS

After going through this module, you are expected to:

1. understand the concept of supply and price;
2. analyze the law of supply; and
3. enumerate the non-price determinants of supply.

PRETEST

Directions: Read each statement carefully. Choose the letter of the best answer and
write it on a separate sheet of paper.

1. The number of goods that businesses are willing and able to sell at a
specific price during a particular period.
A. Supply
B. Demand
C. Quantity supplied
D. Quantity demanded
2. It refers to the number of goods that producers are willing and able to sell
at different prices.
A. Supply
B. Quantity supplied
C. Both a and b
D. None of the above
3. The law of supply states that:
A. As price goes up, ceteris paribus, the producers will offer more for
sale.
B. As income increases, ceteris paribus, quantity supplied also
increases.
C. As price increases, ceteris paribus, quantity supplied decreases.
D. None of the above

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4. The relationship between the price and quantity supplied is:

A. negative

B. positive

C. negative first, then positive

D. positive first, then negative

5. This factor causes shifts of the supply curve.

A. Price

B. The income of consumers

C. Cost of production

D. Inferior good

RECAP

Directions: Explain how non-price determinants affect demand shifts. Give at least
one reason for the shift and write it in the table below.

Non-Price Increase in Demand Decrease in Demand

Determinants
1. Consumer’s Income -
Normal Good

2. Consumer’s Income -
Inferior Good

3. Price of the Related

Goods - Complementary
Goods

4. Price of the Related

Goods - Substitute Goods

5. Number of Buyers

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LESSON

Businesses give us the products that we want. Without businesses, there are
no manufactured materials available for consumption. They produce goods and
provide services which are needed in everyday living. We have discussed that
economic resources are the factors of production which turn input into useful
products. The interaction of businesses and individuals in a society is crucial in the
market and mixed economy. Thus, the behavior of business or producer is also a
concern in economics. This module will give you a background on how producers are
willing to supply given the economic factors.

Market Supply
Supply is a fundamental economic concept that describes the total amount of
a specific good or service that is available to consumers (Kenton, 2020). Supply refers
to the number of goods that producers are willing and able to sell at different prices.
It is also referred to the relationship between the price of a good or service and the
quantity or number of units all sellers in a market would choose to sell during a
given period.

Just like demand, the price has a great effect on the number of goods and
services which producers are willing to produce. For sellers, price signals businesses
to sell the products or not. It is an indicator if the business will gain profit or loss. If
the price of a product rises, the number of units available for sale increases. The
number that producers are willing and able to sell at a regular price during a
particular period is called quantity supplied. The price and quantity supplied are
positively related. This economic theory refers to the law of supply, which states that
as the price goes up, ceteris paribus, the producers will offer more for sale and if the
price goes down, producers are reluctant to sell and will offer to sell less.

Supply Schedule

The supply schedule shows the quantity of items sellers would offer for sale
at different prices. Table 1 contains a hypothetical schedule of the supply for a
sandwich in a local market during school days. The left column shows the various
prices while on the right column shows the number of units that producers would
choose to sell at a given price. As observed, as the price increases, the quantity
supplied goes up.

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Table 1. Market Supply Schedule for Sandwiches

Situation Price per unit Quantity supplied

(Php) (Units)

A 10 20

B 15 40

C 20 60

D 25 80

E 30 100

Supply Curve

It is a graph showing the quantities of a product that would sell at various

prices at a given time. The market supply curve for sandwiches is a graphical
representation of a supply schedule for sandwiches.

As shown in
figure 1, the price is
scaled on the graph’s
vertical S
axis and
quantity on the
horizontal axis. Each
point on the curve
shows the number of
sandwiches that sellers
would choose to sell at
a particular price. In
D situation A, at ₱10
sellers would sell 20
sandwiches. Situation
B represents the
combination of 40 sandwiches at ₱15 while in situation C, sellers will sell 60
sandwiches at ₱20, and so on. When we connect all these points, we obtain the
market curve, labeled as S – this represents as the supply curve.

The market supply curve slopes upward towards the right. An upward slope
reflects the observed positive relationship between price and quantity – law of supply.
As the price increases, the quantity supplied increases, and vice versa. Since the
assumption is that price is the only factor that affects the quantity supplied, for every
price change, there is a movement along the supply curve. When the price of
sandwiches rises from ₱20 to ₱25, the number of units supplied by sellers rises also
60 to 80. There’s a movement along the supply curve from point C to D.

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Non-Price Determinants and Shifts of the Supply Curve

Supply can also be affected by other factors other than price. The non-price
determinants of supply are; (1) the number of sellers; (2) cost of production; (3) prices
of alternative goods produced; (4) expectations of future prices; (5) weather
conditions; and (6) technology. When these factors change, there is a shift of the
entire supply curve.

Figure 2 shows the shifts in the market supply curve that results from a
change in one of the non-price factors. The rightward shift from S1 to S2 implies an
increase in supply. Sellers would likely sell more sandwiches at every price. For
example, they would choose to sell 80 instead of 60 sandwiches at ₱20. An increase
in supply is an increase in the number of units that sellers would sell to at each and
every price. The leftward shift from S1 to S3 represents a decrease in supply. Sellers
would choose to sell fewer sandwiches at each and every price. For example, they
would choose to buy 40 instead of 60 sandwiches at ₱20. A decrease in supply is a
decrease in the number of units that consumers would sell at each and every price.

1. Number of Sellers

An increase in the number of sellers will increase the supply of goods and
services in the market. As new sandwich producers enter the market, the supply of
sandwiches increases. As they leave the market, the supply of sandwiches decreases.

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2. Cost of Production

Changes in input prices also change the supply of goods. An increase in the
minimum wage of workers will increase the price of input and some producers cannot
afford to pay the increase in wages, supply will decrease due to a decrease in the
number of workers.

3. Prices of Alternative Goods Produced

Suppose producers can easily switch from sandwich to pizza which considered
as substitutes goods. If the price of the pizza decreases, the producers of pizza receive
less income per pizza sold. With this, they switch the production to sandwiches -
which has a higher price compared to pizza, hence, the supply of sandwiches
increases.

4. Expectations of Future Prices

If producers expect prices to increase in the future, they may increase their
production now to gain profit when prices of that particular goods increases. If prices
expected to decrease in the future, producers may reduce production.

5. Weather Conditions

Favorable weather conditions increase the productivity of all firms. Weather

condition also affects the number of supplies, let say in Baguio, which is known for
their strawberries. Because of the weather in Baguio, they can produce more
strawberries. However, unfavorable weather and natural disasters disrupt the
production of firms.

6. Technology

Technology helps production easier and faster. If the producers employ

technology in production it could produce more products.

ACTIVITIES

Activity 1: You Need to Supply

Directions: Read and answer the following questions.

Ceteris paribus, what happens to the supply curve for bread if there is:

A. An increase in the price of flour

__________________________________________________________________________________
_________________________________________________________________________________.

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B. An increase in the price of bread

__________________________________________________________________________________
_________________________________________________________________________________.
C. An improvement of technology used bread production

__________________________________________________________________________________
_________________________________________________________________________________.

Activity 2: Up or Down
Directions: Identify the following situations below. Put (arrow up) if there is an
increase in supply, and (arrow down) if there’s a decrease in supply.

____________1. Calamity hits the entire country

____________2. Increase the tax imposed by the government

____________3. Substitute good has a lower price

____________4. Sellers are expecting a lower price next week

____________5. Traditional production used by the firm

WRAP-UP

To summarize what you have learned in the lesson, answer the following
questions:

1. What is the supply?

2. What is the law of supply?
3. What are the causes of supply shifts?

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VALUING

Reflect on this!

What business do you think is most profitable in this time of pandemic?

Explain your answer.

POSTTEST

Directions: Read each statement carefully. Write T if the statement is correct,

otherwise write F.

____________1. Law of supply states that as price increases, aggregate supply

increases.

____________2. Quantity supplied refers to the number of goods and services willing
to produce at a particular price.

____________3. The relationship between price and quantity supplied is positive.

____________4. If prices expected to decrease in the future, producers may

encourage to produce more.

____________5. A change in supply refers to a shift in the supply curve.

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KEY TO CORRECTION

supply curve shifts to the right (increase).

c. An improvement of technology causes the
5. T 5.
supply curve.
upward movement of quantity supplied in the 4. F 4.
shift the supply curve. Rather, it causes the
3. T 3.
5. C b. An increase in the price of bread does not
4. B 2. T 2.
3. A to the left (decrease)
2. A production, therefore, the supply curve shifts 1. F 1.
1. C a. An increase in its price raises the cost of
PRETEST ACTIVITY 1: ACTIVITY 2: POSTTEST:

References

Carnaje, Gideon P. Applied Economics. Vibal Group Inc., Quezon City, 2019.

Determinants of Supply. Accessed July 14, 2020.

https://staffwww.fullcoll.edu/fchan/Micro/1determinants_of_supply.htm.

Kenton, Will. <Supply.= Investopedia, Investopedia. January 29, 2020. Accessed

July 14, 2020. www.investopedia.com/terms/s/supply.asp.

Nicholson, Maxwell, Ben Lukenchuk, Timothy Taylor, Dr. Emma Hutchinson, and
University Of Victoria. "3.5 Other Determinants of Supply." Principles of
Microeconomics. November 16, 2017. Accessed July 14, 2020.
https://pressbooks.bccampus.ca/uvicecon103/chapter/other-
determinants-of-supply/.
"Supply: Meaning of Supply and Determinants Of Supply." Toppr. December 10,
2019. Accessed July 14, 2020. https://www.toppr.com/guides/business-
economics/theory-of-supply/meaning-and-determinants-of-supply/.

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