Applied Economics

Quarter 3 – Module 1 Lesson 1: Nature and Scope of

Economics
Introductory Message
This Self-Learning Module (SLM) is prepared so that you, our dear learners, can
continue your studies and learn while at home. Activities, questions, directions,
exercises, and discussions are carefully stated for you to understand each lesson.
Each SLM is composed of different parts. Each part shall guide you step-by-
step as you discover and understand the lesson prepared for you.
Pre-tests are provided to measure your prior knowledge on lessons in each
SLM. This will tell you if you need to proceed on completing this module or if you
need to ask your facilitator or your teacher’s assistance for better understanding of
the lesson. At the end of each module, you need to answer the post-test to self-
check your learning. Answer keys are provided for each activity and test. We trust
that you will be honest in using these.
In addition to the material in the main text. Notes to the Teacher are also
provided to our facilitators and parents for strategies and reminders on how they
can best help you on your home-based learning.
Please use this module with care. Do not Put Unnecessary marks on any
part of this SLM. Use a separate sheet of paper in answering the exercises and
tests. And read the instructions carefully before performing each task.
If you have any questions in using this SLM or any difficulty in answering
the tasks in this module, do not hesitate to consult your teacher or facilitator.
Thank you.

iv
 After going through this module, you are expected to gain competence in
differentiating Economics as Social Science and Applied Science in terms of nature
and scope.

Expected Learning Outcome/s:

MELCS: Differentiate economics as social science and applied science in

terms of nature and scope.

Identify the following statements. Choose your answer from the box.

Applied Economics Limited Resources Social Science

Applied Science Oikonomia Theory
Econometrics Natural Resources Unlimited wants and
Economics Scarcity needs

1. This is a branch of science that deals with the study of human societies
and its relationship among individuals within those societies?
2. This is the application of statistical and mathematical theories to
economics for the purpose of testing hypothesis and forecasting future
trends?
3. This is done through the application of economic theories and
econometrics in specific settings?
4. This is the proper allocation and efficient use of available resources for
the maximum satisfaction of human wants?
5. This is a well substantiated explanation of some aspect of the natural
world?
6. It means household management?
7. This is a discipline that is used to apply existing scientific knowledge to
develop more practical applications?
8. An economic situation brought by having limited resources while the
needs and wants of people in society are unlimited.
9. and 10 - These are the two underlying conditions that lead to household
management problem

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Lesso
Nature and Scope of Economics
n1

What’s In

The word Economics came from the Greek word Oikonomia meaning
household management. The problem of managing the household arises from two
basic conditions-- resources are limited and wants and needs of members of the
household are unlimited. Thus, the one who manages the household must allocate
the resources efficiently so that the needs of the household will be met as desired.
Any group has limited resources to satisfy unlimited wants. Hence, the
problem of scarcity can be seen in the face of ever-growing human wants. This
truism calls for the need of studying economics
This lesson dwells on the definition of economics, and on the nature and
scope of Economics as Social Science and as Applied Science.

What’s New

Some definitions of Economics given by different individuals were:

Fajardo defines economics as the proper allocation and efficient use of

available resources for the maximum satisfaction of human wants.
Samuelson states that economics is the study of how societies use scarce
resources to produce valuable commodities and distribute them among different
people.
Sicat defined economics as a scientific study which deals with how
individuals and society in general make choices
Webster define it as a branch of knowledge that deals with production,
dstribution and consumption of goods and services.
Economics is defined as a Social Science concerned with the production,
distribution, and consumption of goods and services. It studies how individuals,
businesses, governments, and nations make choices on allocating resources to
satisfy their wants and needs, trying to determine how these groups should
organize and coordinate efforts to achieve maximum output. (Chappelow, 2019)

Social Science is the scientific study of society--of human behavior and

of social interactions. (Amos Web, 2020)

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 Applied Science is a discipline that is used to apply existing scientific
knowledge to develop more practical applications. (Aquino, 2017)
Applied Economics is the study of observing how theories work in
practice. This is done through the application of economic theories and
econometrics in specific settings. (Cullen, 2017)
Theory is a well substantiated explanation of some aspect of the natural
world, an organized system of accepted knowledge that applies in a variety of
circumstances to explain a specific set of phenomena. Some economic theories
include Consumerism, Keynesianism, Liberalism, Malthusianism, Monetarism and
others. (Mizpa, 2017)
Econometrics is the application of statistical and mathematical theories to
economics for the purpose of testing hypothesis and forecasting future trends.
(Cullen, 2017)

What Is It

Economics is one of several social sciences. Economics is considered a

Social Science because it seeks to explain how society deals with the scarcity
problem. It is one of several disciplines that apply the scientific method to the study
of human behavior. The social part of this phrase means the study of society,
human behavior, and social interactions; while the Science part means the use of
the scientific method to describe and explain the world. (Amos Web, 2020).
The term used to mean Economics as Applied Science is Applied Economics.
Applied Economics applies the economic theories and principles to real world
situations with the objective of predicting potential outcomes. Thus, it can lead to
making a list of possible steps to be taken to ensure stability in real world events.
The results of econometrics are compared and contrasted against real life
examples. The real life application of econometrics would be to study the
hypothesis, like “as the person’s income increases, spending increases.” (Cullen, H.
2017)

What makes economics as applied science is the formulation of general

theories through testing, mainly using data from the past. (Aquino, 2017)

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 What’s More

Identify whether the following statements show the nature and scope of
Economics as Social Science or as Applied Science.
1. The prices of gasoline increases. With limited budget, Ben reduced his
consumption of the product.
2. The government formed the AITF to formulate measures to combat the
CoVID 19 Pandemic.
3. With the influence of Korean culture, samgyeopsal restaurants become
popular in the market. Jenny, a business owner tests the effectiveness of
consumerism theory in her restaurant to keep her business going.
4. Price of alcohol, facemask and face shield increases due to increasing
demand.
5. As the government announced the community quarantine due to CoVID 19
Pandemic, out of fear, a lot of buyers rushed to grocery stores to buy goods
in bulk quantity.

What I Have Learned

Complete the following statements. Use a separate sheet for your answer.

1-3. The word Economics came from the Greek word

meaning household management. The problem of managing the household arises
from two basic conditions which are and .

4. Economics is considered a because it seeks to explain

how society deals with the scarcity problem.

5. Applied Economics applies the to real world

situations with the objective of predicting potential outcomes.

What I Can Do

Read and analyze the article below, then answer the questions.
Article 1:
On the report posted by The Asian Team on April 1 2020, they reported that in La
Trinidad, precautions against the spread of COVID-19 have made it tough for
farmers to deliver vegetables as they have to stop at several checkpoints before

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 queuing at two trading posts to wait for buyers. More time on the road leads to
poor quality of leafy vegetables, thus reducing their value. Local rice farmers in the
Philippines are encouraged to sell their harvest to village officials so rice
distribution would remain unhampered in their respective communities. (Source:
https:/ /theaseanpost.com/article/virus-sparks-food-shortage-philippines)
Question: Relate the nature and scope of Economics as Social Science on the
above article.
Article 2:
On the report written by Anna Malindog-Uy on The Asian entitled “Is the
Philippines Winning Its COVID 19 Fight?” dated May 31. 2020, she reported that
the government of the Philippine launched a multi-sectoral response to the COVID-
19 pandemic through its Interagency Task Force (IATF) on Emerging Infectious
Diseases chaired by the Department of Health (DOH). The Philippine government
has adopted a suppression strategy through the use of non-pharmaceutical health
(NPH) measures (i.e. social distancing, wearing of face masks, quarantines, etc.) to
control the spread of the virus in the country. These measures are embodied in the
Philippine government’s National Action Plan (NAP) Against COVID-19 strategic
framework, which includes strategies such as TASK FORCE T3 (Test, Trace and
Treat) and PDITRA or Prevention, Detection, Isolation, Reintegration, and Adopting
the New Normal Program. (Source: https:// theaseanpost.com/
article/philippineswinning-its-covid-19-fight)
Question: Relate the nature and scope of economics as Applied Science on the
above article

Assessment

Modified True or False:

Instruction: Write the word TRUE if the statement is correct; otherwise,

change the UNDERLINED word. Write your answer on the spaces
provided.

1. The social part of Economics is that it uses scientific method to

describe and explain the world.
2. Determining the demand for a certain commodity at a given price
level requires econometrics.
3. Using Applied Economics, possible outcomes may be predicted.
4. Economics is considered as Applied Science because it seeks to
explain how the society deals with the scarcity problem.
5. Scarcity took place because of human’s unlimited needs and wants
while resources are limited.
6. Theory is a well substantiated explanation of some aspect of the
natural world.

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 7. Using Applied Economics, household, business firms, organizations
and government could be able to draw measures to be taken to
ensure its stability.
8. What makes economics as social science is the formulation of
general theories through testing, mainly using data from the
past.
9. The household has limited wants and needs while resources are
limited. This is why there is a scarcity.
10. Being enrolled in an on-line class, acquiring a smartphone is
considered as want.

Additional Activities

My Family’s Budget
Draw a pie chart showing the distribution of your family’s income. Indicate
the amount or percentage allotted for each expense.

Answer the following:

1. Which expense/s do your family spend the a) most and b) least? Why?
2. What problems do your family experienced in allocating your budget?

3. How do your family settle your budgeting issues?

4. What factors do you consider in solving the problem?
5. Relate the nature and scope of Economics as Social Science and as Applied
Science on how your family plan your budget.
 Applied Economics
Quarter 3 – Module 1 Lesson 2: Utility and
Application of Applied Economics to Solve
Economic Issues and Problems
 After going through this module, learners are expected to gain competence
in examining the utility and application of applied economics in solving economic
issues and problems.
Expected Learning Outcome/s:
MELCS: Examine the utility and application of applied economics to solve
economics issues and problems.

AGREE OR DISAGREE: Write the word AGREE if the statement is true;

otherwise, write the word DISAGREE.
1. The method use in production affects production capacity.
2. Economic advantage is the universal objective of every
economy.
3. One of the fundamental problems of economy is what product
or service is to produce.
4. Economic resources include capital, land, labor and
entrepreneur.
5. The use of applied economics in solving economic problem
becomes a powerful tool to conceal the true and complete
situation in order to come up with things to do.
6. The central problem of economy is production.
7. When resources are scars, it is alright to keep some idle.
8. Scarcity and choice go hand in hand.
9. In solving economic problem, once the result is negative it
simply means the solution will never workout therefore, the
problem has no solution.
10. Testing hypothesis is the most critical stage in scientific
method of solving economic problem.

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 Utility and Application of Applied
Lesso
Economics to Solve Economic
n2
Issues
and
Problems

Scarcity of means for satisfying various needs is the central problem of our
economic life. It is scarcity that creates the need to make a choice. Thus, scarcity
and choice go hand in hand. In making an economic decision, one should apply

What’s In

the concept of applied economics to ensure that resources are utilized effectively
and efficiently to eliminate or at least minimize wastage in providing the need and
wants of every household.
In this lesson, the students will learn how to utilize and apply the concept of
applied economics in solving economic issues and problems.

What’s New

Scarcity is a tension between our limited resources and our unlimited wants
and needs. (Cullen H., 2017)

What is It
Five basic economic problems of the economy
1. What to produce and in what quantities? - Goods and services must
be based on the needs of the consumers.

2. How to produce these goods? - The system must select the proper
combination of economic resources (land, entrepreneurs, labor, capital and
foreign exchange) in producing the right amount of output.

3. For whom shall the goods and services be produced? - Once the
goods are produced, how shall they be distributed and allocated among the
members of the society?

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4. How efficiently are the resources being utilized? - The society has
to see whether the resources it owns are being utilized fully or not. It has to find
out ways and means to utilize them fully.

5. Is the economy growing? - To achieve growth in productive capacity is a

universal objective. Economic growth takes place through higher rate of
capital formation which consists of replacing existing capital goods with new
and more productive ones by adopting more efficient production techniques or
through innovation.

All these central problems of an economy are interrelated and

interdependent.
Economics as a science, in order to study data, observe patterns, and
predict results of stimuli. Economics follows these steps to study data and build
principles.
Source: https://www.economicsdiscussion.net/economic-problems/5-basic-
problems-of-an-economy-with-diagram/18173
Lumen Learning on Boundless Economics cites specific steps that must be
followed when using the scientific method
1. Identify the problem – it involves determining the focus or intent of the work.

2. Gather data – economics involves extensive amounts of data. For this

reason, it is important that economists can break down and study complex
information. The second step of the scientific method involves selecting the data
that will be used in the study.

3. Hypothesis – this involves creating a model that will be used to make sense
of all of the data. A hypothesis is simply a prediction. What does the economist
think the overall outcome of the study will be?
4. Test hypothesis – this is a critical stage within the scientific method. The
observations must be tested to make sure they are unbiased and reproducible.

5. Analyze the results – is the data agrees with the hypothesis? If the answer
is “yes,” then the hypothesis was accurate. If the answer is “no,” then adjust the
study accordingly. A negative result does not mean that the study is over. It
simply means that more work and analysis is required.

Source: https://courses.lumenlearning.com/ boundless-economics/chapter/

economic-models/
In solving economic issues and problem, the application of applied
economics is important to ensure the effectiveness and efficiency of solution to be
employed. Cullen. H (2017) shared the following importance of applied economics
application:
1. Applied economics becomes a powerful tool to reveal the true and complete
situation in order to come up with things to do.
2. Applied economics acts as a mechanism to determine what steps can
reasonably be taken to improve the current economic situation. Examining

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 each aspect of the current economic situation may help in identifying the
areas that needs to be strengthened where performance is weak.
3. Applied economics can teach valuable lessons on how to avoid the
recurrence of negative impact.

Source: https://www.slideshare.net/HannahCullen/lesson-2-economics-as-an-
applied-science

What’s More
Identify the following statements. Choose your answer from the box. Write
your answers on your answer sheet.
Analyze the result Is the economy growing?
Economic growth Needs of the consumer
For whom shall the goods and services be Scarcity
produced? Simple consumer goods
Gather data Test hypothesis
How to produce these goods? Types and quality of goods
Identify the problem

1. In scientific way of problem solving, this stage requires observation?

2. This is the universal objective of every economy?
3. Small and less expensive machines and simple techniques suits for
goods?
4. This is the basis for deciding on what goods and services to produce?
5. This is the root of all economic problems?
6. This is an economic problem where proper combination of economic resources
must be decided?
7. In scientific method of problem solving, this involves determining the focus of
the study?
8. The economic problem that has something to do with distribution of goods and
services?
9. In scientific method of problem solving, this is where the economist breaks
down and study complex information?
10. These serve as basis for deciding the right method and techniques to be used
in production?

What I Have Learned

Scarcity of means for satisfying various needs is the 1. of our

economic life. Because of 2. , the economy is facing on the different
problems such as: 1. What to produce and in what quantities? 2. How to produce

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the goods? 3. For whom shall the goods and services be produced? 4. How
efficiently are the resources being utilized? And 5. Is the economy growing?

The use of 3. is important to determine what steps can

reasonably be taken to improve the current 4. . Doing so, the
scientific way of 5. and issue is applied. These steps includes identify
the problem, gather data, hypothesis, test hypothesis and analyze the result.

What I Can Do
My Business Opportunity

Assuming that you are an entrepreneur, what business opportunity do you

find worth investing at this time? Determine your business opportunity by
completing the diagram.

• name of How will

What is
the good/service you use • strategy of
good/service • descript the using the
resources resources
How to • resources efficienty
produce the needed How the
good/service product/ •
• method and
? may 1.
contribute to •
For whom • target
shall the customer
good/seervice • how
?

Explain how you may apply the concept of applied economics in ensuring
the effectiveness and efficiency of your business plan.

Assessment

Multiple Choices: Choose the letter of the correct answer.

1. Which of this economic problem has something to do with the allocation

of goods and services among the members of society?
a. What to produce and in what quantity?
b. How to produce the goods/services?
c. For whom shall the goods and services be produced?
d. How efficiently are the resources being utilized?
2. This is the central problem of our economic life?
a. Product/service b. Population c. Resources d. Scarcity

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 3. In solving economic problem, this involves thinking about the overall
outcome of the study?
a. Identifying the problem c. Hypothesis
b. Gather Data d. Test hypothesis
4. Scarcity and go hand in hand?
a. Choice b. Solution c. Problem d. Resources
5. The following are economic resources, EXCEPT one?
a. Land b. Capital c. Manpower d. Time
6. Which one is a factor that must be considered in identifying the goods
or services to produce?
a. required quantity b. product description
c. price d. availability of resources
7. The following describe the importance of applying applied economics in
solving an economic problem, EXCEPT one?
a. It creates problem and solution to a given situation.
b. It becomes a powerful tool to reveal the true and complete
situation.
c. It acts as mechanism to determine what steps can reasonably be
taken.
d. It can teach valuable lesson on how to avoid the recurrence of a
negative situation.
8. What is the universal objective of every economy?
a. Increase the production c. Economic growth
b Efficient use of resources d. Elimination of scarcity
9. Clarisse conducted a research to determine the causes of the problem
and its environmental conditions. Which step of solving a problem
does Clarisse performs?
a. Identifying the problem c. Gather data
b. Analyzing data d. Test hypothesis
10. If Zac is observing to find out the effectiveness of his economic model,
which step of problem solving is Zac doing?
a. Gather data c. Test hypothesis
b. Analyze the result d. Identifying the problem

Additional Activities

Job for Filipino People!

Unemployment is one of the socio-economic problems of our
county. Assuming that you are one of our political leaders, how will you solve this
problem? Recommend a solution following the process of scientific method of
solving economic problem.
Reflection: Complete the statement:
The application of applied economics is helpful in solving economic problem
because ….
As individual I can apply the concept of applied economics in my daily life by
means of …

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 Applied Economics
Quarter 3 – Module 1 Lesson 3: Market Supply
 After going through this module, you are expected to gain competence in
analyzing the market supply.
Expected Learning Outcome/s:
MELCS: Analyze the market supply.

TRUE OR FALSE: Write the word TRUE if the statement is correct; write
FALSE. Use separate sheet of paper for your answers.
1. The cost of inputs has something to do with the willingness of sellers to
supply.
2. Sellers believe that offering goods at a higher price brings them a greater
profit.
3. Related goods are goods of the same kind.
4. Government policies may affect the supply of goods and services.
5. Sellers are encouraged to sell more if the price of goods in the market is
high.
6. The kind of technology use in production may affect the supply level of a
particular good.
7. Sellers are motivated to sell more if prices of goods are low.
8. Price has nothing to do with the amount of supply of goods.
9. The law of supply states that if the price of good rises, supply increases.
10. The greater number of suppliers in the market, the higher the supply of a
particular good.

Lesso
Market
n3
Supply

What’s In

The law of supply is a fundamental economic law and it is tied up into

almost all the economic principles in some ways. Determining the factors that
affect supply is vital in analyzing the economic situation.
In this module you will learn the relation of price to the supply of goods.
Likewise, you will learn the different factors that affect market supply and analyze
how these factors affect the supply level of goods and services in the market.

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 What’s New

Market Supply is the total quantity of a good or service all producers are
willing to provide at the prevailing set of relative prices during a defined period of
time.

Law of Supply represents the direct relationship between price and

quantity supplied. It means that when the price of good or services rises, supply
increases and if the price of good or services falls, supply goes down.

What is It

Market supply is the summation of the individual supply within a specific

market where the market is characterized as being perfectly competitive. As stated
on the law of supply, there is a direct relationship between price and quantity
supplied meaning as price increases, quantity increases due to low barriers to
entry, and as the price falls, quantity decreases as some firms may even opt to be
out of the market.

Listed below are the factors that affect market supply according to Lumen
Learning on Boundless Economics.

Factors Affecting Market Supply

1. Good’s own price: An increase in price will induce an increase in the

quantity supplied.
2. Prices of related goods: Related goods refer to goods from which inputs are
derived to be used in the production of the primary good.
3. Conditions of production: The most significant factor here is the state of
technology. If there is a technological advancement related to the production
of the good, the supply increases.
4. Seller’s expectations: Sellers’ expectations concerning future market
conditions can directly affect supply.
5. Price of inputs: If the price of inputs increases the supply curve will shift
left as sellers are less willing or able to sell goods at any given price.
6. Number of suppliers: As more firms enter the industry, the market supply
curve will shift out driving down prices.
7. Government policies and regulations: Government intervention can take
many forms including environmental and health regulations, hour and wage
laws, taxes, electrical and natural gas rates and zoning and land use
regulations. These regulations can affect a good’s supply.
Source:https://courses.lumenlearning.com/boundlesseconomics/chapter/supply/

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 What’s More

Instruction: Determine whether the supply of goods and services in the

market will increase or decrease in the following situations. Use
a separate sheet of paper for your answers.

Goods or Service Situatio Impact to supply

n
1. fish The government imposed the fish
holiday.
2. watermelon It is summer season.
3. vegetables Super typhoon strikes the country.
4. coconut milk for Prices of copra use for coconut oil
cooking production recently rose.
5. hair treatment There are several number of salons
stablished in an area.

What I Have Learned

The law of supply states that there is a relationship between
price and quantity supplied. This means that as the price of good/service rises,
supply for that good .

Multiple factors can affect supply causing them to increase or decrease in

various ways. None-price determinants of supply includes

,
, , , , .

What I Can Do
Instruction: Identify the factor that may affect the supply of goods in the following
situation. Then analyze how it may affect the supply and state your
reason. Write your answer in a separate sheet of paper.

Factor Effect on Reason

Situatio that supply
n affects (increase
supply or
decrease
)
1. Product: Fruit Juice drinks
The government imposed excise tax on
sweetened beverages.

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2. Product: Loaf bread
Flour is the main ingredient of bread.
Recently, its price increases.

3. Product: Pork
African Swine Fever strikes hog industry.

4. Product: liquor
During the CoVID 19 Pandemic the
demand for disinfectant increases. Thus,
producers converted their liquor to
disinfectant.
5. Product: notebook and other
school supplies
The education system adapted the on-
line distance learning modality.

Assessment

Multiple Choice: Write the letter of your answer in a separate sheet of paper.

1. Assuming that a typhoon devastated the rice farm in Central Luzon, what
will happen to the price of rice after few days assuming other factors remain
constant?
A. Price will decrease B. Price will remain the same
C. Price will increase D. No change in price
2. Which of the following may affect market supply?
A. Income B. Taste and preferences
C. Technology D. Number of buyers
3. Marilou reduced her production as the price of the raw material of her
product rose. What factor affects the supply of the product?
A. Cost of production B. Number of suppliers
C. Technology D. Seller’s expectation to future price
4. As price of commodity increases, suppliers are attracted to sell more while
buyers tend to their consumption.
A. Increase B. Maintain
C. Reduce D. Stop
5. The following encourage suppliers to produce more EXCEPT ONE?
A. Imposition of additional tax
B. There is an abundant supply raw material.
C. New technology for production was introduced
D. The government grants financial assistance to micro-small
enterprises

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 Additional Activities

Instructions:

1. Cut out a news article related to supply of goods in the market at present and
paste it on a bond paper.
2. Give your reaction towards the issue.
3. Explain how the law of supply applies on the issue.
 Applied Economics
Quarter 3 – Module 1 Lesson 4: Market Demand
 After going through this module, you are expected to gain competence in
analyzing the market demand.
Expected Learning Outcome/s:

MELCS: Analyze market demand.

Yes or No: Write the word Yes if the statement is correct; otherwise write No. Use a
separate sheet of paper for your answers.
1. As price of good increases, buyers tend to buy more.
2. If the price of good is high, buyers may shift to its substitute.
3. The willingness of buyers to buy a particular good may change without
changing its price.
4. If the buyer expects for a price to drop in the future, the demand for good
increases at present.
5. Demands for goods vary as population changes.
6. There is an inverse relationship between price and quantity demanded.
7. If the price of good is low, buyers tend to lessen their purchase.
8. The demand for inferior goods decline as income rises.
9. Complementary goods are products consumed along with another product.
10. If the price of a substitute decreases, then the demand for the other product
decreases.

Lesson
Market
4
Demand

What’s In

In this module you will understand the relation of price to the demand for
goods and services. Likewise, you will learn the different factors that affect market
demand and analyze how these factors affect the demand for goods and services in
the market.

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 Market Demand is the sum of the demands of all consumers.
Law of Demand represents the inverse relationship between price and
quantity demanded. It means that when the price of good or services rises, demand
decreases and if the price of a good or services falls, demand goes up.

Market demand is the number of good and services required by a group of

people in a given market. Price and demand are closely related: applying the law of
demand, the lower the price, the greater the demand and vice versa. However,
multiple factors can affect market demand causing them to increase or decrease in
various ways.

Determinants of Demand

1. A change in buyers’ real incomes or wealth - When buyers’ incomes

change, we distinguish between two products: normal goods and inferior goods.
The demand for normal goods increases if buyers experience an increase in real
incomes or wealth. However, some products may experience a decrease in demand
as buyers’ real incomes increase. These are inferior goods.

2. Buyers’ tastes and preferences - As a product becomes more fashionable

or useful, its demand increases. As some products gain in popularity, others lose.
Thus, the demand for the less popular products decreases.

3. The prices of related products or services - If the price of a substitute

decreases, then the demand for the other product decreases (and vice versa). A
related good can also be a complementary product. This is a product consumed
along with another product. If the price of a complementary product decreases, the
demand for the other product increases (and vice versa).

4. Buyers’ expectations of the product’s future price - This increases

current demand. This will have the eventual effect of actually increasing the real
price in the short run (an increase in demand increases the price).

5. Buyers’ expectations of their future income and wealth - When

buyers expect their income or wealth to increase, they will increase their demand
for normal products and decrease their demand for inferior products, and vice
versa.

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Many people anticipate their future increased (or decreased) incomes by changing
their consumption habits now.

6. The number of buyers (population) If the population of buyers of a

certain product increases, we experience an increase in the demand for that
product. With the aging of the Baby Boomers we can anticipate a rise in the
demand for products that senior citizens typically purchase (insurance, health care,
travel, nursing care). If we experience another baby boom in the future, the
demand for baby products will increase again.

Source: https://inflateyourmind.com/macroeconomics/unit-2/section-6-
demanddeterminants/

Instruction: Determine whether the demand for goods and services in the market
will increase or decrease in the following situations. Write arrow
up (↑) if it will increase and down (↓) if it will decrease. Use a
separate sheet of paper for your answers.

Products Situatio Impact to demand

n
1. meat The government imposed the fish
holiday.
2. watermelon It is summer season
3. vegetables Based on newscast, a super
typhoon will hit the country very
soon.
4. Sweetened The government imposed an
beverages additional tax.
5. TV sets Employees have received their
bonuses and 13th month pay.

What I Have Learned

The law of demand represents the 1. relationship between 2.

and 3. demanded. It means that when the price of good or
services rises, demand goes down and if the price of a good or services falls,
demand goes up.
Multiple factors can affect market demand that may cause them to increase
or decrease in various ways. Non-price determinants of demand include: 4.
5. 6. 7. 8. 9. .

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Instruction: Identify the factor that may affect the demand for the underlined
goods in the following situation. In second column, write the factor that may affect
the demand. In 3rd column, determine whether the demand will raise or decline.
While in 4th column, give your reason for the changes in the demand. Write a
separate sheet of paper for your answers

Situatio Factor that Effects on Reason

n affects the demand
demand
1. House and Lot –
Marilou’s salary has increased
as she assumed her new
position in
the company. She may now
afford her dream house.
2. Shoes – There will be a
mall wide sale next week.
3. Chicken – The price of
pork goes up as African Swine
Fever attacked hog farms
nationwide.
4. Plant pots – a lot of people
inclined to planting during the
Community Quarantine.
5. Busy working moms now
prefer the fully automatic
washing machine than the
regular one.

Multiple Choices: Choose the letter of your answer. Write them on a separate
sheet of paper.
1. The law of demand refers to the:
A. Positive relationship between price and quantity demanded.
B. Positive relationship between quantity supplied and quantity demanded
C. Inverse relationship between price and quantity demanded
D. Inverse relationship between quantity supplied and quantity demanded
2. Which of the following is a factor that affects demand?
A. Number of sellers B. Cost of production
C. Taxes D. Income
3. Jane plans to buy a bag on the Rainy Season Sale at the end of this month.
What factor affects Jane’s decision?
A. Season B. Expectation to future price
C. Quality of product D. Taste and Preferences

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4. What may possibly happen to the demand for a product if buyers expect that
their income will increase?
A. The demand for normal good will increase.
B. The demand for inferior good will increase.
C. The demand for normal good will decrease
D. The demand for goods will remain the same
5. If the price of butter (a complementary product of loaf) increases, the demand
for loaf may .
A. Increase B. Decrease
C. Remain constant D. None of the above

Additional Activities

Instructions:

1. Cut out a news article related to demand for goods in the market at
present and paste it on a bond paper.
2. Give your reaction towards the issue.
3. Explain how the law of demand applies on the issue.

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 Applied Economics
Quarter 3 – Module 1
Lesson 5: Market
Equilibrium

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In this lesson the learners will gain competence in analyzing the market equilibrium

Expected Learning Outcome/s:

MELCS: Analyze Market Equilibrium.

True or False: Write the word TRUE if the statement is correct and FALSE if it is
not.
1. If the demand for goods is greater than its supply, there will be an excess
supply.
2. If the market demand is lesser than its supply, shortage occurs.
3. Shortage and surplus are conditions of market disequilibrium.
4. Price is the first determinant of demand and supply.
5. If the supply of good is greater than its demand, its price will drop.
6. Shortage will result to price hike.
7. If there is a shortage on the supply of basic commodities the government
impose price ceiling.
8. Market equilibrium takes place once price and supply are equal.
9. Surplus in the market gives opportunity for sellers to gain greater profit.
10. Market disequilibrium is favorable to both sellers and buyers.

Lesson
Market Equilibrium
5

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 Market Equilibrium -is a market state where the supply in the market is
equal to the demand in the market.
Equilibrium Price -is the price of a good or service when the supply of it is
equal to the demand for it in the market.

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 If the price of goods or service in the market is above the equilibrium, there
will be more supply than demand resulting to an excess supply or surplus. In this
situation, sellers will tend to lower their price, slow down or reduce their
production or stop ordering from suppliers. The lower price attracts more
consumers to buy, however discourage the sellers to supply. This process will
result in increasing demand and decreasing supply until the market price equals
the equilibrium price.

If the market price is below the equilibrium value, current demand is

greater than supply resulting to an excess demand or shortage. In this case,
buyers will bid up the price of the good or service in short supply in order to obtain
it. As the price goes up, enticed sellers will start to supply more of it. However,
some buyers might quit because they don't want to, or cannot pay the higher price.
Eventually, the upward pressure on price and supply will stabilize at market
equilibrium.

Equilibrium Price and Quantity

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 Importance of Supply and Demand Analysis

Woodruff (2018) expressed that all business managers and consumers use
supply and demand analysis to make decisions. Business owners analyze the
factors that affect supply and demand curves to determine what volume to produce
and how to price their products. Consumers make buying decisions, either
consciously or instinctively, based on their wants and needs and perceived value
received at particular price points.

Fill in the blanks.

1. is the price/quantity point where consumers and producers

are satisfied with their decision, and the market is in balance.
2. Low supply and high demand price.
3. If quantity supplied is greater than the quantity demanded there will be
.
4. If quantity demanded is greater than its supply the result is .
5. is the price of a good or service when the supply is equal to the
demand for it in the market.

What I Have Learned

The law of supply and demand is a theory that explains the interaction
between the 1. and 2. of goods and services. Generally, low
supply and high demand 3. price and vice versa. Supply and 4.
pull against each other until the market find an 5. price.

Instruction: Draw a demand and supply curve for

the market demand and supply schedule below.
Then, answer the following questions.
1. What is the equilibrium quantity?
2. What is the equilibrium price?
3. At what price does market start to have a
surplus?
4. At what price does market start to have a
shortage

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Multiple Choices: Write the letter of your choice on the separate sheet of paper.

1. Market equilibrium exists when quantity supplied is than/to the

quantity demanded.
A. Greater B. Equal C. Less D. Over
2. What is the result if market demand is greater than market supply?
A. Surplus B. Shortage
C. Market Equilibrium D. Free Enterprise Price Demand
3. As price of commodity increases, suppliers are attracted to sell more
while buyers tend to .
A. Increase their consumption B. Maintain their consumption
C. reduce their consumption D. Not to consume
4. What is the result if market supply is greater than market demand?
A. Surplus B. Shortage
C. Market Equilibrium D. Free Enterprise
5. Prices of goods tend to if there is an excess supply.
A. rise B. drop
C. remain constant D. either A or B

Additional Activities

Cut out an article in a newspaper that shows market disequilibrium.

1. Analyze the market situation. Determine whether it is in the state of

equilibrium or disequilibrium. In case of disequilibrium, conclude whether
there is a shortage or a surplus.
2. Justify your analysis.
3. What action should be taken to maintain/achieve equilibrium in the market?
Applied Economics

Quarter 3 – Module 1
Lesson 6: Implications of
Market Pricing on
Economic Decision
 Why is the study of market pricing important? Primarily, market pricing is
one of the first considerations for many customers and it determines the profit
margin on products. Secondly, pricing is an important decision-making aspect after
the product is manufactured. Finally, through knowledge and understanding, the
customer may base his final buying decision on the overall benefits offered by the
product. As you read this learning pathways you will be equipped with informed
concepts in market pricing and be able to demonstrate understanding on different
conditions concerning the effects or possible results on market pricing on economic
decision.

Expected Learning Outcome/s:

1. Define market pricing.

2. Explain the market pricing on economic decision.
3. Demonstrate understanding of market pricing on economic decision.

Multiple Choice Instructions: Encircle the letter of your best answer.

1. It is a way of finding a competitive price of a product or a service.
A. Marketing Strategy C. Finding Competitive
B. Pricing Strategy D. Market Demand

2. Choosing the right price of the product will allow you to

A. Maximize profit margins C. Decrease Profit Margin
B. Crippling your company D. Exceed Cost

3. A kind of pricing strategy used to impose high rates during initial phase then
lowers the price gradually as competitor goods appear in the market.
A. Economy Pricing C. Price Skimming
B. Geographical Pricing D. Premium Pricing

4. Mang Juan is taking advantage of selling leather jackets at a higher price during
cold days.
A. Economy Pricing C. Price Skimming
B. Geographical Pricing D. Premium Pricing

5. A kind of strategic pricing used to expand business across international line.

A. Value Pricing C. Captive Pricing
B. Geographical Pricing D. Psychological Pricing

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 Lesson Implications of Market Pricing
6 on Economic Decision

Importance of Pricing Strategies When it comes to business market, prices

are everything. Prices are accountable for the decisions that producers and
consumers make. Price is the value that is put to a product or service and is the
result of a complex set of calculations, research and understanding and risk-taking
ability. Pricing strategy takes into account segments, ability to pay, market
conditions, competitor actions, trade margins and input costs.

Different Kinds of Pricing Strategies

1. Premium pricing: Price at the high rate set as defining criterion. Pricing
strategies work in segments and industries where a strong competitive
advantage exists for the company.
2. Penetration Pricing: Artificially low price to gain market share quickly.
This is done when a new product is being launched. It is understood that
prices will be raised once the promotion period is over and market share
objectives are achieved.
3. Economy Pricing: no-frills price. It targets the mass market and high
market share.
4. Price Skimming: high price is charged for a product till such time as
competitors allow it, after which prices can be dropped.
5. Psychological Pricing: refers to techniques that marketers use to
encourage customers, to respond based on emotional impulses, rather than
logical ones
6. Bundle Pricing: Sell multiple products for a lower rate than the
consumers would face if they purchased each item individually.
7. Geographical Pricing: Involves setting a price point based on the location
where its sold.
8. Promotional Pricing: Involves offering discounts on a particular product.
9. Value Pricing: Occurs when external factors, like a sharp increase in
competition or a recession, force the small business to provide value to its
customers to maintain sales.
10. Captive Pricing: Can increase prices so long as the cost of the secondary
product does not exceed the cost that customers would pay to leave for its
competitor.

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 Let’s take a closer look at just how prices can affect the decision making for
producers as well as consumers. Robert Dodge (1995) cited the following critical
factors for making a decision

1. Setting a high price creates bigger margins which leads to increase profits.

2. With low prices the opposite happens: margins are reduced and there is less
contribution from that particular product.

3. Premium prices may deflate demand resulting in less total profitability from
sales of that particular product.

4. Too high a price can create an umbrella under which competitors can enter
the market with lower prices and gain market share.

5. Too low a price compared with what the market is willing to pay can create
what is called an opportunity cost, which may define as the difference
between the higher prices? If you experience either of these scenarios, then
you understand that prices have major effect on producers and consumers
and the decisions that they make.

How prices can affect the decision making for producers as well as consumers?
1. Prices and Producers the law of supply states that the quantity of goods
increases when the price decreases. The law of supply is a primary example
of how pricing can affect decision making with producers. For example,
Mang Jose works for a company that produces smartphones. The company
he is working with has been made aware that a rival company will be
introducing a newer smartphone in four months, which has the same
features but at a lower cost. The company has chosen to lower the price of
their current smartphone along with trying to sell it to other retail stores to
try and get ahead of the competition. In anticipation of additional sales from
the lowering prices, there must be additional supplies purchased. Price also
affects producers because it relates to the cost of materials needed to
produce a good. For example, you are the manufacturer of bags and the
materials to create these bags are made from supplies such as cottons,
yarns along with other fabrics. If the cost of supplies is high, then it affects
your decision making because you must look on how many bags can be
crafted.

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 2. Prices and Consumers Price has a direct effect on consumers. The law of
demand states that when prices increase, the quantity of a good decreases.
Prices affect consumer decisions by often providing low-cost generic
alternatives to name brands. Sandeep Heda (2017) in his article entitled
How Customers Perceive a Price Is an Important as the Price Itself shows
how industries used price to position themselves against traditional
competitors. According to him, what will boost their perceived value to
consumers is to reduce prices either by cutting the listed price or offering a
discount. A store with the same prices as a competitor would like to be seen
as having lower prices, and a retailer with average prices that are 10%
higher than a key competitor would love to be perceived as being only 5%
higher.

What I Have Learned

Market pricing transactions in the market economy commonly functions

based on the law of supply and demand. Best economic outcomes can be achieved
through strategic market pricing. Pricing such as premium pricing, penetration
pricing, economy pricing, price skimming, psychological pricing, bundle pricing,
geographical pricing, promotional pricing, value pricing and captive pricing can be
used in appropriate forms in different types of situations.

Vocabulary Enrichment Instruction: Define the following words and phrase

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 Matching Type: Match the items in Column A with the items in Column B.

Additional Activities

Multiple Choices

1. If customers are price sensitive, the company should;

A. Match the pricing of competitors’
B. Price above the competition
C. Justify the pricing by explaining the benefits
D. Do it in a haphazard way

2. If the product has an extra feature over the competitor’s product, the company
could either;
A. Price it to the highest amount
B. Price it slightly for the additional feature
C. Price a product base on a competition
D. Price a product based on estimation

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 3. Aling Anita is a bag maker, her decision to produce was affected by the high-rate
cost of the materials she used to craft bags, what decision making to belong as
a duty?
A. Price and the Consumers B. Price and the Producers
C. Pricing Competitors D. Buyers and sellers
4. It is a technique in setting price based on emotional impulses than logical ones.
A. Psychological pricing B. Value pricing
C. Product base D. Premium Pricing

5. Price affects producers because it relates to;

A. Cost of materials needed to produce a good
B. Income sharing of producers
C. High demand of production
D. Pursue profit

Applied Economics

Quarter 3 – Module 1
Lesson 7: Market
Structures
 What I Need to Know

At the outset, students engage in a cognitive task upon which new

understanding can be developed. This will help them achieve greater intellectual
development in the form of deeper knowledge. It is also important that students
understand the concepts and principle of market structure. Also enhanced
personal efficacy occurs through action and reflection as students seek to achieve
real objectives for deeper understanding.

Expected Learning Outcome/s:

1. define market structure;

2. identify the different forms of market structure and its characteristics; and
3. understand the conditions for the existence of each market structure.

What I Know

Multiple Choice Instruction: Encircle the letter of your best answer.

1. This market structure means a single producer controls the whole supply of a
single commodity.
A. Monopolistic Competition B. Perfect Competition
C. Oligopoly D. Monopoly

2. This market has 25-75 firms, selling slightly differentiated products and some
prices are controlled.
A. Monopolistic Competition B. Perfect Competition
C. Oligopoly D. Monopoly

3. This market structure has 2-24 firms slightly differentiated products with high
barriers to entry and high control over price.
A. Monopolistic Competition B. Perfect Competition
C. Oligopoly D. Monopoly

4. The following are the characteristics of Oligopoly except;

A. Dominant B. Strict barriers
C. High Concentration D. Differentiated in nature

5. Markets like automobiles, cellphones, cable TV, and internet providers are
examples of which market structure?
A. Monopolistic Competition B. Perfect Competition
C. Oligopoly D. Monopoly

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6. Which of the following is a source of Monopoly power?
A. Smart Phones B. Lazada
C. Maynilad D. National Steel Corporation

7. This market structure has easy entry and exit of products?

A. Monopolistic Competition B. Perfect Competition
C. Oligopoly D. Monopoly

8. These are labeled as public goods except?

A. Social Security System B. Public Highways
C. Education D. Restaurants

9. It has the same impact on the market as monopoly?

A. Duopoly B. Duopsony
C. Monopsony D. Oligopoly

10. Market failure happens when individuals create

A. Irrational self- interest B. Profits
C. Business D. Economically inefficient outcome.

Lesson
Market Structures
7

(1) Perfect Competition is a market structure by a large number of small firms

which offer a homogenous product. Prices are usually kept low by
competitive pressures. The role of the firm in perfect competition is to
regulate scarce resources to satisfy consumer demand in a profitable way.
Agricultural markets often get close to perfect competition. In some cases,
there are several farmers selling identical products to the market. Also
through internet services like Lazada, e-bay and Shopee are close to this
type of market structure where it is easy to compare the prices and buy the
cheapest. There is no need to spend money on advertising in Perfect
Competition. Information is shared evenly between all participants where the
firm industries can sell all they can produce. There is easy entry and exit of
products.

(2) Monopoly market structure. The extreme opposite of perfect competition. It

is defined by a single seller or producer. The occurrence of transaction in the
system has only two choices either by the monopolist product or none at all.
The product has no close substitutes. It is said that the elasticity of demand
with every product is very low. This means a single producer controls the
whole supply of a single commodity. Monopoly firm can change the price and
quantity of the good or service. It maximizes profits due to the lack of
competition. There is strict barriers to the entry of new firms either in the
market or to do production.

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 (3) Monopolistic competition occurs when an industry has many firms with
differentiated products. It means they are price makers because the goods
are highly differentiated. Examples of the monopolistic competitions are
restaurants, hairdressers, clothing and TV programs. It has freedom of entry
and exit in the market system. (4) Oligopoly is a market form wherein a
market or industry is dominated by a small group of large sellers. Each
oligopolist is likely to be aware of the others. Oligopolies like monopolies
frequently maintain their position of dominance. There are two types of
Oligopoly pure or perfect and differentiated or imperfect. Example of pure
oligopoly is aluminum industry which product is homogenous in nature
while Talcum powder industry is a product differentiated in nature. There
are two major reasons Oligopoly industries determine on how it can
maximize profits. Some oligopolies have high concentration ratio while other
industries have much lower concentration making it more difficult to do the
pricing strategy. It has an open and close entry to the market.

(4) Market Failures can be answered using private market solutions,

government imposed solutions, or voluntary collective actions.

Externalities happen when one person’s behaviors affect another person’s

well-being and the pertinent amount and profits are not reflected in market prices.
Decrease the social benefits of individual selfishness. If selfishness consumers do
not have to pay producers for benefits, they will not pay; and if selfish producers
are not paid, they will not produce. A valuable product fails to appear. As David
Friedman explains, “it’s not that one person pays for what someone else gets but
that nobody pays and nobody gets, even though the goods is worth more than it
would cost to produce.”

(1) Positive externalities are benefits that are infeasible to charge to provide.
For instance, if you walk to work, it will reduce congestion and pollution; this will
benefit everyone else in the city or a farmer who grows apple trees provides a
benefit to a beekeeper gets a good source of nectar to help make more honey.
(2) Negative Externalities are cost that are infeasible to charge not to provide.
For example, oceans are a public utility, and nobody holds private rights over
them. This means that ships and boats can pollute the sea since there are no
property rights in the deep seas. The pollution affects other ocean users, such as
fishermen who depend on the ocean water for their livelihood. Cowen (2002) stated
that most statements for government involvement supported the idea that the
marketplace cannot provide public goods or handle externalities. Public health and
welfare programs, education, roads, research and development, national and domestic
security, and a clean environment all have been labeled public goods.

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Special Types of Market Structure
(1) Bilateral Monopoly happens when a market has only one producer (i.e.,
monopoly) and one buyer (i.e., monopsony). Examples of Bilateral Monopolies

●Coal Mining Monopsonist facing a Trade Union is the only employer of Labor. But
there is only one supplier of labor from the trade Union members.

●A monopsony would pay a wage of W2 and employ Q2 workers where MRP=MC

● A trade Union could organize labor and bargain for higher wages of W3- without
causing a fall in employment.
(2) Strategically bilateral oligopoly market game with two commodities, it
allows strategic behavior one on the other sides of the market. When the sum of
purchasers is large, market condition with an effect degree of seller performed
like Oligopoly and a significant degree of buyer combination like Oligopsony.
(3) Duopsony is an economic state in which there are only two large buyers for a
particular product or service. These two buyers influence market demand,
giving them considerably strong bargaining power, assuming they are
outnumbered by firms.

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 (4) Duopoly is the simplest form of Oligopoly controlled by small companies. A
duopoly can have the same impact on the market as a monopoly if the two
players work on prices or output.
(5) Monopsony exists in a specific area, wherein only one buyer usually works
along with many sellers.

Market Failures, Public Goods and Externalities

According to Chappelow (2020) market failure is an economic situation
defined by an inefficient distribution of goods and services in the free market.
(1) Market failure happens when individuals playing in rational self-interest create
a less than optimal or economically inefficient outcome.
(2) Market failure can happen in a complete market where goods and services are
bought and sold outright, which we think of as an average market. 31
(3) Market failure can also occur in implicit markets as approvals and special
treatment are exchanged, such as elections or the legislative process.

TRUE OR FALSE: Write T if the statement is true. F the statement is false.

1. The exact number of firms cannot be determined in Perfect

Competition.
2. Meralco is one example of a perfect competition.
3. Oligopoly is a market structure characterized by few sellers.
4. Monopolistic competitive market face high barriers of entry.
5. Perfect competition is a single firm with differentiated products.

Quick Write. Using the concept of supply and demand, how would
consumers react to an economy based solely
on a monopolistic market structure?

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Market Structure Chart:
Let’s summarize important distinctions among the four market structures.

Additional Activities

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Applied Economics
Quarter 3 – Module 1

Lesson 8:
Contemporary
Economic Issues
Affecting Filipino
Entrepreneurs
 What I Need to Know

In this lesson, learners are expected to gain competence and critically analyze
how contemporary economic issues and problems affect Filipino entrepreneurs.

Expected Learning Outcome/s:

MELCS: Analyze the effects of contemporary economic issues affecting the Filipino
entrepreneurs.

What I Know

TRUE OR FALSE: Write the word TRUE if the given statement is

correct, otherwise write FALSE.

1. Investment is an amount of money derived merely from savings.

2. Job and skill mismatch are some of the labor issues in the Philippines.
3. Minimum wage policy tends to reduce employment in small scale firms.
4. Non-VAT business pays 3% tax based on sales.
5. Alcohol, tobacco, petroleum products, automobiles, and mineral products
are charged with excise tax.
6. Rate of interest is the sole determinant of investment.
7. One reason of educated unemployment is the graduate’s reservation on
wages and that they can afford to wait for better opportunities.
8. The tax liability for a corporation is determined by its residency status
and is based on the net income it obtains while carrying out its business
activity.
9. Tax imposed to a non-VAT business is also called percentage tax.
10. A 12% tax based on gross sales is imposed by government to a VAT
business.

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 Lesso Contemporary Economic
n8 Issues Affecting Filipino
Entrepreneurs

What’s In

Entrepreneurship is vital in our economy as it creates wealth and so

improves the standards of living not only for the entrepreneurs, but for other
people as well. With entrepreneurs’ innovation, new and improved products enable
new markets to develop. Higher earnings can help boost national income and tax
revenue. However, like any endeavor, entrepreneurs are faced with challenges.
There are some economic issues that affect their growth and development.

What’s New

A contemporary issue refers to an issue that is currently affecting people and

that is unresolved. The fundamental economic problem faced by society and
business owners is how to allocate scarce resources to produce various goods and
services within the economy. Filipino entrepreneurs are currently faced with
different economic problems and issues that affect their business operations.

What is It

Contemporary Economic Issues Affecting Filipino Entrepreneurs:

1. Capital/Investment and the Rate of Interest Chen, J. (2020)

defined "investment" as any mechanism used for generating future income. She
explained that investing is putting money to work to start or expand a project or
to purchase an asset or interest where those funds are then put to work, the
goal of which is to earn an income and increase its value over time. Abrugar, V.
(2014) stated that for starting entrepreneurs who are not yet earning an
operating income, getting financial aid from the government or obtaining a loan
from banks seems to be difficult. Applying for a bank loan requires too much
paperwork, while interest rates are also too high. To get a loan, an entrepreneur
must have a collateral or show some years of operating income. Pettinger, T.
(2019) added that with higher interest rates, it is more expensive to borrow
money from a bank. Interest rate is the amount a lender charges for the use of
assets expressed as a percentage of the principal. The interest rate is typically
noted on an annual basis known as the annual percentage rate (APR). Higher
rates increase the cost of borrowing and require investment to have a higher
rate of return to be profitable. This tends to discourage investment because of
higher opportunity cost. Interest rates are one important determinant of
investment. However, it is not the only factor, other factors include investor

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 confidence, economic growth, the willingness of banks to lend, and state of
technology.

2. Labor refers to an economic group comprising those who do manual labor or

work for wages. Unemployment, job and skill mismatch and educated
unemployed are one of the labor issues in the Philippines. Even with the high
unemployment rate, there are actually jobs that are not filled because there are
no applicants who have the right qualifications. From this job mismatch
problem also arises for the educated unemployed. In 2010, the unemployment
rate among the college educated is about 11%. Some have difficulty in finding
an appropriate job for the degree they have. Others, have higher reservation
wages and can afford to wait for better opportunities. With the declining
earnings, people are looking for additional hours of work (underemployed), or
going abroad (overseas employment) or choose to be selfemployed. This also
shows how they are not content with the quality of employment. In 2009, it was
reported that 1.423 million Filipinos were deployed overseas. (Source:
https://en.wikipedia.org/wiki/Labor_policy_in_the_Philippines)

3. Minimum wage is monetary compensation or remuneration paid by an

employer to an employee in exchange for work done. Payment may be
calculated as a fixed amount for each task completed (a task wage or piece rate),
or at an hourly or daily rate, or based on an easily measured quantity of work
done. Based on the findings of the study conducted by Lanzona, L.Jr. (2014) it is
explained that, the minimum wage policy reduces employment in small-scale
firms. Because of greater marginal cost it would be difficult for small-scale firm
to grow and become a larger-scale firm. Thus, it causes them to reduce their
production workers.
4. Taxes are imposed and collected pursuant to the National Internal Revenue
Code, the Tariff and Customs Code, and several special laws. There are four
main types of national internal revenue taxes: income, indirect (value-added
and percentage taxes), excise and documentary stamp taxes, all of which are
administered by the Bureau of Internal Revenue (BIR). At the local level,
governments have some autonomy to impose taxes on business and ownership
of real property.

● Corporate Income Tax - In the Philippines, all companies – domestic or

foreign – are liable to pay corporate income tax (CIT). The tax liability for a
corporation is determined by its residency status and is based on the net
income it obtains while carrying out its business activity, normally during
one business year.
● Sales Tax - Sales tax is a tax imposed on the gross sales or gross
receipts of an entity. The tax rate ranges from 3% to 12% depending on
the tax type, such as VAT or NON-VAT. When a business entity is VAT
registered, it is subject to 12% sales tax on its gross sales or receipts.
Such sales tax is referred to as VAT or Output Tax. On the other hand, if
a business entity is NON-VAT, it is subject to 3% sales tax on its gross
sales or receipts. Such sales tax is referred to as Percentage Tax. (Source:
● Excise Taxes - Excise taxes are imposed on the following: alcohol,
tobacco, petroleum products, automobiles, mineral products, and non-
essential goods such as jewelry and precious stones, perfumes, yachts
and other sport vessels. (Source:

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 https://oxfordbusinessgroup.com/overview/keypoints-detailed-look-tax-
laws-businesses)
● Documentary Stamp Tax - A documentary stamp tax (DST) is
required for certain documents, transactions or instruments specified in
the tax code when the obligation or right arises from Philippine sources
or when the property is situated in the
Philippines. . (Source:
https://oxfordbusinessgroup.com/overview/key-points-detailed-look-
taxlaws-businesses)

5. Rental every business requires space for its office, store, warehouse, shop or
plant for production. However, not all entrepreneurs have their own real
property to place the required facilities. Thus, most of businesses started with
renting a space. Rent is the grant of possession and enjoyment of property or
machinery and etc. in turn for the payment of rent from the tenant or lessee.
This payment for rent is part of business operation’s expenses and must be
covered through its sales. Moreover, if the rental terms and conditions that a
business has to comply are unfavorable, that brings another challenge for
entrepreneurs.

What’s
More
Instruction: Identify the following.
1. A tax imposed on the gross sales or gross receipts of an entity.
2. A tax that is required for certain documents, transactions or instruments
specified in the tax code.
3. It refers to any mechanism used for generating future income.
4. It refers to an issue that is currently affecting people and that is unresolved.
5. A tax paid by all companies – domestic or foreign.
6. This is the amount a lender charges for the use of assets expressed as a
percentage of the principal.
7. This refers to an economic group comprising those who do manual labor or
work for wages.
8. This is imposed and collected pursuant to the National Internal Revenue Code,
the Tariff and Customs Code, and several special laws.
9. It refers to the grand of possession and enjoyment of property or machinery
and etc. in turn for the payment of rent from the tenant or lessee.
10. This is a monetary compensation or remuneration paid by an employer to an
employee in exchange for work done.

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 What I Have Learned

Instruction: Fill-in the blanks.

1. Filipino entrepreneurs are faced with different that affect their

operation.
2. is putting money to work to start or expand a project or to purchase
an asset or interest where those funds are then put to work, the goal of which is
to earn an income and increase its value over time. With higher interest rates, it
is more expensive to borrow money from a bank.
3. Unemployment, job and skill mismatch and educated unemployed are some of
the in the Philippines.
4. Because of greater marginal cost it would be difficult for small-scale firm to
grow and become a larger-scale firm. Thus, it causes them to reduce their
.
5. are imposed and collected pursuant to the National Internal
Revenue Code, the Tariff and Customs Code, and several special laws.

What I Can Do

News clip. Cut or print out a news article discussing economic issues affecting
entrepreneurs nowadays. Place it in a bond paper. Answer the following
questions:

1. What economic issue affects the Filipino entrepreneur on your selected news
article?
2. How does this economic issue affect the Filipino entrepreneurs?
3. What are your reactions towards the issue?
4. If you are a political or economic leader, how will you resolve the issue?

Assessment

Instruction: Choose the letter of the best answer. Write your answer on a
separate sheet of paper.
1. Mary Ann is paying 3% tax based on her gross sales. What type of tax is she
paying?
A. Excise Tax B. Value Added Tax C. Percentage Tax
2. The government grants additional cost of living allowance to workers. What
possible economic issue affects the small-scale production business of Mang
Jose?
A. Labor B. Wage C. Investment

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3. Interest rate on borrowing is high. How this situation may affect the inclination
of Mr. Martinez to borrow money for his micro business enterprise?
A. Mr. Martinez may increase his borrowing to increase his fund.
B. Mr. Martinez may have a second thought of borrowing due to its cost.
C. Mr. Martinez may borrow however lower his price in order to boost greater
sales.
4. Which of the following taxes is being paid by all types of business?
A. Corporate Income Tax B. Excise Tax C. Sales Tax
5. Which of the following is charged with excise tax?
A. Agriculture products B. Livestock Products C. Petroleum Products
6. Which of the following is a labor issue?
A. Underemployment B. Employment C. Labor Supply
7. The following determines the tax liability of a corporation EXCEPT one.
A. Residency status B. Net income it obtains
C. Number of stockholders
8. What is the reason of educated unemployed?
A. Difficulty in finding an appropriate job for the degree they have.
B. They simply do not want to apply for a job.
C. Have lower reservation wages
9. What could be the result of sending our professionals and skilled workers
abroad?
A. Oversupply of professionals and skilled workers in local job market.
B. Undersupply of professionals and skilled workers in local job market.
C. No supply of professionals and skilled workers in local job market.
10. If the cost of investment is high, what may entrepreneurs tend to do?
A. Offer the product at lower price.
B. Offer the product at higher price.
C. Neither A nor B

Additional Activities

Instruction:

1. Construct a “hugot line” showing how contemporary economic issue affects

Filipino entrepreneurs during this Covid 19 Pandemic.
2. Identify the economic issue that you have cited.
3. Explain how the economic issue affects the Filipino Entrepreneurs.
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