Applied Economics

(Q1)

Kristelyn Monterola Cubacob I, LPT

Rogie Ramos Francia, LPT
 Table of Contents

Module 1: Introduction to Applied Economics

Introduction 1
Learning Objectives 1
Lesson 1. Definition of Economics 2
Lesson 2. Economics as Social Science 2
Lesson 3. Economics as Applied Science 4
Assessment Tasks 5
Summary 7
References 7

Module 2: Basic Economic Problems and

The Philippine Socioeconomic Development
in the 21st Century
Introduction 8
Learning Objectives 8
Lesson 1. Basic Economic Problems of Society 9
Lesson 2. The Philippine’s Basic Economic Problems 10
Assessment Tasks 12
Summary 15
References 15

Module 3: Application of Supply and Demand

Introduction 16
Learning Objectives 16
Lesson 1. Demand 17
Lesson 2. Supply 21
Lesson 3. Prices of Basic Commodities 25
Lesson 4. Elasticities of Demand and Supply 28
Assessment Tasks 32
Summary 34
References 34

Module 4: Economic Decision-Making

Introduction 36
Learning Objectives 36
Lesson 1. Scarcity, Trade-Offs, Opportunity Costs 37
Lesson 2. Economic Resources 39
Assessment Tasks 40
Summary 42
References 42
Module 5: Market Structures
Introduction 43
Learning Objectives 43
Lesson 1. Define Market Structures 44
Lesson 2. Types of Market Structures 44
Assessment Tasks 47
Summary 49
References 49
Subject Code: APP ECON

Subject Description: This subject deals with the basic principles of applied
economics, and its application to contemporary economic issues facing the
Filipino entrepreneur such as prices of commodities, minimum wage, rent,
and taxes. It covers an analysis of industries for identification of potential
business opportunities. The main output of the course is the preparation of
a socioeconomic impact study of a business venture.

Content Standards:
The learners demonstrate an understanding of:

1. economics as an applied science and its utility in addressing the economic

problems of the country;
2. the law of supply and demand, and factors affecting the economic situation;
3. industry analysis, its principles, tools, and techniques leading to the
identification of business opportunities; and
4. various socioeconomic impacts of business on the following sectors:
consumer, supplier and investors, government, households, and
international trade.

Performance Standards
The learners shall be able to:

1. analyze and propose solution/s to the economic problems using the

principles of applied economics;
2. conduct a survey of current economic situations within the vicinity apply
tools and techniques for business opportunities like the SWOT/TOWS
analysis;
3. conduct a survey of macro and micro environments affecting business in a
locality; and
4. conduct a socioeconomic impact study on consumers (new product and
services); suppliers; investors (capital, income) government (tax revenues,
poverty alleviation, basic services); households (standard of living,
employment) and international trade (exports and imports of goods and
services) leading to options in venturing into a business.
Subject Requirements:
 Assessment Tasks
 Written Works - 25%
 Performance Tasks (Activity) - 45%
 Quarterly Exam - 30%
Quarterly Grade 100%

Final Grade = (First Quarter Grade + Second Quarter Grade)/2

 MODULE 1
INTRODUCTION TO APPLIED ECONOMICS

Introduction

A good knowledge of economics offers many favorable possibilities. It guides us how

to make a living, how to use our money wisely, how to run our business, how to properly
allocate our available resources and how to maximize our profits and consumer satisfaction,
among other things. With the sue of appropriate economic decision and implementation, life
for everybody is most likely better, for the income earner, housewife, student, teacher,
businessman, professionals, and top government officials. Economics is being taught in
schools to prepare our young citizens on their roles as a member of society in responding
toward the goal of material survival, stability, and growth (Fajardo, 1995).

This lesson presents the definition of economics as social science and applied
science.

Learning Outcomes

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

1. differentiate economics as social science and applied science in terms of
nature and scope;
2. define basic terms in applied economics; and
3. explain the basic problems of economics.

1
Lesson 1. Definition of Economics

The word “economics” was derived from the Greek word “oekonomia” which is
interpreted as the “management of household”. Alfred Marshall define economics as a study
of mankind in the ordinary business of life. It examines part of the individual and social action
that is most closely connected with the attainment and use of material requires of well-being
as restated by Dinio & Villasis (2017).

Economics is the study of the proper allocation and efficient use of scarce resources
to produce commodities for the maximum satisfaction of unlimited human needs and wants.
Needs are essential for human survival like food, shelter and clothing. Wants are goods that
give more satisfaction and make life more pleasant and worth living (Gabay, Remotin, Uy &
Uy, 2012).

According to Tullao (2017), there are three development definition of economics; it

focuses on wealth, it is the process of making decision and lastly, it focuses on the allocation
process. Economics deals with the allocation of scarce resources to meet the unlimited human
wants. Part of a human behavior is the tendency of man to want have as many goods and
services as he can. However, his ability to buy goods and services is limited by his income
and purchasing power. It is therefore in this context that man has to practice economics.

Lesson 2. Economics as a Social Science

Economics is classified as social science because it deals with the study of life of
people and how they deal with other members of the society. There are some social sciences
that are related to economics. These social sciences are distinctly related to one another
because they study the social life of human beings but differ in method and analysis and
objectives. Some of the discipline of social science that is connected to economics is the
Anthropology, Political Science, Sociology and History (Gabay et al., 2012).

2
Branches of Economics

According to Ancheta, Torrefranca & Ancheta (2017), the field of Economics is divided
into two major branches:

1. Macroeconomics
The word “macro” came from the Greek word “makros” which means “large”. It deals
with the behavior of economy as a whole with the view to understand the interaction between
economic aggregates such as employment, inflation, and national income/ country’s gross
national product (GNP).

It also deals with the study of governments, industries, central banking, and the boom
and bust of business cycle. It can help us answer some of the biggest questions about how
and why recession occurs or how surges in immigration or gas prices will affect the economy.

2. Microeconomics
The word “micro” came from the Greek word “mikros” means “large”. It deals with the
behavior of individual components as an economic agent such as household, worker, firm,
and individual owner of production (producer). It also refers to the study of choices by
individuals, like how someone decides on the budget and prices.

Researchers use the tools of the microeconomics to measure the link between health
and economic well-being, study the impact of micro loans in poor countries, and understand
why people never seem to save as much for retirement as they would like.

Positive Economics vs Normative Economics

According to Manapat & Pedrosa (2014), there are two kinds of analysis in economics
by value judgments.
 Positive Economics- Simply decribes what exists and how things work. It is more
objective orientation and fact based. It should be tested proved or disapproved.
Example: “Taxes provide government services to the people”. This is a positive
statement as it only describes the existence of something, the context maybe wrong,

3
 but positive economics is not concerned with right or wrong statements, instead they
only tell what is.
 Normative economics - It is concerned with what should be. It looks at the outcome of
economic behavior through judgments and prescriptions for courses of actions.
Commonly, the statements are opinion and subjective, make recommendation and
suggestion about something.
Example: “Government should levy more taxes to provide more services to the
people”. This statement is an expression of opinion and value judgments.

Lesson 3. Economics as an Applied Science

Applied economics is the application of economic theory and econometrics in specific

settings with goal of analyzing potential outcomes. As one of the two sets of fields of
economics, it is typically characterized by the application of the core, referring to economics
theory and econometrics, as a means of dealing with practical issues in fields that include
demographic economics, labor economics, business economics, health economics, economic
history and many others (Dinio & Villasis, 2017).

“Applied economics is the application of theories and principles to real world situations
with the desired aim of predicting potential outcomes. The use of applied economics is
designed to analytically review potential outcomes without the noise associated with
explanations that are not backed by numbers. Applied economics can involve the use of
econometrics and case studies” (Laraya, De Leon & Santos, 2017).

John Neville Keynes is attributed to be the first to use the phrase “applied economics”
to designate the application of economic theory to the interpretation and explanation of
particular economic phenomena. Applying economic theory in our lives means trying to
address actual economic issues and be able to do something about it. The concept of scarcity
and choice should encourage us as individuals to help in our own way to provide solutions to
the country’s economic problem (Dinio & Villasis, 2017).

4
Assessment Tasks

TASK NO. 1 (WRITTEN WORK)

Instruction: Classify the following topics. Write MIC it falls under Microeconomics;
MAC, if it falls under Macroeconomics (Dinio & Villasis, 2017).
_______1. The unemployment rate in the Philippines is 12.3 %.

_______2. The price of garlic tends to increase next month.

_______3. There is a shortage in the supply of dairy products.

_______4. The Philippines total gross revenue index of industries went up to 12.7
percent in the fourth quarter of 2018.

_______5. The inflation rate in the Philippines last year was 2.8%.
_______6. Call centers open job opportunities for a college graduate.

_______7. San Miguel Corporation is one of the top companies in the Philippines

producing different kinds of products.

_______8. The Value Added Tax Law was approved by the Congress to strengthen
the tax system of the Philippines.
_______9. The Philippine budget next year is expected to be 2 trillion pesos.

_______10. The Philippine economy grew at the rate of 5.8% in 2019.

5
TASK NO. 2 (ACTIVITY)
A. Instruction: Using a pie chart, show how you manage your weekly allowance by
dividing your personal and school expenses. Explain it briefly on the space
provided below the pie chart.

______________________________________________________________

______________________________________________________________

______________________________________________________________

______________________________________________________________

B. Instructions: Differentiate positive and normative economics by citing instances

in the various economic activities you have encountered at home or at school.

Positive Economics Normative Economics

6
 Summary

 The word “economics” was derived from the Greek word “oekonomia” which is
interpreted as the “management of household”.
 Economics is the study of the proper allocation and efficient use of scarce resources
to produce commodities for the maximum satisfaction of unlimited human needs and
wants.
 Macroeconomics deals with the behavior of economy as a whole with the view to
understand the interaction between economic aggregates while microeconomics deals
with the behavior of individual components as an economic agent.
 Positive Economics describes what exists and how things work while Normative
economics is concerns itself with what should be. It looks at the outcome of economic
behavior through judgments and prescriptions for courses of actions.
 Applied economics is the application of economic theory and econometrics in specific
settings with goal of analyzing potential outcomes.

References

 Ancheta, R., Torrefranca, N., & Ancheta, U. (2017). Applied Economics. Manila:
Fastbooks Educational Supply, Inc.
 Dinio, R., & Villasis, G. (2017). Applied Economics. Manila: Rex Book Store, Inc.
 Fajardo, F. R. (1995). Economics. Manila: Rex Book Store, Inc.
 Gabay, B., Remotin, R., Uy, E., & Uy, A. (2012). Economics. Manila: Rex Book Store,
Inc.
 Laraya, J., De Leon, J., & Santos, R. (2017). Applied Economics. Mandaluyong City:
Books Atbp. Publishing Corp.
 Manapat, C., & Pedrosa, F. (2014). Economics, Taxation and Agrarian Reform.
Quezon City: C&E Publishing Inc.
 Tullao Jr. T. S. (2017). Applied Economics for a Progressive Philippines. Quezon City:
Phoenix Publishing House Inc 927 Quezon Ave

7
 MODULE 2
BASIC ECONOMIC PROBLEMS AND THE
PHILIPPINE SOCIOECONOMIC DEVELOPMENT
IN THE 21ST CENTURY

Introduction

The application of theory in practice or in the real world would enable the economist
or economic planning officer to determine more applicable theory to provide the best solution
to an economic problem. Typing of a growing economy, the Philippines is confronted with
several issues and problems which prevent its citizens from realizing a meaningful life, on the
one hand, and in pushing its socioeconomic development, on the other. A sizable proportion
of its people have insufficient resources to afford the basic goods and services, limited
freedom in their choices of employment and consumption, and a low self-esteem that weakens
the people (Laraya et al., 2017).

In this lesson, we will discuss the Philippine’s basic economic problems confronting
the Philippine economy. These issues and problems will also be linked with the challenges
that face our nation as it moves forward to a more prosperous Philippines in the 21 st century.

Learning Outcomes

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

1. examine the utility and application of applied economics to solve
economic issues and problems; and
2. identify the basic economic problems of society.

8
Lesson 1. Basic Economic Problems of Society

There are three basic economic problems that should be worked on by every economic
system (Medina, 2003).

Basic Economic
What goods and Problems of For whom shall
services must be Society these goods and
produced and in
services be
what quantities?
produced?
How shall these
goods and services
be produced?

Figure 2.1 Basic Economic Problems of the Society

Source: Medina (2003 pg. 5)

Economic System

According to Gabay et al. (2012), the economic systems have significant roles in
answering the three basic problems. An economic system refers to a set of economic
institutions that dominate a given economy with the main objective of solving the basic
economic problems.

These are the four economic systems or categories according to Gabay et al. (2012):

1. Traditional Economy
 In one whose economic decisions are made with great influence from the past. It finds
answers to the three economic problems by copying the decisions made from the
previous generations. A system whose past experiences, is the bases for economic
decisions. Tribes is one of the examples of traditional economy.

2. Command Economy
 An economic system that society uses in allocating the scarce resources. Under this
system, the factors of production are owned and managed by the state. Decisions in

9
 answering the basic economic problems are planned and directed by the government.
Citizens under this system have a little or no political and economic freedom.

3. Free Market Economy

 In this system, individual consumers and businesses interact to solve the economic
problem. The price of commodities dictates what goods and services will be produced,
for whom and how it will be produced. The interaction takes place between buyers and
sellers in determining the price of good/commodity.

4. Mixed Economy
 It is the elements of traditional, command and free market. Both private and public
institutions exercise economic control. The means of production are owned by the
private sectors as well as the government. The people decide on economic activities
within the economy.

Lesson 2. The Philippine Basic Economic Problems

According to Tullao (2017), the following are the Philippine Basic Economic Problems:

1. Poverty and Unequal distribution of Income- poverty is a restriction condition experienced

by millions of families that prevents them in attaining the minimum level of consumption for
subsistence of living.

Two categories of poverty

 Absolute poverty - the lack of income to buy the basic food and necessities for
subsistence living. This is measured in terms of poverty threshold and poverty
incidence.
 Poverty threshold is the income needed to purchase this minimum nutritional
requirements and other basic necessities for daily survival.
 Poverty incidence is the proportion of households in the country with family
income lower than the poverty threshold or poverty line.

10
  Relative poverty - refers to the structure on how the national income is being
distributed among households in the economy.

2. Demographic Changes and its economic implications- the booming population growth in
the Philippines is another basic economic problem that can be connected to the issue of
scarcity. When population becomes too big, economic resources may be no longer be enough
to support the growing population. One of the implications of an expanded population is the
enlargement of labor force in the future.

3. Weak Infrastructure- Physical infrastructure facilitates and expands transactions that

likewise fuel economic growth. We need roads, bridges, and other networks in transportation
and communication because these grids link economic sectors tightly. In addition, a well-
developed energy infrastructure can be relied in supplying cheap electric power to
households, businesses, and other sectors. With these sufficient linkages transactions costs
of many sectors is lowered thus creating greater income that brings about faster economic
expansions.

4. Pursuing Food Security- With more than 100 million people to feed, the concern of the
government is to ensure food security for all. This goal has been interpreted, however, as food
self-sufficiency in the light of the huge amount of arable land devoted to the production of food
grains- rice and corn. In addition, food sufficiency is intimately linked with the development of
agriculture as a major economic sector of the country contributing over 11% to gross domestic
product and absorbing almost third of labor force.

5. Slow Adoption of Modern Technology- the development of the industrial sector particularly
manufacturing and the services sector should be likewise pursued to push the rapid
development of the Philippine economy. Technology is the manner of processing raw
materials or intermediate inputs into transformed outputs through the use of factor inputs. A
technology that is biased in the use of labor is called labor-intensive technology while a capital-
intensive technology refers to the use of more capital relative to labor in the production
process.

6. Environmental Sustainability and the country’s development thrust- the capacity of our
economy to maintain its productive capacity and pursue its development goals will be

11
constrained by the prudent use of natural resources for sustainable development. The
environment is part of natural resources where we drive income from the utilization of wealth.
However, excessive us of our natural resources compromise its ability to provide income and
other benefits in the future.

Assessment Tasks

TASK NO. 1 (WRITTEN WORK)

Instruction: Write the type of economic system described in each statement.

___________________1. Consumers and producers interact to solve the economic

problems.
___________________2. The production of goods is managed by the state.
___________________3. The economic decisions are influenced from the past
experience.
___________________4. The buyers and the sellers determine the price of the
goods.
___________________5. Tribes is an example of this system.
___________________6. The productions of goods are owned by the private sectors
and government.
___________________7. The people decide on the economic activities within the
economy.
___________________8. There is no economic freedom in this system.
___________________9. It is the combination of traditional, command and free
market.
___________________10. It is directed by the government.

12
TASK NO. 2 (ACTIVITY)
A. Instruction: Compose a slogan about the importance of environment protection.

B. Instruction: 4Ps is a conditional cash transfer program that aims to alleviate

poverty. Discuss the positive and negative sides of the policy.
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________
_______________________________________________________

13
 Summary

 The basic economic problems are: what goods and services must be produced; for
whom shall these goods and services be produced; and how shall these goods and
services be produced.
 The tradition, command and market economy are the basic economic systems.
 The Philippine’s Basic Economic Problems
o Poverty and Unequal distribution of Income
o Demographic Changes and its economic implications
o Weak Infrastructure
o Pursuing Food Security
o Slow Adoption of Modern Technology
o Environmental Sustainability and the country’s development thrust

References

 Gabay, B., Remotin, R., Uy, E., & Uy, A. (2012). Economics. Manila: Rex Book Store,
Inc.
 Laraya, J., De Leon, J., & Santos, R. (2017). Applied Economics. Mandaluyong City:
Books Atbp. Publishing Corp.
 Medina R. G. (2003). Principles of Economics. Quezon City: Rex Printing Company
 Tullao Jr. T. S. (2017). Applied Economics for a Progressive Philippines. Quezon City:
Phoenix Publishing House Inc 927 Quezon Ave.

14
 MODULE 3
APPLICATION OF DEMAND AND SUPPLY

Introduction

The operation of demand and supply is the answer to the three basic economic
problems. In a market economy, prices of goods and services shows how demand and supply
works in a competitive market (Gabay et al., 2012).

In this lesson, we will discuss the basic concepts of supply and demand as well as the
concepts of market equilibrium.

Learning Outcomes

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

1. analyze market demand, market supply and market equilibrium;
2. discuss and explain factors affecting demand and supply; and
3. compare the prices of commodities and analyze the impact on
consumers

15
Lesson 1. Demand

Demand is the schedule of various quantities of commodities which buyers are willing
and able to purchase at a given time, price and place (Fajardo, 1995).

Demand Schedule

Table 3.1 Demand schedule of candy

Price (P) Demand Quantity (Q) The demand schedule shows the tabular

5 10 representation of the relationship between the

4 20 quantity of a good demanded and the price of the
3 30 good. It is a list or table of the different amounts
2 40 of the commodity that are purchased in the
1 50 market as different prices per unit of time
0 60 (Ancheta et al., 2017).

An example of a demand schedule is presented in Table 3.1. The first column of the
demand schedule indicates the price of the commodity or goods, and the second column
shows the number of units of commodities that would be purchased at a given price.

Demand Curve
A demand curve is a
graphical representation of the
Price of Candy

demand schedule. The price is

measured on horizontal axis and
the quantity demand is measured
on the horizontal axis (Figure 3.1).
(Gabay et al., 2012).
Quantity Demanded
Figure 3.1 Demand Curvy of Candy
Source: Juazen (2015)
The demand curve slopes downward indicating the negative relationship between the
two variables which are the price and the quantity demanded.

16
 To show what a demand curve is, we need to prepare a graphical presentation of
Table 3.1, the demand schedule, where we have to indicate the price at the vertical axis and
the quantity at the horizontal axis. The downward slope of the curve indicates that as the
price of candy increases, the demand for this good decreases. The negative slope of the
demand curve is due to income and substitute effects (Gabay et al., 2012).

Fajardo (1995) defined income and substitutes effect as:

 Income Effect – at lower prices, an individual has a greater purchasing power. This
means he can buy more goods and services. But with a higher price, he can buy less.
It means, with the same amount of money or income, one can buy more goods when
prices are lower, but lesser goods when the prices are higher.

 Substitutes Effect- consumers tend to buy goods with lower prices. In case the price
of product that they are buying increases, they will look for substitutes where the prices
are lower. This is one of the reasons why the price of a certain product reduces the
quantity demanded for such product.

Law of Demand

Using the schedule and graph, we can observe what is called the law of demand. This
law states that there is an inverse relationship between the price of goods and the quantity
buyers are willing to purchase in a defined time period. It means when the price increases,
quantity demanded decreases; and as price decreases, quantity demanded increases, if other
factors remain constant (Gabay et al., 2012).

Demand Function

According to Gabay et al. (2012), demand function is a representation of the

relationship between demand and all of its determinants expressed in a mathematical
expression using functional form given below:

Qd= a-bP

Qd - quantity demanded

17
 P- Price
a- intercept (the number of Qd if the price is 0)
∆𝑄𝑑
b- slope= ∆𝑃

Example:
Demand Function from the Demand Schedule of Candy: Qd= 60- 10P

Table 3.2 Demand schedule of candy

Price (P) Demand Quantity (Q) Formula: Qd= a-bP

If P=1 Qd=? If P=5 Qd=?
5 10
= 60-10 (1) = 60-10 (5)
4 20
= 60-10 = 60-50
3 30
Qd = 50 pieces Qd = 10 pieces
2 40
1 50
0 60

Using the demand function, you can get the quantity demanded if there is a given
price. Substitute the price of the peso in variable P and multiply it by slope of 10. The available
answer will be subtracted to 60, the answer will be 50 quantity demanded (Balitao, Buising,
Garcia, De Guzman, Lumibao, Mateo & Mondejar, 2015).

Shifts of the Demand Curve

As explained by Gabay et. al (2012) there is a shift in the demand curve if there is a
change in the demand of a commodity.
 The demand curve shifts to the left as commodity demand decreases.
 The demand curve shifts to the right as the demand for goods increases.
Price
Price

Quantity Demanded Quantity Demanded

Figure 3.2 Shifts of Demand Figure 3.3 Shifts of Demand
18
Curve to the Right Curve to the Left
Source: Juazen (2015) Source: Juazen (2015)
 The graph shows the shift of the demand curve. Increasing demand will cause the
demand curve to shift to the right. The shift in demand to the right will occur if changes in non-
price factors cause an increase in demand. Lowering demand will cause the demand curve to
shift to the left. Demand shift to the left will occur if factor change is that non price has resulted
in lower demand (Gabay et al., 2012).

Determinants of Demand

According to Laraya et al. (2017), determinants of demand are those that actually
influence the quantity of demand. Asides from the price that influence the quantity demanded
as stated in the law of demand, there are also other factors that should be given consideration.
These are referred to us as determinants of demand enumerated below:

1. Money Income or salary

- money is the medium of exchange. You have purchasing power if you have money.
People who are employed received income, therefore, they have the power to buy. A
determinant of demand, people receiving higher income can afford to demand more. But if
more people are unemployed, they have less or no money at all, therefore, their demand is
low. With low income and low demand, economy’s productivity is low.

2. Prices of goods and other goods

- Prices of goods for sale varies for several reasons. One of this pertains to the high
cost of production. Some raw materials are imported and some are seasonal. This condition
pushes up the price of the commodity or good.

3. Buyer’s Expectation
- expectation is defined as anticipation or the belief or feeling of someone that
something will happen. The expectations of buyers or consumers are related to what is
actually happening in the market. If buyers, for example, are expecting that price for a kilo of
rice will increase the following day, they will decide to buy now for their tomorrow’s
consumption. In this case, the buyer or consumer is expecting or anticipating a price in

19
increase in the future; therefore, a higher price as expected, will make the buyer decide to
take advantage to buy now at a lower price.

4. Number of consumers in the market

- the number of consumers in the market referred to here as the total population or
number of people expected to demand goods and services. They compose the number of
people expected to be served by the sellers or the producers. When more consumers are
willing to participate in the market, more goods and services are expected to be sold,
indicating a high demand.

5. Consumers’ taste and fashion

- consumer’s tastes and fashion varies from one person to another. Also tastes depend
on people’s culture, religion and lifestyle. Fashion, on the other side, shifts from one season
to another.

Lesson 2. Supply

Supply is defined as the quantity of goods or services producers can offers. This
quantity supplied refers to the amount of quantity of goods and services producers are willing
and able to supply at a given price, at a given period of time (Gabay et al., 2012).

Supply Schedule
Supply schedule shows the tabular representation of the relationship between the
quantity of good supplied and its price (Balitao et al., 2015).

Table 3.3 Supply schedule of Ana for bread in one week

Prices Quantity Supplied
5 50
4 40
3 30
2 20
1 10

20
 As seen in Table 3.3, the relationship between the price of candy and the quantity that
Ana is willing to sell is direct. The higher the price, the higher quantity supplied.

Law of Supply
This law stated the price and quantity have a direct relationship. This means that if the
price of a good increases, quantity supplied also increases; and as price decreases, quantity
supplied also decreases (Gabay et al., 2012).

Supply Curve
Supply curve is a graphical
representation of the supply schedule. The
price is measured on horizontal axis and

Price
the quantity supplied is measured on the
horizontal axis (Figure 3.4). It provides the
data of the price of commodity and the
number of goods that the seller is willing to Quantity
sell (Balitao et al., 2015).
Figure 3.4 Supply Curve of Candy
Source: Juazen (2015)
The supply curve is typically upward
sloping. It describes the positive relationship between the price of goods and the quantity that
suppliers are willing and able to sell at a given price. In figure 3.4 tell us that as price goes up,
producers are willing to produce more goods (Balitao et al., 2015).

Supply Function

According to Gabay et al. (2012) it is a representation of the relationship between price

and quantity supplied expressed in a mathematical expression using functional form given:

Qs = c + dP
Qs= volume of supply
P = Price
c = intercept (the number of Qs if the price is 0)
∆𝑄𝑠
d= slope= ∆𝑃

21
The slope shows a change in supply volume with each peso price change.

Example Computation:
Qs= 30 + 10P
Formula: Qs = c + dP

P=1 Qs = ? P=5 Qs = ?
Qs = 30 + 10P Qs = 30 + 10P
Qs = 30 + 10(1) Qs = 30 + 10(5)
Qs = 30 + 10 Qs = 30 + 50
Qs = 40 pieces Qs = 80 pieces

Using the supply function, you can get the quantity supplied if there is a given peso.
Substitute the price of the peso into the variable P and multiply it by 10, the available answer
will be added to the intercept 30 so the answer will be 40 quantity supplied. In the second
example, the price 5 is multiplied by 10 then add the intercept 30. The quantity supplied is 80
(Balitao et al., 2015).

Shifts of the Supply Curve

Shifting from one supply curve to another is called change in supply. This is brought
about by a change in all determinants. A shifting of the supply curve to the right indicates that
there is an increase in supply, and shifting to the left indicates decrease in supply (Gabay et
al., 2012).
Price

Price

Quantity Quantity
Figure 3.5 Shifts of Supply Figure 3.6 Shifts of Demand
Curve to the Right Curve to the Left
Source: Juazen (2015) Source: Juazen (2015) 22
Determinants of Supply

According to Laraya et al. (2017), the determinants of supply are the things being taken
into consideration by the producer or seller in determining the selling price of the commodity.
Some determinants of supply are given as follows:

1. Changes in technology
- technology is the technique, the process or method used in the production of goods
and services. The technique or process of creating or manufacturing may contribute to the
productivity of a business, or its downfall or loss. The growth of a nation depends largely on
technology, modern technology. It will increase production and employment opportunities.
Modern technology, though, requires modern equipment, and technological change. Applying
modern technology would definitely increase productivity, thus increasing the supply in the
market.

2. Changes in the price of factors of production

- factors of production are inputs in the production process. The readily available
supply of these factors would greatly influence the volume supply in the market. Price is the
monetary value of the factors of production. The price of these factors as input in the
production process is one of the many reasons why supply in the market sometimes is low.
High price of these factors will result to high cost of production. To minimize the effect of high
price to production cost, producers generally need to reduce their production output, thus
resulting to shortage in supply. Cases like this is common among producers with less or limited
capital.

3. Changes in the prices of substitute goods

- substitute goods are alternate or other goods for which one could be used in place
of the other. Prices of substitute goods also affected the supply available in the market. With
higher price of substitute goods production cost would likewise increase. Under this condition
the supply of the goods in the market is expected to decline. A lower price, though, would
lower production, and an anticipated increase of supply of goods in the market. Demands for
substitute goods with lower price would increase the supply of the substitute good in the
market with higher price.

23
4. Changes in producer’s expectation
- producer’s expectations are what they anticipate to happen in the future as regards
changes in prices, government policies, and growth in the economy. If producers expect
higher price in the future, the tendency is for these producers to supply less, than what they
would have. They prefer to wait until such time when they could sell their product at higher
price. This decision of the producer would bring them more profits.

5. Changes in the number of competitors

- competitors are people or business firms trying to outdo all others in order to stay or
penetrate the market. The competitors in business are always working towards improving the
quality of their products and strives to do better than all others. The behavior of these
competitors will depend on the number of firms existing in market, the ease with firms to
differentiate their products from one another.

Lesson 3. Prices of Basic Commodities

Equilibrium Price
When buyers and sellers transact in a market they agree on the price of the commodity
and the amount to be sold and bought. This agreed price is called the equilibrium price. Money
is used as a medium of exchange (Tullao, 2017).

Market Equilibrium

According to Manapat & Pedrosa (2014), a condition of equilibrium is reached when

the quantity of supply and demand are balanced or equal at a given price level. This means
that at one particular price, the buyers are able to purchase the quantity they are willing to buy
and the sellers are also able to trade the quantity they are willing to sell. When a market
reaches equilibrium, no change in the market price will take place. In Figure 3.7, market
equilibrium is attained at the point of intersection of the demand and supply curves.

24
 Figure 3.7: Market Price and the Equilibrium Point
Source: Market Equilibrium (2015)

Disequilibrium

According to Gabay et al. (2012), disequilibrium refers to the condition when the
quantity supplied is not equal to the quantity demanded. This condition is the direct result of
disequilibrium: the shortage and surplus.
 Shortage occurs when the quantity demanded exceeds the quantity supplied or the
quantity demanded greater than the quantity supplied.
Shortage = Quantity demanded (Qd) > Quantity supplied (Qs)
 Surplus is experienced when the price of good is above the equilibrium point or the
quantity supplied is greater than the quantity demanded.
Surplus = Quantity supplied (Qs) > Quantity demanded (Qd)

Source: Kumarasingam (2009)

25
 The market schedule of milk above shows that, at the price of 1.1, the quantity
demanded and supplied are the same. It is called the Equilibrium point. It means that there
is no shortages or excess of the product in the market. Above the equilibrium point, we can
see that the quantity supplied is greater than the quantity demanded, this situation is called
surplus. On the other hand, below the equilibrium point, we can see that the quantity supplied
is less than the demanded, this situation is called shortage (Kumarasingam, 2009).

Figure 3.8 Market Schedule of Demand and Supply of Milk

Source: Kumarasingam (2009)

Figure 3.8 Market Equilibrium of Demand and Supply of Milk, shows the graphical
representation of the schedule. The demand and supply curve intersect, it is called the
equilibrium point.

Another example:
Table 3.4 Market Schedule of Shoes
Price Quantity Demanded Quantity Supplied Situation
100 80 20 Shortage
200 70 30 Shortage
300 60 40 Shortage
400 50 50 Equilibrium
500 40 60 Surplus
600 30 70 Surplus
700 20 80 Surplus

26
Lesson 4. Elasticities of Demand and Supply

In economics, the concept of elasticity measures the responsiveness of one variable

to a certain change of another variable. It simply measures how much the buyers and the
seller’s response to the changes in the market conditions (Gabay et al., 2012).

Price of Elasticity Demand

It is the degree of responsiveness of quantity demanded to a change in price. The
basic formula used to determine the demand elasticity is:

Source: Juazen (2015)

Where:
Qd= quantity demanded
P= price
𝜀 = Greek letter used as a symbol for elasticity
∆ = Greek letter delta which means “change”
%= percentage
Example:

Source: Juazen (2015)

27
 Table 3.5 Types of Price Elasticity of Demand (Gabay et al., 2012)

Value of Classification Description Example

PED
Elastic Demand is price elastic Examples of price elastic products
when the elasticity are products of many substitutes.
coefficient is greater than One of these is soft drinks. When
| ∈ | >1 one. the price of soft drinks goes up,
many buyers will buy another brand
of soft drinks or just buy juice or
bottled water as substitutes.
Inelastic Demand is price inelastic Example of price inelastic products
when the elasticity are the basic needs and products
coefficient is less than one. with almost no substitutes. When
| ∈ | <1 the price of goods and services
rises there is almost no change in
the quantity demanded. Examples
of inelastic price services are
electricity and water.
Unitary or Unit Demand is unitary when
| ∈ | =1 Elastic elasticity coefficient is There is no definite example of this
equal to one. This means degree of elasticity
that a change in price is
equal to a change in
quantity demanded.
Perfectly The demand is perfectly
Elastic elastic when demand is There is no definite example of this
totally responsive to degree of elasticity
changes in price. It shows
|∈|=∞ here that at the same price,
the demand is not realized
or counted. It has a
coefficient of infinite.

28
 Perfectly Demand is perfectly
|∈|=0 Inelastic inelastic when the quantity There is no definite example of this
Demand demanded does not degree of elasticity
respond to any changes in
price. It has a coefficient of
zero

Price Elasticity of Supply

According to Gabay et al. (2012) the concept of price elasticity of supply measures the
responsiveness of quantity supplied in response to percentage change in the price of the
products. The formula of price elasticity of supply is identical to the price elasticity of demand
only that supply substitutes demand as follows:

Source: Juazen (2015)

Where:
Qs= quantity supplied
P= price
𝜀 = Greek letter used as a symbol for elasticity
∆ = Greek letter delta which means “change”
%= percentage

29
Example:

Source: Juazen (2015)

According to Gabay et al. (2012) the following are the types of price of elasticity of
supply:
Table 3.6 Types of Price Elasticity of Supply
Value of Classification Description Example
PES
Elastic A change in price Example are manufactured goods such
leads to a greater as clothing, fabrics and shoes. When its
𝜀𝑠 > 1 change in quantity price rises, producers are able to
supplied. produce the product faster.
Inelastic A change in price An example of this is those who own
leads to a lesser resorts. They cannot immediately
change in quantity increase the supply of room or swimming
𝜀𝑠 < 1 supplied. pool even if the fee or rent increases with
them. it will take a long time for resort
owners to respond to a change in
payment or rent
Unitary or Unit A change in price
𝜀𝑠 = 1 Elastic leads to an equal There is no definite example of this
change in quantity degree of elasticity
supplied.

30
Assessment Tasks

TASK NO. 1 (WRITTEN WORK)

Instruction: Solve for the demand schedule of James given the following prices of
bread using the demand function.

Qd= 20-5P

Price Qd
₱3
₱6
₱9
₱12
₱15

On the other hand, for James, a seller of bread in the market, the supply
function is given as:
Qs= 5+5P
Price Qs
₱4
₱8
₱12
₱16
₱20

B. Instruction: Determine if the following quantity demand and supply is surplus

shortage and equilibrium.

Price Quantity Quantity Situation

Demanded Supplied
10 100 50
20 20 80
30 20 20
40 10 70
50 80 60

31
TASK NO. 2 (ACTIVITY)
A. Instruction: Compute the price of demand and supply elasticity and determine
what type of elasticity it is. Show the computation.

Solve for Elasticity of Demand:

Q1=300 P1=80
Q2= 400 P2= 40

Solve for Elasticity of Supply:

Q1= 100 P1= 50
Q2= 200 P2= 60

32
 Summary

 Demand is the schedule of various quantities of commodities which buyers are willing
and able to purchase at a given time, price and place
 Supply is defined as the quantity of goods or services producers can offers.
 The demand/supply schedule shows the tabular representation of the relationship
between the quantity of a good demanded and the price of the good.
 A demand/supply curve is a graphical representation of the demand schedule.
 The law of demand states that there is an inverse relationship between the price of
goods and the quantity buyers are willing to purchase in a defined time period.
 Demand/Supply function is the mathematical expression in between the relation of
quantity demanded/supplied to the prices of commodity.
 The Law of Supply stated the price and quantity have a direct relationship.
 Equilibrium is reached when the quantity of supply and demand are balanced or equal
at a given price level.
 Disequilibrium refers to the condition when the quantity supplied is not equal to the
quantity demanded.
 Price Elasticity of Demand is the degree of responsiveness of quantity demanded to a
change in price.
 Price Elasticity of Supply measures the responsiveness of quantity supplied in
response to percentage change in the price of the products.

References

 Ancheta, R., Torrefranca, N., & Ancheta, U. (2017). Applied Economics. Manila:
Fastbooks Educational Supply, Inc.
 Balitao, B., Buising M., Garcia E., De Guzman, A., Lumibao, J., Mateo, A., & Mondejar,
I. (2015). Ekonomiks. Quezon City: Vibal Publishing House Incorporation.
 Carnaje, G. P. (2017) Applied Economics. Quezon City: Vibal Publishing House
Incorporation

33
 Dinio, R., & Villasis, G. (2017). Applied Economics. Manila: Rex Book Store, Inc.
 Fajardo, F. R. (1995). Economics. Manila: Rex Book Store, Inc.
 Gabay, B., Remotin, R., Uy, E., & Uy, A. (2012). Economics. Manila: Rex Book Store,
Inc.
 Juazen J.R. Ekonomiks. https://www.slideshare.net/jaredram55/ekonomiks-lm-yunit-
2-2
 Kumarasingam, S. (2009). Economics A Textbook.
https://drtayeb.files.wordpress.com/2012/01/economics-study-guide-new.pdf
 Laraya, J., De Leon, J., & Santos, R. (2017). Applied Economics. Mandaluyong City:
Books Atbp. Publishing Corp.
 Manapat, C., & Pedrosa, F. (2014 ). Economics, Taxation and Agrarian Reform.
Quezon City: C&E Publishing Inc.
 Market Equilibrium. (2015). Retrieved from
https://www.tutorialspoint.com/managerial_economics/market_system_and_equilibriu
m.htm
 Tullao Jr. T. S. (2017). Applied Economics for a Progressive Philippines. Quezon City:
Phoenix Publishing House Inc 927 Quezon Ave

34
 MODULE 4
ECONOMIC DECISION- MAKING

Introduction

Economics is a discipline of social science that helps people on how to make

alternative choices to the limited resources in the society. The concept of opportunity cost
helps us to understand the importance of the value of choice in making a decision. Decision
making is a part of life of everyone, you cannot go for a day without making economic
decisions so it is better for a citizen to understand this economic thought that help us to be
more careful in making a decisions in life (Carnaje, 2017).

In this lesson, we will understand the decisions of an entrepreneur, individual and a

manager of a firm in a market setting.

Learning Outcomes

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

1. determine the implications of market pricing on economic decision-
making;
2. identify the economic resource; and
3. understand the importance of making a choice.

35
Lesson 1. Scarcity, Trade-Offs, Opportunity Costs

People want goods and services. Goods are physical objects such as shoes and
computers. Services are work done for people such as shoe repair and computer
maintenance. People are forced to make a choice if they faced scarce resources. Making a
choice means selecting one thing over another because a man needs to make decisions on
how to maximize the use of the scarce or limited resources to his/her unlimited wants and
needs (Carnaje, 2017).

Scarcity
Scarcity is the reason why people have to practice economics. It refers to the condition
where people cannot have everything that they want because there are only limited resources
to meet the needs and wants of people. Resources are the most basic elements that people
use to produce goods and services that they want. A resource is scarce when the available
quantity of that resource is less than its desired uses because of limited resources (Carnaje,
2017)

Types of Scarcity (Laraya et al.,2017)

1. Relative Scarcity- when a good is scare compared to its demand. For example,
coconut is abundant in the Philippines since the plants easily grows in our soil and
climate. However, coconuts become scare when the supply is not sufficient to meet
the needs of people.

2. Absolute scarcity- when supply is limited. Oil is absolutely scarce in the country
since we have no oil wells from which we can source our petroleum needs.

Trade-Offs

In the word of scarcity, people face trade-offs- situations in which they have to choose
between two things that cannot be done at the same time. You were selecting between given
alternatives in a situation. A trade-off arises from scarce time or scarce money. Time is a
scare resource- you only have 24 hours each day. It means that if you spend more time
updating your Facebook profile, you will have less time preparing for the exam. Choosing one

36
thing that you want- a high exam score- usually means spending less time for another thing
that you also want- relaxation and entertainment. For example, student have a choice of
spending Saturday studying for the quarterly exam or shopping at the Mall makes a trade-off
of shopping time for study time in deciding how many hours to study and how many hours to
spend shopping (Carnaje, 2017).

Opportunity Cost

Choice and opportunity cost are the two fundamental concepts in economics. Given
that resources are limited, producers and consumers have to make choices between
competing alternatives. All economic decisions involve making choices. Individuals must
choose how best to use their skill and efforts, firms must choose how to use their workers and
machinery, and governments must choose how best to use taxpayer’s money (Gabay et al.,
2012).

Making an economic choice creates a sacrifice because alternatives must give up,
which results in the loss of benefit that the alternative would have provided. For example, if
an individual has Php100 to spend, and if books are Php100 each and downloaded music
tracks are Php50 each, buying the books means the loss of the benefit that would have been
gained from the 2 downloaded tracks. Similarly, land and resources, which have been used
to build a new school, could have been used to build a new factory. The loss of the best next
option represents the real sacrifice and is referred to as opportunity cost. The loss of choosing
the school is the loss of the factory, and what could have been produced (Ancheta et al.,
2017).

According to Manapat & Pedrosa (2014), one of the effects of scarcity is opportunity
cost. This refers to the cost of giving up an alternative by selecting the best choice. When
resources are limited, consumers are compelled to choose how to manage them efficiently
and decide how much of their wants and needs will be satisfied or will be satisfied and how
much of them will left unsatisfied. When a particular need is pursued, all the other alternatives
are foregone.

37
Lesson 2. Economic Resources

According to Gabay et al. (2012), there are four categories called factors of production.
It is the resource that people use to produce goods and services.

Figure 4.1. Economic Resources

Source: Pettinger (2019)

1. Land – it refers to the resources provided by nature such as soil, forests, water and mineral
deposits. This is the raw materials are available from mining, fishing, agriculture.

2. Capital- it refers to the tangible, physical goods that a person or society creates to improve
the production. Examples are machinery, technologies, tools and equipment.

3. Labor- it refers to the human effort, it is also referring to the physical and mental talents of
the people who have to produce goods and services.

4. Entrepreneurship- it means that people are combining the other three factors of production
to create some products or services to sell. They hope for profit, but take risk, loss, or
bankruptcy.

38
Assessment Tasks

TASK NO. 1 (WRITTEN WORK)

A. Instruction: Identify the economic resources of the following:

_____________1. Entertainers
_____________2. Minerals
_____________3. Forests
_____________4. Businessman
_____________5. Technology
_____________6. Production equipment
_____________7. Engineers
_____________8. Call center agents
_____________9. Computers
_____________10. Business proprietor

B. Instruction: Explain the statement:

““There is no such thing as a free lunch”

- John Ruskin

39
TASK NO. 2 (ACTIVITY)
Instruction: Analyze the following situations, determine its opportunity cost.

1. You are in a department store and you like to buy a pair of shoes and pants.
You only have enough money for one item. You decided to buy the pair of shoes.
What is the opportunity cost?

2. Attending high school is time-consuming and requires a lot of effort. So why do

many young people decide to attend high school? Use the concept of opportunity
cost in your answer (Carnaje, 2017).

3. You have ticket to a premiere movie on Saturday and you have an invitation to
attend your classmate’s party. You cannot go both. You choose to watch the movie.
What is the opportunity cost? What is the risk in your decision?

40
 Summary

 Scarcity refers to the condition where people cannot have everything that they want
because there are only limited resources to meet the needs and wants of people.
 Relative Scarcity is when a good is scare compared to its demand while Absolute
scarcity is when supply is limited.
 Trade-offs- is the choosing between two things that cannot be done at the same
time.
 Opportunity cost refers to the cost of giving up an alternative by selecting the best
choice.
 The factors of production are land, labor, capital, and entrepreneurship.

References

 Ancheta, R., Torrefranca, N., & Ancheta, U. (2017). Applied Economics. Manila:
Fastbooks Educational Supply, Inc.
 Carnaje, G. P. (2017) Applied Economics. Quezon City: Vibal Publishing House
Incorporation
 Gabay, B., Remotin, R., Uy, E., & Uy, A. (2012). Economics. Manila: Rex Book Store,
Inc.
 Laraya, J., De Leon, J., & Santos, R. (2017). Applied Economics. Mandaluyong City:
Books Atbp. Publishing Corp.
 Manapat, C., & Pedrosa, F. (2014 ). Economics, Taxation and Agrarian Reform.
Quezon City: C&E Publishing Inc.
 Pettinger, T. (2019). Factors of Production.
https://www.economicshelp.org/blog/glossary/factors-of-production/

41
 MODULE 5
MARKET STRUCTURES

Introduction

Market is a place where buyers and sellers are exchanging goods and services. More
than a place or state where transactions are made between sellers and buyers, what is more
important in this setting is the power being exercised by any actor in the market. A Filipino
who wants to engage in any business or become an entrepreneur should know the
characteristics of the market he is trying to enter. He should know whether the structure of the
market can provide him reasonable profit and environment for growth (Tullao, 2017).

In this lesson, we will discuss classifications of market structures depending on the

market power of the actors in any transactions.

Learning Outcomes

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

1. Define market structures;
2. Differentiate various market structures in terms of:
a. number of sellers
b. types of products
c. entry/exit to market
d. pricing power

42
Lesson 1. Define Market Structures

Market Structures are composed of different firms that sell similar products or varying
qualities. Identifying which existing market structures a business belongs to is essential in
understanding how the market system works (Manapat & Pedrosa, 2014).

According to Gabay et al. (2012), the word market is a place where goods are being
bought and sold. There is no exact size of location to be considered as a market. Market
power is the ability of the sellers and buyers to affect the price of goods and services. In
economics, market is a place where buyers and sellers are exchanging goods and services
with the following considerations:
 Types of goods and services being traded;
 The numbers and size of buyers and sellers in the market;
 The degree to which information can flow freely;
 The entry and exit of firms in the market

Lesson 2. Types of Market Structures

According to Dinio & Villasis (2017), the following are the types of market structures:

1. Perfect Competition
It is a market situation where there is a large number of independent sellers offering
identical or homogeneous products like rice, fruits and vegetables. It is easy for a new firms
or sellers to enter into or exit from the market as there are no significant barriers to entry to
and exit from the industry. The buyers and sellers are well informed about the prices and
sources of the goods. Well-informed buyers and sellers simply mean that buyers and sellers
have all relevant information needed to make their decision to buy or sell. Examples:
Vegetable/fruit vendor, fish market.

2. Imperfect Competition
In this market, the sellers and buyers can influence the price of goods in the market.
The types of imperfect competition include the:

43
a. Monopoly

It is the market structure characterized by only one producer or seller of the

goods and services in the industry and there are no substitutes for the goods and
services that they provide. The following are the sources of monopoly (Dinio & Villasis,
(2017).
 A single producer/ seller controls the total supply of raw materials in the
industry;
 It owns a patent or copyright;
 Its operations are under conditions of scale;
 There are no available substitutes so the product or service is considered
as unique;

In this structure of market, a stricter government laws are needed to prevent

abuses of market power. Monopolist 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 it is because of the legal barriers like government laws, patents and
copyrights. It is extremely difficult for a new firm to enter the market because of the big
capital needed, it is considered a giant in the industry. The monopolist makes the price,
since he is the only supplier, he can reduce the output in order to increase the price or
he can increase his supply if this means an increase in his total profit. Examples:
MERALCO, PLDT, Maynilad (Dinio & Villasis, (2017).

b. Monopolistic Competition

In this market situation, there are many sellers producing slightly differentiated
products. Under this condition, there is a competition because many sellers offer
products that are close, but not enough to determine as the substitutes for each other.
The characteristics of the monopolistic competition are (Dinio & Villasis, (2017):

 A large number of buyers and sellers in a given market act independently;

 There is a limited control of price because of product identification;
 Sellers offer differentiated or similar products but not identical products;

44
  New firms can enter the market easily but there is a great competition;
 Producers changes the product characteristics to attract customers;
 Competition focusses not only on price but also on product variation and
promotion.
Example: brands of soaps, shampoo and detergent soaps

c. Oligopoly

In this type of market, there is a small number of sellers, each aware of the action
of the others. A market type where there are few firms that each behaves
independently, and competes. Producers of almost similar products. Its characteristic
is (Dinio & Villasis, (2017):

 Action of each firm affects other firms; and

 Interdependence firms

The entry of the new competitors in the market is difficult. It requires enormous
capital and large-scale production. 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. Examples are airlines, oil company (Dinio & Villasis, (2017).

45
Assessment Tasks
TASK NO. 1 (WRITTEN WORK)
Instruction: Identification.

__________1. In this market situation, there are many sellers producing slightly
differentiated products.
__________2. It is the market structure characterized by only one producer or seller
of the goods and services in the industry.
__________3. It is easy for a new firms or sellers to enter into or exit from the
market as there are no significant barriers to entry to and exit from
the industry.
__________4 There is no substitutes in this market.
__________5. Example of Perfect competition.
__________6. It is a place where goods are being bought and sold.
__________7. Example of Monopoly.
__________8. Producers changes the product characteristics to attract customers.
__________9. In type of market, the entry of the new competitors in the market is
difficult.
__________10. Competition focusses not only on price but also on product variation
and promotion.

46
TASK NO. 2 (ACTIVITY)
Instruction: Complete the table. Describe each type of market by identifying their
characteristics (Gabay et al., 2012).

Perfect Monopolistic Oligopoly Monopoly

competition Competition
Number of
Sellers/Firms

Types of
products

Barriers to
entry

Examples (2)

47
 Summary

 Market Structure are composed of different firms that sell similar products or varying
qualities.
 Market is a place where goods are being bought and sold.
 Perfect Competition is a market situation where there is a large number of independent
sellers offering identical or homogeneous products
 Monopoly is the market structure characterized by only one producer or seller of the
goods and services in the industry
 Monopolistic Competition is the market structure where there are many sellers
producing slightly differentiated products.
 Oligopoly is a type of market, there is a small number of sellers, each aware of the
action of the others.
 Oligopoly is a type of market, there is a small number of sellers, each aware of the
action of the others.

References

 Dinio, R., & Villasis, G. (2017). Applied Economics. Manila: Rex Book Store, Inc.
 Gabay, B., Remotin, R., Uy, E., & Uy, A. (2012). Economics. Manila: Rex Book Store,
Inc.
 Manapat, C., & Pedrosa, F. (2014 ). Economics, Taxation and Agrarian Reform.
Quezon City: C&E Publishing Inc.
 Tullao Jr. T. S. (2017). Applied Economics for a Progressive Philippines. Quezon City:
Phoenix Publishing House Inc 927 Quezon Ave

48