What I Need to KNOW

This module contains nine (9) lessons, namely:

LESSON 1: INTRODUCTION TO ECONOMICS

LESSON 2: THE CIRCULAR FLOW OF ECONOMIC ACTIVITY
LESSON 3: MARKET DEMAND, SUPPLY AND EQUILIBRIUM
LESSON 4: MARKET PRICING
LESSON 5: MARKET STRUCTURES
LESSON 6: CONTEMPORARY ECONOMIC ISSUES FACING THE FILIPINO
ENTREPRENEUR
LESSON 7: INDUSTRY AND ENVIRONMENTAL ANALYSIS COMPETITIVE
ANALYSIS
LESSON 8: BUSINESS PRINCIPLES, TOOLS, AND TECHNIQUES IN
PARTICIPATING IN VARIOUS TYPES OF INDUSTRIES IN THE
LOCALITY
LESSON 9: THE EFFECTS OF THE VARIOUS SOCIO-ECONOMIC FACTORS
AFFECTING BUSINESS AND INDUSTRY

At the end of this module, the students are expected to:

 differentiate economics as social science and applied science in terms of nature and
scope;
 apply the concept of opportunity cost when evaluating option and making economic
decision;
 make decision based on how man can satisfy most of his wants given limited resources;
 describe and state the importance of economics resources;
 describe The Circular flow of economic activity;
 distinguish the different kinds of goods;
 differentiate the classification of goods;
 differentiate the micro and macro economics;
 identify the basic economic problem of the country;
 describe the various economic system;
 differentiate needs and wants;
 define demand and supply;
 recognize Factors that affect Demand and Supply;
 recognize the Equilibrium Point and Price;
 state the Law of Demand and Supply;
 determine the implications of market pricing in making economic decisions;
 explore the elasticity of demand and supply;
 solve problems on price elasticity of demand and supply;
 value the implications of market pricing in decision making.
 identify the concept of market;
 recognize the different market structures and its role in giving fair market price;
 recognize the entry and exit of each market structures;
 determine the effects of investments and interest rate on our Filipino Entrepreneur;
 recognize the importance of rental;
 recognize different types of payments for service rendered;
 identify nature and scope of minimum wage;
 differentiate the classification of taxation;
 analyse different principles, tools, and techniques in creating a business;
 differentiate various types of industries in the locality.
 determine the socio economic impact; and
 explore the viability and impacts of business on community.

General Instructions: Answer all the activities on this module. Use separate sheets of paper
for your answers.
Activity I

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Subject: Applied Economics – Module 1
A. WANTS OR NEEDS. Assume that you are buying or paying something. Identify the following
items if it is considered as WANTS or as NEEDS and explain your answer.
1. Coke 6. Spotify Premium Account
2. Water 7. Clothes
3. Cellphone load for playing Mobile Legends 8. Netflix Account
4. One sack of rice 9. Electricity Bill
5. Shampoo with Keratin 10. Bluetooth Speaker

B. RESOURCES. Identify which resource (Land, Labor, and Capital) is referred to in each item.
1. Construction Workers 4. Nurses
2. Farmers 5. Production Supplies
3. Quarry Sites

Introduction to Economics

A simple buy and sell in a store or in the market is a demand and supply transaction.
People buy in order to satisfy their wants but sometimes it is not enough to satisfy them due to a
lack of money or scarce resources. Others do not buy anymore due to insufficient purchasing
power (or buying power). This will result in deprivation of the needs that have not been met.
Sadly to say people would rather beg for a share or “paying” to those who can afford it. Some
can afford to buy their wants or needs constantly but they are not satisfied at all.
Economics came from the Greek word ‘oikonomia’ which means management of household
expenditures. This means that economics refers to the operation of household transactions.
Starting from a simple unit of society the Family the income generated by the parents up to the
budget they stretch to meet every need for the members of the family is already economics in
action. If we put it to the upper bracket of the society which is the GOVERNMENT, economics is
about the management or operation of the entire productions and consumptions of the people to
be able to meet everyone’s need, the need to study intelligently the process of how to allocate
the limited natural resources, human resources, capital goods to satisfy the unlimited wants of
the people. “Therefore, Economics is the study of efficient and effective allocation of scarce
resources to satisfy unlimited wants and needs of the people”.
Economics examines how people use their scarce resources to satisfy their unlimited
wants. For example, a jeepney driver uses the jeep and other scarce resources, such as
knowledge of the city, driving skills, gasoline, and time to generate income. Their income turns
to buy housing, rentals, groceries clothing, electronic gadgets, and other goods and services
that may satisfy some of the driver’s unlimited wants. Scarcity is a condition facing all societies
because there are not enough productive resources to satisfy people’s unlimited wants.

PROBLEM WITH SCARCITY

What is scarcity?
It is a condition where there are insufficient resources to satisfy all the needs and wants
of a population. We have 2 types of Scarcity it can be Absolute or Relative.
Absolute Scarcity is when the supply is limited. For example, Oil is scarce in the
country because we have no oil deposits in our country which we can source our petroleum
needs, oil deposits mostly found in the Middle East, China, Russia, and the United States, so
we rely on imports from oil producing countries.
Another example is cranberries are absolutely scare in our country since cranberries
generally grow in the period between the last spring frost, and the first autumn frost. That might
sound like the berries should thrive during the summer, and they do, but extremes in
temperature like the ones we experience during a Philippine summer dry out their shallow roots,
and kill them. They also require constant watering, and proper irrigation, which is rather difficult
to provide during long, summer droughts, especially when our rice fields which provide the
country’s main food source and are thus the priority are clamoring for the same thing. We have
to rely on imports for our supplies of cranberries. This explains why cranberries are expensive in
the Philippines.
Relative Scarcity is when a good is scarce compared to its demand. Relative Scarcity
occurs not because the good is scarce and is difficult to obtain but because of the
circumstances that surround the availability of the good. For example coconuts are easy to find
on our country since the plant easily grows in our soils and climate. However, coconuts become
scare when the supply is not sufficient to meet the needs of the people. Another example is
bananas are abundant in the Philippines and are being grown in a lot of regions around the
country. But when there is a calamity like typhoons it destroys the banana plants and the farmer
has no banana to harvest, then bananas became relatively scarce.

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Subject: Applied Economics – Module 1
ECONOMIC RESOURCES
Economic, resources are also known as factors of production, are the resources used to
produced goods and services. These resources are, by nature, limited and therefore, command
payment that becomes the income of the resource owner. In short these are resources that are
used for the production of economic goods.

These resources are: LAND, LABOR, and CAPITAL

1. Land – soil and natural resources that are found in nature and are not manmade.
Trees, water forest mineral and oil are considered under the category of land as factor of
production in Economics. These natural resources even without the help of mankind could
produce something for their consumption. Trees bear fruits, water has its own creatures such as
marine mammals, fishes, shells , and other sea creatures, mineral and oil are essential products
that are used in the production of other products such as fuel gasoline and energy that gives life
to our industry. Owners of the land receive a payment known as rent.
2. Labor – Physical and human effort exerted in production. It also refers to the labor
force the exertions of human energy in order to produce or in layman’s term to work According
to the Philippine Labor Law, labor force starts from age 15 years old and above who are able
and capable of working and could render service, employed or unemployed under the labor
code. Some of those not included in the counting of labor force are those who are fulltime
students, housewives and those disabled persons who are incapacitated to work. Nevertheless
during our modern times during our modern times these disabled persons have already find
their place contributing to the labor force because modern society paved the way of proving that
these people still are worthy in the labor force. Even the housewives are no longer house
keepers and caregivers in their family. They involved themselves in a part time job like online
selling, selling goods like process foods, cook foods etc., and others offer services like laundry,
manicure and pedicure.

Labor Force is divided into two categories:

Physical Exertion- Labor using mostly hand and body or actual manpower action
Mental Exertion – Labor using mostly brain for decision making and planning

3. Capital – Anything manmade materials or resources that may use in the production to
produce more goods and service in layman’s term materials that is used in operating a
business. Another definition anything that is manmade like machineries and equipment that are
used in the production of another product would be rather be under capital. Due to man’s
innovation and encompassing vision of the future man has created tools and equipment’s that
allowed him to produce his everyday need.

CHOICE ON DECISION MAKING

Because of the presence of scarcity, there is a need for man to make decisions in
choosing how to maximize the scarce resources to satisfy as many wants as possible. A
homemaker who has a monthly budget needs to decide on how to utilize it to pay the rent, to
buy, food, and to pay the children’s tuition fees to have a better education, and to buy clothes
and shoes.
If the budget is not enough, then the house maker has to give up for some of these
things. She/he needs to make a choice. If she/he decides not to buy new shoes for the children
at the start of the school yea, then this is the choice she gave up. The basic human necessities
are Food, Water, Shelter, Air, Education, Sanitation, and healthcare.

Opportunity cost refers to the value of the best foregone alternative. When the land is devoted
exclusively to the cultivation or rice, we give up an output of bananas or mangoes that we could
have planted on that land area. A producer, who decides to transform all his leather into shoes,
gives up the chance to produce bags with that leather. The concept of opportunity cost holds
true for individuals, businesses, and even a society.

ECONOMIC AS SOCIAL SCIENCE

Economic is a different science from biology and chemistry as these are physical
sciences. Economics is a social science because it studies human behavior just like
psychology and sociology. A social science is broadly speaking, the study of society and how
people behave and influence the world around them. As a social science, economics studies
how individuals make choices in allocating scarce resources to satisfy their unlimited wants.
THE CIRCULAR FLOW OF ECONOMIC ACTIVITY
Initially the commercial world comprises of only two types of person – the consumer and
the producer. The consumers are those who consume or buy the good(s)/service(s)
produced/made by the producers. On the other hand, the producers are those who produce;
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those who make or provide goods to the buyers. The producers also avail the services of the
consumers. For examples producers of breads need baker, and the baker needs bread also. In
a simple market economy we can illustrate this simple circular flow as basic circular flow.

THE DIFFERENT KIND OF GOODS

Goods – material or tangible things which are consumed that gives satisfactions.
Economic Goods – are tangible things which are useful but scarce for example Oil
Gold, Woods.
Free Goods - are things which are useful but abundant for example air, water, ocean
land
Consumer Goods -are those things which are ready for consumption and gives direct
satisfaction for example books, houses, computers, and cars.
Producers Goods – are goods which are used for the production of other goods and
services. These are also known as capital goods. For example wood for furniture, sugar cane to
make sugar, flour for bread and etc.

CLASSIFICATION OF GOODS AS TO NECESSITY

Luxury Goods are things which are not really needed they give prestige and adds
status symbol, one can live even without those things, it is also known as wants. For example:
branded cars such as BMW, Lamborghini, branded phone with excessive accessories or
upgrades, mansion and resorts.
Basic Goods are things which are really needed. One cannot live without them. For
example are food, clothing, water, shelter, money, health care, sanitation.
Two Divisions of Economics
Microeconomics – Micro means small. It refers to the study of small unit of the
societies like family, house hold, persons, consumption, spending, production and investment
Macroeconomics – Macro means big. It pertains to the study of large unit of the society
or the economic as a whole. It is also the study of the whole economy of the country base on its
measurement of its production, income, and spending commonly called gross national product
or GNP. It also includes the decision of implementing fiscal and monetary laws for the whole
economy.

BASIC ECONOMIC PROBLEM OF THE COUNTRY

1. What to produce? – This is the decision on what goods and service to produce and
their quantities. The necessity of the products and the demand of the people determine the
products to produce, and the type of service to provide. For natural resources, the problem of
utilization and conservation are factors to be considered in production. Woods are being used
for production of houses, cabinets and furniture. For human resources, what is the right age for
those who work part time or full time job? What type of worker should be needed for a certain
work? How many holidays are to be given? When does the contract end? Having decided on
the nature of goods that will be produced and the quantity of these goods should also be
decided on.
2. How to Produce? – This is the decision in the production; the process and method of
producing. It answers some of these questions: Are we endangering the environment if we
putting our waste anywhere? Are the products not harmful to the health of the people? This also
refers to the resource mix and technology that will be applied in production.
3. For whom to produce? – It refers to the people who will demand for the product or
the target market. Who would accept the product from the market? We should consider the
demographic profile like age, gender and their buying capacity.
4. Availability of the produce – These are some of the questions to be considered: Are
the resources available all throughout the year either locally made or export material? Will the
product be a finished product, processed product or by product? Will it be seasonal or
occasional?
TYPES OF ECONOMIC SYSTEM

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Subject: Applied Economics – Module 1
 1. Traditional Economy – it is characterized by a system where the production of goods
trading and distribution of income are sanctioned by custom. It is referring to the traditional
manner of doing things, makes decisions on what, how and for whom to produce. The methods
of production are carried over by the system used by our forefathers. Technological change and
innovation are closely constrained because they may clash with tradition and threaten the social
order. Religious and cultural values are over and above economic activity to attain status in the
society one must belong to the highest position in the religion or tribe.
2. Command Economy – The government owns the means of production. The
government dictates what, and for whom to produce. This type of economy is also called
communistic economic structure. All the capital resource and consumer goods are being divided
on its citizenry. No private or individual production and consumption are allowed because the
government dictates the prices.
Some of essential characteristic of Command Economy
 No economic freedom – you cannot choose to get rich everything has fair share. You
could not just put up your business because the government will take care of it. No one
is allowed to just lie down all day; everybody has to work in order to eat.
 No free competition – the government is the sole source of central planning because it
dictates how much to produce and how much price the commodities cost, when to
produce.
 No profit motive – Because communist prides themselves for having equal share, the
government does not impose too much profit because it gives to its people what had
been generated as revenue. Business firms are not motivated to sell anymore because
the government intervene the price of their goods.
 No religion
3. Market Economy - The resources are privately owned and the people themselves
make decision. This is also known as capitalism or free enterprise economy and it follows the
laissez faire policy, French term which means “let alone policy” or “leave it alone.” The
economic problems are being decided by the person who actively participates in the inner
looking network of market and prices. There are many independent buyers and sellers of each
product and resources. Therefore, competition arises giving height to consumer’s sovereignty.
The price of good is the basis for the producer’s knowledge. This is exact reverse of
communism.

Characteristic of a Market Economy

Presence of economic freedom – People can have a choice to get rich. They could put
up their own businesses. If someone does not want to work, he could choose to do so. If he/
works hard and longer he could ask payment for extra working hours.
Presence of profit motive – There are lot of people motivated in trading and business
because there is private property. Businessmen could price their goods at their whims but taking
in consideration the demand and supply in the market.
Presence of competition – Businesses need to survive in selling that why they are
competing with each other for the equal price.
Presence of religion – This is recognition of the belief in God. Whatever religious sect it
may enter as long as it does not jeopardized humanity is permitted.
No central planning – There is no one who could dictate how much to produce, when
to produce, how to produce, and whom to produce.

ECONOMIC AS AN APPLIED SCIENCE

Applied Economics is the application of economic theory and econometrics in
specific settings with the goal of analyzing potential outcomes. As how sets of field of
economics, it is typically characterized by the application of the core, referring to economic
theory and econometrics, as a means of dealing with radical issues in fields that include
demographic economics, labor economics, business economics, agricultural economics,
development economics, educational economics , health economics, monetary economics,
economic history, and many others. We should be able to improve human welfare among
Filipinos by the investigation and analysis of economic problems in the real world.

APPLIED ECONOMICS ON BASIC ISSUES AND PROBLEMS

Applied Economics seeks to solve the problems on scarcity. This happens when human
wants for goods and services exceed the available supply. In a modern economy, it is evident
that a division of labor happens when people earn income by specializing in what they produce.
They will use that income to purchase the products they need or want every day.
Also, in the division of labor, it allows workers and firms to produce more. This is because:
a) Agents focus on areas of advantage due to natural factors and skill levels;

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b) The agents learn and invent; and
c) The agents take advantage of economies of scale.
Division and specialization of labor only work when individuals can purchase what they
do not produce in markets.
Applied economics then helps you understand the basic problems facing the world
today. It helps you become a well-rounded thinker and most importantly it prepares you to be a
good citizen.

Activity II
A. GRAPHING EXERCISE. Draw a pie chart similar to the chart shown below that
demonstrates how you spend your monthly allowance. To construct your pie chart, draw a circle
and divide it into slices. Each slice represents the spending categories of your money by
percentages. Label each slice with a spending category and explain your answer.

 Food – 40%
 Load – 5%
 Clothes – 5%
 Utilities – 10%
 Transportation – 30%
 Others – 10%

B. Talk to a person who prepares the household budget for the family, it could be your mother
or your father then make a list of all the basic expenses for one month. After that, budget in
percentage for each of these expenses.

C. MULTIPLE CHOICE. Choose the letter that corresponds to your answer.

1. Scarcity of resources in your locality (Biñan/Cabuyao/Calamba/Sta.Rosa/Silang) is evident.
Only available are fabrics, electric sewing machines and skilled workers. The government said,
you are only allowed to work from home to be safe and free from infection of viruses. Which
items most likely you need to produce?
a) PPEs b) canned goods c) lack of rice d) sewing machines
2. Cabuyao is ranked 5th in the most cases of COVID patients in Laguna Province. The city
needs urgent services of the medical front liners in curing the increasing number of patients.
There is scarcity in the raw materials for production. To whom would you produce first the
available resources?
a) soldiers b) police officers c) medical frontlines d) your family
3. There is an urgent need of PPEs by the medical front liners in the City of Manila due
increasing number of COVID patients every day. Which is not true of producing the products
(PPEs)?
a. import from China
b. TESDA students and skilled workers may produce the PPEs
c. manufacturers/suppliers may supply the PPEs
d. export PPEs to Japan as gross national products
4. The 3S Manufacturing Company decides to produce more on liquid soap than bar soap to
supply the growing demands in the market. It solves issues on:
a. whom to produce c. how much incentive
b. how to produce d. what to produce
D. MATCHING TYPE. Match Column A to Column B.
COLUMN A COLUMN B
1. Luxury Goods A. Ply Wood
2. Consumer Goods B. Drinking Water
3. Free Goods C. Laptop
4. Tangible Goods D. Land
5. Basic Goods E. Bread
6. Economic Goods F. Mansion

Activity III
A. WRITING AN ESSAY. Think critically in answering the following questions.
Rubrics:
Content 10 points
Organization/Clarity 5 points

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Subject: Applied Economics – Module 1
 Relevance 5 points
______________
20 points
1. How can you tell whether the food you eat from your refrigerator is scarce?
2. Identify a good or services provided by the government that has no apparent cost to you.
Why is this good or service not free?
3. Why economics deeply rooted in the concept of scarcity?

B. REFLECTIVE LEARNING SHEET. Read the paragraph below. On separate sheet of paper,
answer the question below. (20 points)

Every society must make choices about which essential should be allocated with the
available but limited resources for production. In most cases, where there is scarcity in the
production of necessities, or where there are no enough funds to accomplish everything for the
satisfaction of everyone, the society has to make better choices.
Today, we have to adjust to the new normal way of living. There is scarcity in the production of
goods and services for everyone’s needs and wants. Everything in this world has limitations.
Rich and poor, all individuals…”ceteres paribus….” “all else are equal”…..
Regardless of your economic status, which is more important to you, health or unlimited
supply for your wants?
Rubrics:
Content 10 points
Organization/Clarity 5 points
Relevance 5 points
______________
20 points

Activity IV
A. MULTIPLE CHOICE. Read and analyze each question. Write the letter that corresponds
your answer.

1. It is a condition where there are lack of resources to satisfy all the needs and wants of a
population.
A. Scarcity B. Absolute C. Relative D. Economics
2. It occurs not because the good is scarce and is difficult to obtain but because of the
circumstances that surround the availability of the goods.
A. Scarcity B. Absolute C. Relative D. Economics
3. These are resources used to produce goods and services.
A. Land B. Labor C. Capital D. Economics Resources
4. These are resources that are not manmade.
A. Land B. Labor C. Capital D. Economics Resources
5. It is a physical and human effort exerted in production.
A. Land B. Labor C. Capital D. Economics Resources
6. The material that is used in operating a business.
A. Land B. Labor C. Capital D. Economics Resources
7. It refers to the value of the best foregone alternative.
A. Opportunity Cost C. Cost Alternative
B. Cost Cutting D. Cost Value
8. It is the management of household expenditures.
A. Scarcity B. Absolute C. Relative D. Economics
9. It is when the supply is limited.
A. Scarcity B. Absolute C. Relative D. Economics
10. These are the resources that may be used in the production to produce more goods and
service.
A. Land B. Labor C. Capital D. Economics Resources
11. This kind of good is a material or tangible things consumed that gives satisfaction.
A. Producer Goods B. Goods C. Consumer Goods D. Economic Goods
12. These are things which are useful but abundant.
A. Producer Goods B. Goods C. Consumer Goods D. Economic Goods
13. These are things which are not really needed they give prestige and adds status symbol,
one can live even without those things, it is also known as wants.
A. Basic Goods B. Luxury Goods C. Goods D. Economic Goods
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14. These are things which are really needed. One cannot live without them. For example are
food, clothing, water, shelter, money, health care, sanitation.
A. Basic Goods C. Goods
B. Luxury Goods D. Economic Goods
15. It is the application of economic theory and econometrics in specific settings with the goal of
analyzing potential outcomes.
A. Applied Economics C. Command Economy
B. Market Economy D. Traditional Economy
16. This type of economy is also called communistic economic structure.
A. Applied Economics C. Command Economy
B. Market Economy D. Traditional Economy
17. It refers to the study of small unit of the societies like family, house hold, persons,
consumption, spending, production and investment
A. Economics C. Microeconomics
B. Macroeconomics D. Applied Economics
18. It is also the study of the whole economy of the country base on its measurement of its
production, income, and spending commonly called gross national product or GNP.
A. Economics C. Microeconomics
B. Macroeconomics D. Applied Economics
19. These are things which are useful but abundant for example air, water, ocean land.
A. Producer Goods B. Goods C. Free Goods D. Economic Goods
20. It pertains to the study of large unit of the society or the economic as a whole.
A. Economics C. Microeconomics
B. Macroeconomics D. Applied Economics

B. ESSAY. Answer the question as comprehensive as possible.

1. What are the problems you face when you make economic choices?
Rubrics:
Content 10 points
Organization/Clarity 5 points
Relevance 5 points
______________
20 points

Activity V
A. Look for an article from the latest news report, magazine or article from the internet that is
related to any economic issues. Tell if it the issue is related to scarcity then explain how.

B. Give five (5) examples of countries that have Traditional Economic system. Cite proofs that
they exercise the traditional economic system. After that, make a short analysis about the
activity. Do this on separate sheet.

Activity VI. Study the illustration below. What idea(s) or thought(s) come in your mind when you
encounter the words demand and supply?

Needs are things that we must have for us to live like food, clothing or shelter. These are
all basic needs that the absence of any one among the three would cause sickness that would

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lead to death. Our body needs food for health and likewise, we need shelter and clothes to
secure us from harm and danger especially during bad weather. Houses are built for people as
place for resting while clothes are made for people to protect themselves against harmful
dangerous species, insect bites, protection from too much heat and cold.
Wants are the things that will give us the state of ease and contentment. Sometimes, we
really do not need a thing but we ought to have it because it gives us satisfactions.
Food is a basic ne ed likewise some of the food which people consume is not really for
health reason(s) or survival like junk food, candies and soft drinks. People demand for these
products because they give them satisfaction, regardless of the many harmful ingredients that
they give to the body. Juan Dela Cruz does not need expensive clothes yet he wants to have
fashionable dress that he thinks will give him “pogi” points and will give him more satisfaction.
There is really a need for shelter, on the other hand, furniture and appliances make the house a
better place for living.
There are times that wants would make us suffer more. These are products lack scrutiny
against their harmful effects. They are presented to the market for profit motives. To name a few
are cosmetics, bath soaps, shampoo, lotion, and other over the counter medicines etc.
For example: you want to have a smooth and flawless face so you use astringent that
you believe will give you radiant beautiful face but what happens is an opposite to your
expectation. A fearful face resulted, not a white complexion but a pale looking skin. Some
medicines are good for the relief of headache but gives palpitation of the heart. Needs could be
met but wants could not. Wants are the result of human’s unsatisfied nature always asking for
more, seeking for greater satisfaction that might result for his/her own suffering.

MARKET, DEMAND AND SUPPLY

When a person buys his needs and wants he goes to the market. Market is the place
where all goods and services are bought. A place where the two types of people meet: the
buyer and the seller. They exchange transactions with the agreement that one must pay with
willing of the goods and accept the agreed price. It is understood that in a market the key
players are the buyers the one who demand and the sellers the one who supply. Aside from
these two players, government also plays an important role in determining the price especially if
the products are considered basic commodities.

Price ceiling - the maximum price to be imposed by the sellers to its commodity; and Price
floor - the minimum price to be imposed by the sellers.
Demand – refers to the willingness of the people to buy or purchase the goods regardless
whether it is a need or wants over a period of time at a giver price.

The following are factors that influence demand:

1. Income – The higher the income the more demand there will be. If the economy is having a
full labor force employment, the more demand is created
2. Taste and Preference – There is favorable change in taste and preference because of
advertisement and fashion which leads to an increase in demand.
3. Population - Whenever there is an increase in population or where there are a large number
of people in an area, increase in demand abounds.
4. Changes in the prices of related goods - Related goods are those substitutes or
complimentary goods. Substitute goods are those that give the same value but differ in price,
brand, form or shape yet gives the same satisfactions.
For example, Rambutan and Lychee, Dalandan and Orange juice and soft drinks, bread
or rice. Complementary goods are goods ha go hand in hand or always together. For example
Micro SD and cell phones, sugar and coffee, sandwiches and drinks. Whenever there is a
change in the price of one, the demand for its partner also changes.

5. Expectation in future price – As there will be an increase in the price of a commodity

natural reaction is for people to buy more today to save.
6. Availability of credit facilities – Since credit cards are already used as medium of
exchange, people are tempted to demand more because of easy terms of payment
7. Climate and weather – if there is a natural disaster, typhoon and change in weather
conditions demand for commodities are affected.
For graphical illustration of the demand curve see figure 1 the demand curve is sloping
downward, from left to right. An increase in the demand leads to shift of demand curve to the
right while a decrease in the demand leads to a shift of the demand curve to the left.

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Subject: Applied Economics – Module 1
 As the price of the commodity increases the quantity demand decreases or if the price f
the commodity decreases, the quantity demand increases. People are encourage to buy more if
the price is low and they are not willing to pay when the price is high .the movement of points
along the same demand curve is brought about by changes in price of the commodity only, a
change in price will cause a change in quantity demand. To understand the graph let us have
Table 1 for more explanation of figure

TABLE 1
DEMAND SCHEDUE FOR MEAT FOR A DAY
Points Price Qty. Demanded
A 100 0
B 90 10
C 70 30
D 60 40
E 50 50
F 40 60
G 30 70
H 20 80
I 10 90
J 5 100
Table 1 shows the relation between the price and quantity demanded of a commodity of
an individual consumer. Price and quantity demanded is inversely proportional, as the price
decreases the quantity demanded increases and vice versa.
Aside from prices, the demand is also influenced by different factors stated earlier. It is
not only the movement of points along demand curve that takes place there is also movement of
the demand curve that takes place there is also movement of the demand curve from right to left
or left to right and this is what we call shift of demand curve. Shift od demand for example Shift
from Do to D1 to D2, D2 to D3 is a change in demand because of changes in the conditions of
demand due to change in income taste, population or other factors that influence demand. A
new quantity is demanded to old price. Remember shift to right indicates increase in demand
and shift to the left indicates decrease in demand.

LAW OF DEMAND
As the price increases, the consumers are not willing to buy more decreasing quantity
demanded or as the price decreases the consumer are more willing to buy, increasingly the
quantity demanded

Supply – Refers to the willingness of the people to sell or produce the goods regardless
whether it is a need or a want over a period of time at a given price.

The following are factors that influence supply:

1. Price of goods – Increase in the price of goods especially raw materials will discourage
produces to produce more.
2. Cost of production – the higher cost of production like raw materials, labor, and electricity
will decrease number of supplied products. However, it the cost of production decrease, the
suppliers will maximize production then store them for higher price as they are expecting
another price hike.
3. Availability of raw materials – There will be shortage of supply once the raw materials
needed for the production is not obtainable.
4. Number of Sellers – An increase in supply is due to a lot of sellers involved in the market.
5. Technology- The fast increase of supply of goods and services are indebted to the advance
technology around. Due to advance machineries and equipment that number of supply
increases geometrically.
6. Taxes – The imposition of low taxes will encourage producers to sell more while a high tax
will discourage producers to supply more.

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Subject: Applied Economics – Module 1
7. Subsidies – These are help extended by the government to motivate the business firm to do
business like promotion and advertisement for favored business.
8. Weather and calamities – Suppliers are affected by what weather and natural calamities will
bring to the country in a year especially agricultural crops. For example COVID 19 Pandemic
abruptly increases the supply for surgical mask, n95 mask, alcohol, vitamins, and other
disinfectant. There is drought a decline in the supply of agricultural products.

For graphical illustrations of the supply curve see figure 3 the supply curve is sloping
upward, from right to left. An increase in the supply leads to shift of the supply curve to the right
while a decrease in the supply leads to a shift of the supply curve to the left.

As the price of the commodities increases, the quantity supplied increases or if the price
of the commodity increases, the sellers are motivated to sell, the products. Producers are
encouraged to sell more if the price is high. The movement of points along the same supply
curve is brought about by changes in price of the commodity only a change in price will cause a
change in quantity supply.
TABLE 2
SUPPLY SCHEDUE OF MEAT FOR A DAY
Points Price Qty. Demanded
A 100 100
B 90 95
C 70 80
D 60 70
E 50 50
F 40 30
G 30 20
H 20 15
I 10 5
J 5 0
Table 2 shows the relation between the price and quantity supply of a commodity
per individual consumer. Price and quantity supply are directly proportional, as the price
increases the quantity demanded increases and vice versa. Aside from prices, the supply is also
influenced by different factors stated earlier. It is not only movement of points along supply
curve that takes place, there is also movement of the supply curve from right to left or left to
right and this is what we call shift of supply curve. For example Shift from S0 to S1, from S1 to
S2, from S2 to S3 is a change in supply because of changes in the conditions of supply due to
change in price of goods, availability or resources, weather or other factors that influence
supply. Remember, shift to the right indicates increase in supply and shift to the left indicates
decrease in supply.

Law of Supply
As the price increases, the producers are willing to sell more, increasing quantity supply
or as the price decreases the producers are not willing to sell more, decreasing the quantity
supply.

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Subject: Applied Economics – Module 1
Market Equilibrium
If the forces of demand and supply operate together, we can show how price is
determined in a market economy.
Equilibrium is a state of balance when demand is equal to supply. The equality means that the
quantity that sellers are willing to sell is also the quantity that buyers are willing to buy for a
price. As market experience, equilibrium is an implicit agreement between how much buyers
and sellers are willing to transact. The price at which demand and supply are equal is the
equilibrium price.

The Equilibrium Point and the Law of Demand and Supply

1. Equilibrium Point is a point where the sellers and the consumer agree to pay the price of the
commodity. It is actually the point of the intersection and where demand is equal to supply.
2. Law of Demand and Supply – It is the price where the buyers are willing to buy at the price
of the seller’s willingness to sell.
TABLE 3
Schedule of Demand & Supply of Chicken
Quantity
Price in
Points Demand Situation
Peso/Kilo
Supply
A 70 100 40 Shortage
B 75 90 50 Shortage
C 80 80 60 Shortage
D 85 70 70 Equilibrium
E 90 60 80 Surplus
F 100 50 90 Surplus
As shown in table 3, there are 100 consumers who are willing to buy at ₱70.00 per kilo
of chicken while there are only 40 sellers who are willing to sell at the said price. More demand
than supply means a shortage of chicken in the market. To be able to meet the demand of the
chicken, buyers of the chicken has to vary from ₱70.00 to ₱100.00 per kilo. It is at price of
₱85.00/kl that the quantity demanded and quantity supply agrees, therefore, point D is the
equilibrium point. The equilibrium price and the equilibrium quantity of a commodity are
determined by the demand and supply of the market. The Equilibrium price is the price at which
the quantity of the goods is purchase at a given price by the consumers. Therefore, the point
where the willingness of the buyer to buy and the willingness of the seller to sell meet at a given
price is actual the Law of Demand and supply.
The producers sell at equal quantity where the consumers buy at the same equal
quantity to an agreed price. The intersection of the demand and supply curve is the point of
equilibrium and the price at which it dictates is the equilibrium price. For graphical illustration
see figure 5.
In table 3, at lower prices the quantity demanded is higher than quantity supply and the
resulting shortage pushes the price up for the seller to sell more thereby, pushing the price
toward the equilibrium level. At higher prices the quantity demanded falls short of the quantity
supplied and resulting surplus exceeds the quantity demand. This will drive the price toward
equilibrium level in meeting the quantity demand in the market. Thus, the equilibrium price is
achieved by the dictate of the market demand and supply.
Figure 5, shows the intersection of the demand curve and supply curve at point D where
the Price is 85 and the quantity is 70. This figure shows the point of equilibrium.

The Marketing Price System

The article in previous page shows the causes and effects of the water shortage around
the Philippines could be best explained if we could understand the concepts of demand and
supply elasticity of the clean water. A shortage is when there is an excess demand for the
quantity supplied. While surplus is excess in supply.
For example, if there are 10 bottles of water and there are 20 students who want drinking these,
then there will be only 10 students whose demands are met while the others will not be able to
be given anything. There is shortage in the supply. If producers make too many bottles of water
and consumers cannot by them want to buy them, there will be surplus.
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Subject: Applied Economics – Module 1
Price System in a Market Economy
Let us find out more about the price system. We have learned that demand is the
willingness of the consumers to buy goods and services.
In economics, the willingness to buy goods and services should be accompanied by the ability
to buy, also called the “purchasing power”. This is referred to as an effective demand
EQUILIBRIUM CHARACTERISTICS
Equilibrium is a point of balance or a point of The supply and demand are balanced in
rest. It is also called “market-clearing price”. equilibrium.
Equilibrium price is the price at which the The economic forces are balanced and in the
producer can sell all the units he wants to absence of external influences, the
produce and the (equilibrium) values of economic variables will
buyer can buy all the units he wants. not change.
Quantity demanded and quantities supplied The amount of goods or services sought by
are equal. buyers is equal to the amount of goods or
services produced by sellers.
Price System in a Market Economy: Its Characteristics
The prices of goods that we encounter to the things we buy play a crucial role in determining an
efficient distribution of resources in a market system. The prices will help us to make every day
economic decisions about our needs and desires. They are the indications of the acceptance of
a product; the more popular the product, the higher the price that can be charged.
Example is when tables are for sale in your community today and is assumed that they
are not very important as compared to other products or commodities that we need to survive
especially that our movements are very limited.

Price acts as a signal for shortages and surpluses which help firms and consumers respond to
changing market conditions.
Neither the producers nor consumers can impact prices; consumers can buy whatever they
want; nor can producers make and sell whatever they want.

Prices are decided by interactions between the producers and the consumers
 If a good is in shortage – price will tend to rise.
 Rising prices discourage demand, and encourage firms to try and increase supply.
 If a good is in surplus – price will tend to fall.
 Falling price encourage people to buy, and cause firms to try and cut back on supply.
 Prices help to redistribute resources from goods with little demand to goods and services

The market price is the point that the supply and demand curves intersect.

We explore more how equilibrium happens. Let us analyze the chart below.
The chart shows a surplus – the quantity is greater than demand. When quantity is greater than
demand it causes prices to go down.

PRICES ARE MARKET DRIVEN

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Subject: Applied Economics – Module 1
Elasticity of Demand and Supply
We have learned how demand and supply respond to changes in their determinant
goods; however, differ in terms of how demand and supply respond to changes in theses
determinants. The degree of their response to a change is referred to as elasticity. Elasticity is
measure of how much buyers and sellers response to changes in market condition (supply and
demand).

PRICE ELASTICITY OF DEMAND AND SUPPLY

Price Elasticity refers to the type of elasticity that deals with the degree of
responsiveness of people when there are changes in prices. For example when there is a
change in price whether increase or decrease people reacted in the situation buying/ selling less
or buying/selling more or not buying / selling at all.

Effects of Change in Demand and Supply

Elastic demand or supply curve indicates that quantity demanded or supplied respond
to price changes in a greater than proportional manner.

Different Degree of Elasticity

1. Elastic – Demand or Supply is elastic when there is a greater change always greater than
one. For example if the price of LPG increases by 10% and as a result the quantity demanded
goes down by 12% then we say that the demand for LPG is elastic
a. Perfectly elastic demand/supply occurs when there is a greater change in quantity
demanded/quantity supply.
2. Inelastic – Demand or supply is inelastic when there is a lesser change in quantity
demanded or supply. In mathematics equations it is always less than one. For example the
supposed price of cellphone load goes up by 5% and the quantity demanded goes down by 3%,
then we can say that demand for cellphone load in inelastic.
a. Perfectly inelastic demand/supply occurs when there is almost no change in quantity
demanded/quantity supply because there is no close substitute for the product.
3. Unitary – Demand or supply is unitary when there is an equal change in quantity demanded
or supply in mathematical equation it is equal to one. For example let us say that the price of
string beans goes down by 6% and as a result the quantity demanded goes up by 6% also, we
describe the demand for string beans as unitary elastic.

CATEGORIES OF PRICE ELASTICITY

1. The Price Elasticity of Demand Price elasticity of demand is the responsiveness of quantity
demanded, or how much quantity demanded changes, given a change in the price of goods or
services.

The mathematical value is negative. A negative value indicates an inverse relationship between
price and the quantity demanded. But the negative sign is ignored
Price Elasticity of Demand (PED) = % change in quantity demanded % Change in price

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Subject: Applied Economics – Module 1
 https://www.economicsonline.co.uk/Competitive_markets/Price_elasticity_of_demand.htm
a) Elastic Demand (PED > 1) - the percentage change in price brings about a more than
proportionate change in quantity demanded.
When the percentage change in quantity demanded is greater than the percentage change in
price, and the coefficient of the elasticity is greater than 1. Example real estate- housing - There
are many different housing choices. People may live in a townhouses, condos, apartments, or
resorts. The options make easy for people to not pay more than they demand.
b) Inelastic Demand (coefficient of the elasticity is less than 1) – is when an increase in price
causes a smaller % fall in demand. When the percentage change in quantity demanded is less
than the percentage change in price, and the coefficient of the elasticity is less than 1. Example
Gasoline – gasoline has few alternatives; people with cars consider it as a necessity and they
need to buy gasoline. There are weak substitutes, such as train riding, walking and buses. If the
price of gasoline goes up, demand is very inelastic. Other Examples: Diamonds, aircon, Iphone,
Cigarettes
c) Unitary Elastic Demand - When the percentage change in demand is equal to the
percentage change in price, the product is said to have Unitary Elastic demand.
Unitary elastic - PED or the price elasticity of demand is 1.
d) Perfectly Elastic - a small percentage change in price brings about a change in quantity
demanded from zero to infinity.
Perfectly elastic - the coefficient of elasticity is equal to infinity (∞).
e) Perfectly Inelastic - the PED is =0 any change in price will not have any effect on the
demand of the product.
Perfectly inelastic - the percentage change in demand will be equal to zero (0).

POINT ELASTICITY
a) The midpoint elasticity is less than 1. (Ed < 1). Price reduction leads to reduction in the
total revenue of the firm.
b) The demand curve is linear (straight line), it has a unitary elasticity at the midpoint.
The total revenue is the maximum at this point.
c) Any point above the midpoint has elasticity greater than 1, (Ed > 1).

The Income Elasticity of Demand (YED)

The income elasticity of demand is the relationship between changes in quantity
demanded for a good and a change in real income.
• YED = % Change in demand % change in income
Normal Goods – are those goods for which the demand rises as consumer income rises;
positive income elasticity of demand so as consumers’ income rises more is demanded at each
price. These goods shift to the right as income rises.
YED is positive. As income rises, the proportion spent on cheap goods will reduce as now they
can afford to buy more expensive goods.
Example, the demand for units of air-conditioning increases as the income of the
consumer increases and the demand for electric fan decreases).
Normal good: units of air-conditioning; Inferior good: electric fan
The Inferior Goods – the demand decreases when consumer income rises; demand
Increases when consumer income decreases)
Shifts to the left as income rises. YED is negative. As income rises, the proportion spent on
cheap goods will reduce as now they can afford to buy more expensive goods. Examples: the
demand for cheap/generic electronic goods (let say electric fans) will fall as people income rises
and they will switch to expensive branded electronic goods (unit of air-conditioning).
Cross Price Elasticity of Demand or (XED)
Cross price elasticity of demand is the effect on the change in demand of one good as a result
of a change in price of related to another product.
• XED = % 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑑𝑒𝑚𝑎𝑛𝑑𝑒𝑑 𝑜𝑓 𝑔𝑜𝑜𝑑 𝑋 % 𝐶ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑝𝑟𝑖𝑐𝑒 𝑜𝑓 𝑔𝑜𝑜𝑑 𝑌 •
• If the value of XED is positive - substitute goods
• If the value of XED is negative – complements goods
• If the value of XED is zero - two goods are unrelated

Price Elasticity of Supply (PES)

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Subject: Applied Economics – Module 1
The measure of the responsiveness of quantity to a change in price. It is the percentage change
in supply as compared to the percentage change in price of a commodity.
PES = % 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑆𝑢𝑝𝑝𝑙𝑖𝑒𝑑 % 𝑐ℎ𝑎𝑛𝑔𝑒 𝑖𝑛 𝑃𝑟𝑖𝑐𝑒
If supply is elastic, producers can increase output without a rise in cost or a time delay. If supply
is inelastic, firms find it hard to change production in a given time period.

PRICE ELASTICITY OF SUPPLY

Determinants of Price Elasticity of Supply

Agarwal,P. (2020) said, price elasticity of supply can be influenced by the following factors:
1. Marginal Cost- If the cost of producing one more unit keeps rising as output rises or marginal
cost rises rapidly with an increase in output, the rate of output production will be limited. The
Price Elasticity of Supply will be inelastic the percentage of quantity supplied changes less than
the change in price. If Marginal Cost rises slowly, supply will be elastic.
2. Time - Over time price elasticity of supply tends to become more elastic. The producers
would increase the quantity supplied by a larger percentage than an increase in price.
3. Number of Firms - The larger the number of firms, the more likely the supply is elastic. The
firms can jump in to fill in the void in supply.
4. Mobility of Factors of Production- If factors of production are movable, the price elasticity
of supply tends to be more elastic. The labor and other inputs can be brought in from other
location to increase the capacity quickly.
5. Capacity - If firms have spare capacity, the price elasticity of supply is elastic. The firm can
increase output without experiencing an increase in costs, and quickly with a change in price.
Activity VII
A. MULTIPLE CHOICE. Choose the letter that corresponds to your answer.
1. An increase in the price of electricity bill will force you to ___.
a. increase your demand for kerosene heaters and coal.
b. increase your demand for light bulbs and aircon.
c. increase your demand for stereos and videokes.
d. increase your demand for TVs and use of gadgets.
2. The market demand curve for apple shows the ____.
a. effect on market supply of a change in the demand for apple.
b. quantity of an apple that consumers like to buy at different prices.
c. marginal cost of producing and selling different quantities of an apple.
d. effect of advertising expenditures on the market price of an apple.

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Subject: Applied Economics – Module 1
3. Economies experience an increased in unemployment and a reduced of activity during
recession. How does recession affect the market demand for new cars?
a. Demand for new cars shifts to the right.
b. Demand for new cars shifts to the left.
c. Demand for new cars has no shift.
d. Demand for new cars either has or no shift.
4. The market supply curve for gasoline shows the ___
a. effect on market demand of a change in the supply of gasoline.
b. quantity of gasoline that firms offer for sale at different prices.
c. quantity of gasoline that consumers are willing to buy at different prices.
d. all of the above are correct
5. If Toyota firm is producing a car faster than people want to buy, there is ____
a. an excess supply of car and price can be expected to decrease.
b. an excess supply of car and price can be expected to increase.
c. an excess demand of car and price can be expected to decrease.
d. an excess demand and price can be expected to increase.

B. DEFINITION OF TERMS. Define the following terms in your own words.

1. Marginal Cost- _______________________________________________________
2. Time- _______________________________________________________________
3. Number of Firms-_____________________________________________________
4. Mobility of Factors of Production- _______________________________________
5. Capacity- ____________________________________________________________

C. TRUE OR FALSE. Read each statement carefully. Write TRUE if the statement is correct
and FALSE otherwise.
1. Elasticity of demand refers to the change in demand when there is a change in another factor
such as price or income.
2. If demand for a good or service is static even when the price changes, demand is said to be
inelastic.
3. Examples of elastic goods include gasoline, while inelastic goods are items like canned
goods and vitamin c tablets.
4. The law of demand states that “elasticity shows how much a good or service is demanded
relative to its movement in price.”
5. Inelastic demand is when a demanded quantity for masks changes by a greater percentage
compared to its percentage change in price.

Activity VIII SOLVING PROBLEM AND CRITICAL THINKING ANALYSIS. Analyze the
problem carefully.
A.“In December, the price of hamon rises and the number of hamon sold also rises. Is this a
violation of the law of demand? Justify your answer”.

B. HOW DO YOU RESPOND TO PRICE ELASTICITY? Answer the questions.

People have unlimited needs and wants for their professional satisfaction and because
of that the prices of products easily get changed. Everyone is affected with the new normal in
the market. The prices of products have become very expensive since the outbreak of the
pandemic, not only in our locality, but in the world
- If your income or the income of your family is not enough to purchase the
basic commodities needed by your family, what good would you buy, instead?
- What economic or marketing strategies would you apply? How would you
respond to the price changes of these commodities?
Rubrics: Content = 5 points, Understanding/Application = 5 points, Original Thinking =10 points

ACTIVITY IX
A. Indicate the effect of each situation in the demand curve. Write INCREASE if the demand
curve shift to the right and write DECREASE if the demand curve shift to the left.
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Subject: Applied Economics – Module 1
 SITUATION What is the effect to?
_________1. There is a spread of CORONA VIRUS Disposable Mask
_________2. There is a typhoon Umbrella
_________3. The price of cellphone decreases Cellphone loads
_________4.Increas in saving interest rates Banks
_________5. Inflation Employment
B. Indicate the effect of each situation in the supply curve. Write INCREASE if the supply curve
shifts to the right and write DECREASE if the supply curve shift to the left.
_________1. Storm RICE
_________2. Increase Animal Feeds (cost) MEAT PRODUCTS
_________3. New technology in meat productions MEAT PRODUCTS
_________4. Sudden Spread of Corona virus DISINFECTANT
_________5. Shortage of leather material SHOES/ BAGS
C. ANALYSIS
PRICE QTY. DEMAND QTY. SUPPLY
10 500 100
12 400 200
18 300 300
20 200 400
22 100 500
1. A shortage exists at price ____________________________.
2. A surplus exists at price _____________________________.
3. The equilibrium quantity is ___________________________.
4. The equilibrium price is ______________________________.
5. Graph the above table _______________________________.
D. IDENTIFICATION. Read carefully each statement and write the correct answer.
________ 1. It is a change in a determinant that will lead to a proportionately lesser change in
demand.
________2. It measures how quantity demanded changes as the price of a related good
changes.
________3. It is a state of balance when demand is equal to supply.
________4. It is a change in a determinant will lead to a proportionately greater change in
demand or supply.
________5. These goods shift to the right as income rises.

E. PROBLEM SOLVING AND CRITICAL THINKING ANALYSIS . Analyze the problems

carefully and answer the problems. Present your solutions and Interpret the results.
1. If there are 10 bottles of water and there are 20 students who want to drink these bottles of
water, there will be only 10 students whose demands are met while the others will not.
Analysis: We can conclude that there is _____________________ in the supply.
2-3. If the price of the instant noodles in the grocery store increases by 8% and the quantity
demanded decreases by 12%, what is price elasticity of demand? Is it elastic, inelastic or
unitary elastic?
Solution:____________________________________________________ Interpretation: This
means it is ___________________________________
4-5. If the 4% increase in price of 1 pack of bread leads to an increase in the quantity supplied
of 8% describe the price elasticity.
Solution:____________________________________________________ Analysis of Price
elasticity: _______________________________________________
F. ESSAY (5 points)
I. Joy Lima manages a Sweet Chocolate Bar Store. She charges P100 per bar for her
chocolate. You, the economist, have calculated the elasticity of demand for the chocolate in her
town to be 2.5.
a) If she wants to increase her total income or revenue, what advice will you give her and why?
b.)What economic principle applies? Explain your answer.

Activity X SHORT ESSAY. Answer the questions/statements below in essay.

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Subject: Applied Economics – Module 1
 1. What comes in your mind when you heard the word “market?”
2. Explain the importance of studying the different market structures.
MARKET STRUCTURES
After looking at the basic principle of demand and supply, and the elasticity of demand
and supply, it will also be helpful to learn about the market structures in which sellers can
operate. Each structure will be described in terms of the nature of the product being sold, the
number of buyers and sellers in the market, and the ease of entering or exiting the market.
Market structure refers to the competitive environment in which buyers and sellers operate.
Competition is rivalry among various sellers in the market. As a student, you are
familiar with the word completion. We are exposed to competition in school, spelling bees, quiz
bee and sports festivals. On the television, we watch beautiful girls from all over the world for
Miss Universe or Miss World Title. We see how the various teams of PBA compete to win the
championship. The market is a situation of diffused, impersonal competition among sellers who
compete to sell their goods and among buyers who use their purchasing power to acquire the
available goods in the market.

There are varying degrees of competition in the market depending on the following factors:
 Number and size of buyers and sellers;
 Similarity or type of product bought and sold;
 Degree of mobility of resources;
 Entry and exit of firms and input owners; and
 Degree of knowledge of economic agents regarding prices, cost, demand and supply
conditions.

Market – this refers to the place where the consumers and producers buy and sell products
at an agreed price.
Market Structure- this refers to the degree of competition in the market for particular
product or service.
Two Elements of Market Structure

1. Number of buyers and sellers – this determines the degree of completion. More buyers and
sellers mean more competition.
2. Nature of the product – the extent to which the product is standardized.

A. Identical product – these are goods that are homogenous almost the same in features and
uses. This type of products command higher degree of competition.

B. Differentiated Products – these are goods that are heterogeneous. No exact product exists
in the market. It differs in features and has almost no close substitutes. Producers enjoy a
certain degree of control over price and quantity of product. Heterogeneous products are
products with attributes that are significantly different from each other, which make it difficult to
substitute one product for another.

Types of Market
1. Perfect Competition
2. Imperfect Competition
a. Monopoly c. Oligopoly
b. Monopolistic Competition

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Subject: Applied Economics – Module 1
Perfect Competition
It is a form of market in which there are a large number of buyers and sellers competing
with each other in the purchase and sale of goods, respectively and no individual buyer or seller
has any influence over the price. Thus, perfect competition is an ideal form of market structure
in which there is the greatest degree of competition.
A perfectly competitive market is one in which economic forces operate unimpeded.

The following are the characteristics of a perfectly competitive market:

1. There are a large number of independent, relatively small sellers and buyers as compared to
the market as a whole that is why none of them is capable of influencing the market price.
Further, buyers/sellers should not have any kind of association or union to arrive at an
understanding with regard to market Demand/price or sales.

a. Each buyer is so significant that he cannot have special privileges from the seller.
b. Each seller produces small volume of goods that he cannot dictate price. A price taker of
what the market dictates as per demand and supply of the commodity. The individual seller
accepts the price and decides on how many he would like to sell. The demand curve is perfectly
elastic.

2. The products sold by different sellers are homogenous and identical. There should not be any
differentiation of products by sellers by way of quality, variety, color, design, packaging or other
selling conditions of the product. That is, from the point of view of buyers, the products of
competing sellers are completely substitutable.
3. There is absolutely no restriction on entry of new firms into the industry and the existing firms
are free to leave the industry. This ensures that even in the long run the number of firms would
continue to remain large and the relative share of each firm would continue to remain
insignificant.
4. Both buyers and sellers in the market have perfect knowledge about the conditions in which
they are operating. Buyers know the prices being charged by different competing sellers and
sellers know the prices that different buyers are offering.
5. The distance between the locations of competing sellers is not significant and therefore the
price of the product is not affected by the cost of transportation of goods.
Buyers do not have to incur noticeable transport costs if they want to switch over from one seller
to another.
6. There is a perfect mobility of resources. It means perfect mobility of resources ensures that
the factors of production, i.e., the resources, can enter or exit a firm or the industry at will. No
one is in a position to control the supply of any of the resources and resources are employed
where they have the highest returns on them. So, we can say that there must be fulfilled these
following conditions for a perfect competition market:
a. Both buyers and sellers are price takers;
b. The number of firm is large;
c. There are no barriers to entry;
d. The firm’s products are identically;
e. There is complete information;
Barriers sometimes take the form of patents granted to produce a certain good.
Social forces such as bankers only lending to certain people may create barriers.

Analysis of Revenue under Perfect Competition

Under perfect competition, since an individual firm cannot influence the market price by
raising or lowering its output, the firm faces a horizontal demand curve, that is, the demand
curve of any single firm is perfectly elastic – its elasticity is equal to infinity at all levels of output.
1. The total Revenue (TR) is the sum of money receives after selling the product, the price
being constant. Total Revenue varies directly with output level. The more product t produces the
more revenue obtained.
TR= P* Q
2. Average Revenue – AR = TR/Q. AR is the price of product
3. Marginal Revenue – is the additional revenue added to TR by obtaining added unit of the
firm’s output.
MR= AR = Price of product

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Subject: Applied Economics – Module 1
PERFECT COMPETITION EXAMPLE
a. Basic needs like food: rice, sugar, eggs and chicken, and meat, fish. Clothing like unbranded
t shirt, pants, socks.
b. There is no need to advertise or promote because these are all basic needs
Remember that the basic food especially the agricultural products sold in the market is
being regulated by the Philippine government by having price ceiling and price floor to secure
the welfare of the people.

Imperfect Competition
In other markets, one or more of the assumptions of perfect competition will not be met thus the
market became imperfectly competitive. We shall discuss the different types of imperfectly
competitive market, which are monopoly, monopolistic competition and oligopoly.

The following are the characteristics of an imperfectly competitive market:

a. As to type of a products, they are not the same. Differentiated in features though gives the
same satisfaction for example bath soap, toothpaste.
b. As to price, they have influence in the rice decision. Oligopoly has control over their price
since it establishes cartel to protect the member for the pricing system and for proper
distribution of product. For example gasoline station, cell phone industries.
c. As to numbers of buyers and sellers, only the monopoly market structure under imperfect
competition enjoys the sole seller of the product with no close substitutes. Oligopoly has few
sellers say hundreds. For example appliance, cars, computers. While monopolistic competition
has large number of sellers say thousand for example hamburger chain, restaurant.
d. As to competition, both the monopolistic competition and oligopoly need an extensive
advertisement. Only the monopoly does not need any promotion. For example soft drinks, juice,
beverages.
e. As to mobility, the entry and exit in the market is not that easy especially in the monopoly. For
example appliances, car, computer.

Monopoly – a sole producer and has no close substitute. Since there are no rivals, it can push
through on whatever price the producer wants the public to take. He can even fix price and
determine his own price policy and leave the consumer’s decision as to how many would they
take given the price of the product. It is not easy to enter into the monopoly industry.

Barriers to entry in moving in the Market

1. Economic in Mature - in some industries, consumers are best served by a single firm and
are not profitable for some other firms to enter the field of a monopolist. Imagine the technology
used in the production of energy. The technical know on how and the capital outlay in producing
electricity is so heavy. Small producer could not enjoy economies of scale.

2. Institutional or Artificial barriers

a. Exclusive Ownership
b. Patent Rights and Copy Rights
c. Market Franchise
d. Cut throat competition- price cutting

1. Simple monopolies charges the same price to all customers for the same commodity
2. Discriminating Monopolies charge different prices to different customers for the same
commodity.

Monopoly can exist for the following reasons:

 A single seller has control of entire supply of raw materials.
 Ownership of patent or copyright is invested in a single seller.
 The producer will enjoy economies of scale, which are saving from a large range of
outputs.
 Grant of government franchise to a single firm.

Monopolistic Competition

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Subject: Applied Economics – Module 1
 One imperfectly competitive market is monopolistic competition wherein products are
differentiated and entry and exit are easy. As consumer, we love it when we have a wide variety
of goods to choose from. An expensive gadget that has all the latest features is preferred to an
ordinary one with very simple applications. When we shop for clothes, we look for those that are
different and not mass produced, lest we wear exactly the same shirt as other people.
Monopolistic Completion allows such variety of choices. Since many firms exist in the market,
consumers also have the freedom to choose from whom to buy good. A successful executive,
who is shopping for a car, may choose to buy from Toyota, Honda, and MercedesBenz, or
Volkswagen. If he wants a Toyota car, he has a variety of choices such as Wigo,Vios, Altis ,
Innova, and Fortuner. We can differentiate one car from the other not only by brand name but
also by the model, the style, and the additional convenience.

This market structure combines some characteristic of perfect competition and monopoly.
Its key characteristic are:
 A blend of competition and monopoly.
 Firms sell differentiated products, which are highly substitutable but are not perfect
substitutes.
 May seller off heterogeneous or differentiated products, similar but not identical and
satisfy the same basic need.
 Changes in product characteristics to increase appeal using brand, flavour,
consistency, and packaging as means to attract customers.
 There is free entry and exit in the market that enables the existence of many sellers.
 It is similar to a monopoly n that the firm can determine characteristics of product and
has some control over price and quantity.

The firm under monopolistic competition faces a downward sloping demand curve. This
means that it can sell more by charging less and can raise price without losing all customers. As
such, the firm in this market is given room to set different prices by their products differences. In
other words, a firm can set a higher price because it has something different to offer its buyer.
The firm tends therefore to engage in non-price competition. This refers to any action to any
action a firm takes to shift the demand curve for its output to the right without having to sacrifice
its prices. This may include better service, products guarantees, free home delivery, more
attractive packaging, better locations, and advertising. The firm can either sell more by charging
a lower price or it can even raise its price without losing all of its customers because it has the
capacity of developing loyalty among customers.

Oligopoly
It is a market dominated by a small number of strategically interacting firms. Few sellers
account for most of or total productions since barriers to free entry make it difficult for new firms
to enter its characteristics are:
 Action of each firm affects other firms
 Interdependence among firms

These strategically interacting firms try to raise their profits by colluding with each other
to raise prices to the detriment of consumers. Just take a look at the oil industry. Producers of
oil from all around the world can manage to raise prices by agreeing with each other on what
prices to charge the consumer. Thus, countries that sell a lot of oil have no choice but to buy
from these producers at high prices.
Oligopoly 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 follower of customer, huge capital investments and specialized input, and
control of supply of raw materials by a few producers .
Cooperative behavior in oligopoly usually takes the form of price fixing or output settings
agreements such as the one maintained by the Organization of Petroleum Exporting Countries

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Subject: Applied Economics – Module 1
Activity XI
A. Give five (5) examples of monopolistic competition industries, firms, businesses that are
established in Laguna; and five (5) oligopoly market structured industries, firms, or businesses
that are established in the City of Cabuyao.

MONOPOLISTIC COMPETITION OLIGOPOLY

1. 6.
2. 7.
3. 8.
4. 9.
5. 10.

B. Define the following terms in your own words.

1. Homogenous 6. Pure Competition
2. Pure Competition 7. Imperfect competition
3. Monopoly 8. Oligopoly
4. Monopolistic Competition 9. Market
5. Perfect Competition 10. Market Structure

Activity XII ENUMERATION. Give ten (10) examples of homogenous product and five (5)
examples of heterogeneous products.

Activity XIII IDENTIFICATION. Identify which market model is referred by the following
businesses and products. Choose your answer inside the box.
Perfect Competition Monopoly
Oligopoly Monopolistic Competition
1. Talcum Powder 9. DITTO
2. Tuding Porkchop 10. OTTO
3. Atoy’s 11. BNY apparel
4. Tobby’s 12. Bench
5. CABWAD(Cabuyao Water District) 13. SM hypermarket
6. Facial Wash 14. Savemore
7. Domino’s Pizza 15.Reysal
8. MERALCO

Activity XIV SHORT ESSAY. Explain your answer briefly.

1. When you hear the word “rentals” what comes on your mind?
2. Is there a difference between salary and wage?
3. If you will invest your money, what type of investment would you choose and why would
you choose that investment?

CONTEMPORARY ECONOMIC ISSUES FACING THE FILIPINO ENTREPRENEUR

Investments
An investment is an asset or item acquired with the goal of generating income or
appreciation.

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Subject: Applied Economics – Module 1
 Appreciation refers to an increase in the value of an asset over time. When an
individual purchases a good as an investment, the intent is not to consume the good but rather
to use it in the future to create wealth.
An investment always concerns the outlay of some asset today time, money, or effort in
hopes of a greater payoff in the future than what was originally put in. Another definition
investment is a product that people buy with the hope that they will be beneficial or will generate
income in the future.
The act of investing has the goal of generating income and increasing value over time.
An investment can refer to any mechanism used for generating future income.
This includes the purchase of bonds, stocks, or real estate property, among other examples.
Additionally, purchasing a property that can be used to produce goods can be considered an
investment. In general, any action that is taken in the hopes of raising future revenue can also
be considered an investment. We have two type of investment long term and short term
investments.
Long term investments. A long-term investment is an account on the asset side of a
company's balance sheet that represents the company's investments, including stocks, bonds,
real estate, and cash. Long-term investments are assets that a company intends to hold for
more than a year.
The long-term investment account differs largely from the short-term investment account
in that short-term investments will most likely be sold, whereas the long-term investments will
not be sold for years and, in some cases, may never be sold.
Being a long-term investor means that you are willing to accept a certain amount of risk
in pursuit of potentially higher rewards and that you can afford to be patient for a longer period
of time. It also suggests that you have enough capital available to afford to tie up a set amount
for a long period of time.
A long-term investment is an account a company plans to keep for at least a year such
as stocks, bonds, real estate, and cash. The account appears on the asset side of a company's
balance sheet. Long-term investors are generally willing to take on more risk for higher rewards.
These are different from short-term investments, which are meant to be sold within a year.

Short-term investments. These are also known as marketable securities or temporary

investments are those which can easily be converted to cash, typically within 5 years. Many
short-term investments are sold or converted to cash after a period of only 3-12 months. Some
common examples of short term investments include CDs, money market accounts, high-yield
savings accounts, government bonds and Treasury bills. Usually, these investments are high-
quality and highly liquid assets or investment vehicles.
Short-term investments may also refer specifically to financial assets of a similar kind,
but with a few additional requirements that are owned by a company. Recorded in a separate
account, and listed in the current assets section of the corporate balance sheet, these are
investments that a company has made that are expected to be converted into cash within one
year.
Short-term investments are marketable securities or highly liquid assets designed to
provide a safe, temporary parking place for excess cash. Short-term investments can also refer
to holdings a company owns but intends to sell within a year or (if debt) mature within a year.
CDs, money market accounts, and Treasury bills are common types of low-risk short-term
investments.

Rental
An agreement between a landlord and a tenant that gives the tenant the right to use and
occupy rental property for a period of time.
The flat lease, which is the oldest and simplest type of lease, is becoming harder to find
but is the best deal for the lessee because it is based on a set price for a set period of time. The
danger here is not to be tempted if the term is too short because a series of short-term leases
could cost more in the long run. If your rent term is short but you love your location, you could
wind up paying the landlord's high rent increases over and over again. What a Lease Covers.
A rental lease usually covers any remodeling to the physical structure that needs to be
done and specifies who will pay for it. Some of this remodeling is considered leasehold
improvements. These can include carpeting and other flooring, insulation, electrical wiring,
plumbing, bathroom installations, lighting, wall partitions, windows, ceiling tiles, painting, a
sprinkler system, security systems, some elements of interior design, and sometimes heating
and/or air conditioning systems.
Leasehold improvements in new shopping centers or malls are by far the most
extensive. Prospective operators often discover, to their dismay, that the shopping center
provides only concrete walls and flooring. Although the cost of finish work often comes out of
the retailer's pocket, a construction allowance can sometimes be negotiated with the lessor to
help offset the cost of some leasehold improvements.
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Subject: Applied Economics – Module 1
Something else to keep in mind is that the time to ask for that new coat of paint--outside or
inside--is before you sign the lease. Get it in writing, if not in the lease itself, then by a letter of
addendum that automatically becomes part of the lease. Make sure the lease specifies that the
landlord is responsible for damages such as roof leaks, faulty plumbing, or old wiring. You will
have enough to think about running your business without worrying about your building falling
apart on you.
If you need to modify the premises, do not be shy about asking the landlord to cut
appreciably or to forgo the first month's rent. You might not get it, but on the other hand, you
might be pleasantly surprised. Always point out that your business will increase the value of the
property with the improvements you will make to the facility from time to time. Some leases
include charges for common-area expenses such as maintenance of walkways, landscaping,
parking lots, and security. Though charging for these services is acceptable, some lessors try to
turn common-area charges into profit centers, adding on charges such as administration
expenses.
Be wary of leases that give landlords the right to remodel at the tenants' expense without
their prior approval.
If your location is in a shopping area, are there added costs for maintenance of common
areas? What are these costs? Are they fixed or variable? What kind and amount of insurance
does the landlord require you to have? Are you paying for coverage that should be the
landlord's responsibility? If you are in a small complex, are you being charged for more than
your share? Are there municipal or town merchant assessments for common customer parking?

A real estate lease usually covers other important matters, such as any remodeling to
be done, who pays for it, liabilities and duties assumed by each party, and permission for the
tenant to put up signs, engage in additional lines of business, or make future alterations, if
needed. Since a lease is a binding legal document, you must seek competent legal counsel
before signing one.
Remember that leases are not engraved in stone and can usually be negotiated. If you
accept the terms without discussion, you have given up the opportunity to negotiate better
terms. If you ask and the lessor's answer is no, you have lost nothing. You can always look
elsewhere and come back if you do not find a better offer.
Real estate leases are a major financial commitment. Consider not only the present
price per square foot, but also the price at the end of the leasing term. Refer to your financial
projections to see if the lease will continue being affordable in the future.

Wages
The term wage is the regular payment to an employee in return for his work or service
rendered. In economics, the price paid to labour for its contribution to the process of production
is called wages.
Labour is an important factor of production. If there is no labour to work, all other factors, be it
land or capital, will remain idle.

Different types of payments

1. Money payments – in modern age where money is well used, wages take the form of money
payment.
2. Payment in kind – in agrarian or rural economies, wages may be paid in kind. For example
farmers may pay his workers 2 kilos of rice per day plus a free meal at his farm.
3. Fringe benefits – an addition to the money payment in the form of incentives to serve as a
motivation for the worker. For example in addition to the money payment, he may also have free
medical benefits, paid holiday, housing facilities, car incentives free tips and a sack of rice,
grocery items, and clothing allowance.

Nature of minimum hours work

Under the Labor code of the Philippines which took effect on November 1, 1974 the
minimum normal hours of work shall not be more than eight hours a day.
Hours of work in the Philippines includes
1. All time during which an employee is required to be on duty or to be prescribed workplace.
2. All time during which an employee is suffered or permitted to work.
3. Rest periods of short duration during working hours shall be counted.
In the Philippines, Commonwealth Act no. 444 approved on June 3, 1939, provided the
legal working holiday not to exceed eight hours daily in any industry or occupation, whether
public or private with the exception of farm workers, laborers who prefer to be paid on piece
work basis, domestic servants and persons in the personal service of another and members of
the family of the employer working for him.

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Subject: Applied Economics – Module 1
Tax
Taxes are the enforced proportional contribution levied by the law making body of the
state by virtue of its sovereignty upon the persons or property within its jurisdiction for the
support of the government and all public need.
As state power to the inherent power if the state exercised through its legislature to
impose or levy a proportionate burden upon persons, property, rights or transactions to raise
revenue to support and maintain government expenditure and for general and economic
welfare. As a process refers to the act of imposing a tax by a sovereign state to raise revenue
for the use and support of the government.

Taxation is the system of payments that individuals and businesses are required to pay the
government.

Classification of taxation

1. As to subject Matter or Object

a. Personal poll or capitalization. Tax of a fixed amount imposed on individual residing
within a specific territory without regard to property or the occupation in which they may be
engaged.
b. Property. Tax imposed on property whether real or personal in proportion to its value.
c. Excise. Tax imposed upon the performance of an act, the enjoyment of privilege or the
engaging in an occupation term privilege tax is often used.

2. As to who bears the burden?

a. Direct Taxes- taxes that are levied on people and are paid directly to a tax collecting
agency of the government, for example: income taxes: Corporation and Individuals.
b. Indirect taxes – demanded from the one person in the expectation and intention that
he shall indemnify himself at the expense of another or the tax which the taxpayer can shift to
another.
1. Sales tax
2. Privilege taxes
3. Custom duties
4. Amusement taxes
Tax exemption. The government exempt the following in order to encourage and promote their
growth. These are:
1. Cooperatives
2. Cottage industries
3. Organization or institutions engage in non-profit undertakings.

Activity XV
A. Give five (5) examples of long term investments and five (5) short term investments.

LONG-TERM INVESTMENTS SHORT-TERM INVESTMENTS

1. 1.
2. 2.
3. 3.
4. 4.
5. 5.
B. UNDERSTANDING. Enumerate and explain the following.

1. Give the classification of taxation. (Subject matter, which bears the burden)
2. Give the different types of payments.
3. Give the two types of investments and give two (2) examples on each.

Activity XVI ESSAY. Write an essay with two (2) paragraphs in answering the question below.

 If you are given a chance to won the lottery, where will you invest your money and
why?
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Subject: Applied Economics – Module 1
Rubrics:
Content - 5 points
Understanding/Application - 5 points
Original Thinking - 10 points
TOTAL = 20 points
Activity XVII
A. Define the following terms in your own words in not more than four (4) to five (5) sentences.

1. Tax exemption 6. Money payments

2. Direct Tax 7. Tax
3. Indirect tax 8. Rent
4. Fringe benefits 9. Wages
5. Payment in kind 10. Investment

B. MULTIPLE CHOICE. Choose the letter that corresponds to your answer.

1. It is an account on the asset side of a company's balance sheet that represents the
company's investments, including stocks, bonds, real estate, and cash.
A. Long term investment B. Assets C. Investment D. Short term
2. It is an asset or item acquired with the goal of generating income or appreciation.
A. Long term investment B. Assets C. Investment D. Short term
3. It is the agreement between a landlord and a tenant that gives the tenant the right to use and
occupy rental property for a period of time.
A. Rentals B. Land Lord C. Wages D. Taxes
4. It is the regular payment to an employee in return for his work or service.
A. Rentals B. Land Lord C. Wages D. Taxes
5. Taxes are the enforced proportional contribution levied by the law making body of the state.
A. Rentals B. Land Lord C. Wages D. Taxes

C. IDENTIFICATION. Identify what is being described on each statement.

1. This refers to the place where the consumers and producers buy and sell products at an
agreed price.
2. It is a form of market in which there are a large number of buyers and sellers competing with
each other in the purchase and sale of goods.
3. This refers to a sole producer and has no close substitute.
4. This refers to a market dominated by a small number of strategically interacting firms.
5. This refers to the degree of competition in the market for particular product or service.
6. More buyers and sellers mean more competition.
7. It is the additional revenue added to TR by obtaining added unit of the firm’s output.
8. It is wherein products are differentiated and entry and exit are easy.
9. It is rivalry among various sellers in the market.
10. It is an ideal form of market structure in which there is the greatest degree of competition.

D. Give five (5) examples of each market model.

Perfect Monopoly Monopolistic Oligopoly
Competition Competition
1. 1. 1. 1.
2. 2. 2. 2.
3. 3. 3. 3.
4. 4. 4. 4.
5. 5. 5. 5.

ACTIVITY XVIII. Explain your answers briefly in the following questions.

 What is the importance of SWOT analysis?
 What are the different Industries that we have in our country?
 What is socio economic impact?
 What is the important of studying socio economic impact?

INDUSTRY AND ENVIRONMENTAL ANALYSIS COMPETITIVE ANALYSIS

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Subject: Applied Economics – Module 1
 Assess your competitors by putting them in strategic groups. For every strategic group,
list their product, its profitability, marketing objectives and assumptions, growth pattern, current
and past strategies, strengths and weaknesses, growth pattern and size in sales.
While undertaking competitive analysis, always try to identify your competitor, products
or services they provide, their market share, their past and current strategies, type of media they
use to market their products or services, how they advertise, competitor’s strength and
weaknesses and potential threat to your competitors.
The best way to know your current and future business rivals is to target products. Once
you have identified your competitors, know their market shares by doing a market research. The
market shares allow you to perform a SWOT which will not only help you to know your
competitor’s opportunities, strength, weakness, strength and threats but also helps you to know
where you currently stand in your industry. After carrying out a SWOT, build a competition
portfolio and plan your strategies.

The SWOT Analysis

It was created in the 1960’s by business guru, Edmund P. Learned, C. Roland Christensen,
Kenneth Andrews, and William D. in their book, Businesses Policy Text and Cases.
SWOT stands for:
S - trengths O - pportunities
W - eaknesses T - hreats
The Internal Factors: (S) Strengths (W) Weaknesses- Internal Environment consists of
factors that exist within the premises of the business, thus, most of it are controllable. And,
because it existed within, it can directly affect the business performance.
 Financial resources such as money and sources of funds for investment.
 Physical resources such as the company’s location, facilities, machinery, and
equipment.
 Human resources consisting of employees.
 Access to natural resources, trademarks, patents and copyrights.
 Current programs such employees program, department hierarchies and software
systems, sales and distribution capabilities, marketing programs, etc.

The External Factors: (O) Opportunities (T) Threats. These are those that affect a company, an
organization, an individual, and those outside their control.

Questions that can help inspire your analysis

Here are a few questions that you can ask your team when you are building your SWOT
analysis. These questions can help explain each section and spark creative thinking.

Strengths
 Strengths are internal, positive attributes of your company. These are the things that are
within your control.
 What business processes are successful?
 What assets do you have in your team, such as knowledge, education, network, skills,
and reputation?
 What physical assets do you have, such as customers, equipment, technology, cash,
and patents?
 What competitive advantages do you have over your competition?
Weaknesses
 Weaknesses are negative factors that detract from your strengths. These are things that
you might need to improve on to be competitive.
 Are there things that your business needs to be competitive?
 What business processes need improvement?
 Are there tangible assets that your company needs, such as money or equipment?
 Are there gaps on your team?
 Is your location ideal for your success?
Opportunities
 Opportunities are external factors in your business environment that are likely to
contribute to your success.
 Is your market growing? Are there trends that will encourage people to buy more of what
you are selling?
 Are there upcoming events that your company may be able to take advantage of to grow
the business?
 Are there upcoming changes to regulations that might impact your company positively?
 If your business is up and running, do customers think highly of you?

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Threats
 Threats are external factors that you have no control over. You may want to consider
putting in place contingency plans for dealing them if they occur.
 Do you have potential competitors who may enter your market?
 Will suppliers always be able to supply the raw materials you need at the prices you
need?
 Could future developments in technology change how you do business?
 Is consumer behavior changing in a way that could negatively impact your business?
 Are there market trends that could become a threat?

Customers
Are persons who avail a product or service. Success in business requires good
information, steely nerves, patience and the ability to stay cool.

Understanding the prospect’s game

Before sitting down with prospective customers, try to determine what game the
customer is planning to play. You cannot put together a negotiating strategy until you have a
good understanding of what the customer wants out of the game. Understand the tactics that
will be used to get you to do things that are not in the best interest of your company, and employ
tactics that get the best things for your company.

Avoid panic pricing

Panic pricing is pulling the price discount lever too often, too much, and without thinking
about the alternatives. Buyers are drawn to insecurity and desperation like sharks are drawn to
blood in the water. So the first thing you must be able to do is manage your desperation.
Even if desperation is not there, many buyers have figured out how to create it. The
easiest trick is to delay a purchase. The longer they can wait, the more desperate salespeople
become. This type of desperation makes salespeople poor negotiators because they are too
anxious to close a deal and are willing to make concessions to get the order.

Four types of customers

The toughest challenge that companies face today is dealing with the margin-draining
games played by some customers to gain additional discounts. Each customer type requires a
different selling approach.
The four primary customer types are:
1. Price buyers. These customers want to buy products and services only at the lowest possible
price. They are less concerned about value, differentiation or relationships.
2. Relationship buyers. These customers want to trust and have dependable relationships with
their suppliers, and they expect suppliers to take good care of them.
3. Value buyers. These customers understand value and want suppliers to be able to provide
the most value in their relations.
4. Poker player buyers. These are relationship or value buyers who have learned that if they act
like a price buyer, they can get high value for low prices.

PRICE BUYERS
Price-buying customers care only about the lowest price possible for a given product or
service. They do not commit to any particularly supplier by making sure they are able to change
suppliers easily and at will.
Negotiating with price buyers
Some things to think about when negotiating with a price buyer:
 Conduct an extensive cost analysis that includes all costs of service and support before
you develop a price.
 Strip away all value-added features in pricing the deal.
 Establish a rational walkaway price so you do not agree to a price that will cost your
company money.

RELATIONSHIP BUYERS
Relationship buyers expect their suppliers to invest in understanding the business their
products or services support. They have a high level of trust in and loyalty to their suppliers.
Negotiating with relationship buyers
Here are the tactics to consider when negotiating with relationship buyers:
 Develop an intimate knowledge of the prospect, concentrating on specific problems,
value drivers and possible solutions.
 Focus on making decisions that are in the customer’s best interest.
 Continually probe for areas of dissatisfaction and the impact of current work.
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Subject: Applied Economics – Module 1
VALUE BUYERS
Value buyers favor suppliers who add value to their operations in terms of increased
efficiencies, reduced costs, increased sales and high margins.
Negotiating with value buyers
 When negotiating with a value buyer:
 Do not focus on price during initial discussions.
 Focus completely on discovering differential value compared to competitors.
 Present an extensive list of where and how you can provide value relative to other
vendors in the negotiation, and quantify that value to defend your position.

POKER PLAYERS
Poker players are value- or relationship-buyers in price buyer disguise. Their intent in
acting like a price buyer is to force the negotiation into a bluffing situation that will benefit the
buyer at the expense of the seller. Poker players try to take advantage of you using a technique
called nibbling – always asking for more – often little things.
Negotiating with poker plays
 When negotiating with a poker player.
 Establish valued give-gets ahead of time.
 Pre-plan tactics that the poker player will use and prepare an appropriate response to
each.
 Recognize that you have value, and do not roll over and start discounting, which will
validate poker-playing behavior.

BUSINESS PRINCIPLES, TOOLS, AND TECHNIQUES IN PARTICIPATING IN VARIOUS

TYPES OF INDUSTRIES IN THE LOCALITY

Industry
An industry is a group of manufacturers or businesses that produce a particular kind of goods or
services. Industry comes from the Latin term industria, which means "diligence, hard work.”

Types of Industries
Agribusiness is the business sector encompassing farming and farming-related
commercial activities. The business involves all the steps required to send an agricultural good
to market: production, processing and distribution. It is an important component of the economy
in countries with arable land, since agricultural products can be exported.

Understanding Agribusiness
Agribusiness treats the different aspects of raising agricultural products as an integrated
system. Farmers raise animals and harvest fruits and vegetables with the help of sophisticated
harvesting techniques, including the use of GPS to direct harvesting operations. Manufacturers
develop increasingly efficient machines that can drive themselves. Processing plants determine
the best way to clean and package livestock for shipping. While each subset of the industry is
unlikely to interact directly with the consumer, each is focused on operating efficiently in order to
keep prices reasonable.
Market forces have a significant impact on the agribusiness sector. Changes in
consumer taste alter what products are grown and raised. For example, a shift in consumer
tastes away from red meat may cause demand and therefore prices for beef to fall, while
increased demand for produce may shift the mix of fruits and vegetables that farmers raise.
Businesses unable to rapidly change in accordance with domestic demand may look to export
their products abroad, but if that fails they may not be able to compete and remain in business.

Examples of Agribusiness
Some examples of agribusinesses include farm machinery producers like Deere &
Company (DE), seed and agrichemical manufacturers like Monsanto, food processing
companies like Archer Daniels Midland Company (ADM), as well as farmer's cooperatives, agri-
tourism companies, and makers of biofuels, animal feeds and other related products.

Manufacturing is the processing of raw materials or parts into finished goods through the use
of tools, human labor, machinery, and chemical processing. Large-scale manufacturing allows
for the mass production of goods using assembly line processes and advanced technologies as
core assets. Efficient manufacturing techniques enable manufacturers to take advantage of
economies of scale, producing more units at a lower cost.

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Manufacturing is a value-adding process allowing businesses to sell finished products at a
higher cost over the value of the raw materials used. It is often reported on by the conference
board, and well examined by economists.
 Manufacturing is the process of turning raw materials or parts into finished goods
through the use of tools, human labor, machinery, and chemical processing.
 Before the Industrial Revolution, most products were handmade using human labor and
basic tools.
 The Industrial Revolution of the 19th century brought with it the advent of mass
production, assembly line manufacturing, and the use of mechanization to manufacture
larger quantities of goods at a lower cost.

Measuring the Role Manufacturing Plays in the Economy

Economists and government statisticians use various ratios when evaluating the role
manufacturing plays in the economy. Manufacturing value added (MVA), for example, is an
indicator that compares manufacturing output to the size of the overall economy. It is expressed
as a percentage of gross domestic product (GDP).

Retail and commercial services are urban objects, designated for the purpose of housing
economic activities that fulfill the role of goods and commercial service provision. Examples
include shops, restaurants, credit unions, etc.

Understanding Retail Sales

Retail sales are a good indicator of the pulse of the economy, and its projected path
toward expansion or contraction. Retail sales figures are reported by all food service and retail
stores and the measurement is typically based on data sampling and used to model the patterns
for the entire country.
As a leading macroeconomic indicator, healthy retail sales figures typically elicit positive
movements in equity markets. Higher sales are good news for shareholders of retail companies
because it means higher earnings. Bondholders, on the other hand, are quite ambivalent
towards this metric. A booming economy is good for all, but lower retail sales figures and a
contracting economy would translate to a decrease in inflation that could see investors flock into
bonds leading to higher bond prices.

Retail sales capture in-store sales, as well as catalog and other out-of-store sales of both
durable (last for more than three years) and non-durable goods (those with a short life span).
These are broken down into a number of different categories including (but not limited to):
 Apparel
 Department stores
 Food and beverage stores
 Electronics and appliances
 Furniture stores
 Gas stations
 Car dealers
As a broad economic indicator, the retail sales report is one of the timeliest as it provides data
that is only a few weeks old. Individual retail companies often provide their own sales figures at
the same time per month, and their stocks can experience volatility as investors process the
data.
Major changes in price can affect retail sales figures. These fluctuations in prices are
seen primarily in two main retail sales categories - food retailers and gas stations. Large
increases in food and energy prices can cause sales figures to drop in both categories, thus
affecting the sales of a particular month.

International Trade
International trade allows countries to expand their markets and access goods and services that
otherwise may not have been available domestically. As a result of international trade, the
market is more competitive. This ultimately results in more competitive pricing and brings a
cheaper product home to the consumer.
 International trade is the exchange of goods and services between countries.
 Trading globally gives consumers and countries the opportunity to be exposed to goods
and services not available in their own countries, or which would be more expensive
domestically.
 The importance of international trade was recognized early on by political economists
like Adam Smith and David Ricardo.
 Still, some argue that international trade actually can be bad for smaller nations, putting
them at a greater disadvantage on the world stage.
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Understanding International Trade
International trade was key to the rise of the global economy. In the global economy,
supply and demand—and therefore prices—both impact and are impacted by global events.
Political change in Asia, for example, could result in an increase in the cost of labor. This
could increase the manufacturing costs for an American sneaker company that is based in
Malaysia, which would then result in an increase in the price charged for a pair of sneakers that
an American consumer might purchase at their local mall.

Imports and Exports

A product that is sold to the global market is called an export, and a product that is
bought from the global market is an import. Imports and exports are accounted for in the current
account section in a country's balance of payments.
Global trade allows wealthy countries to use their resources—for example, labor, technology,
or capital—more efficiently. Different countries are endowed with different assets and natural
resources: land, labor, capital, and technology, etc. This allows some countries to produce the
same good more efficiently—in other words, more quickly and with less of a cost. Therefore,
they may sell it more cheaply than other countries. If a country cannot efficiently produce an
item, it can obtain it by trading with another country that can. This is known as specialization in
international trade.
For example, suppose Country A and Country B both produces cotton sweaters and
wine. Country A produces ten sweaters and six bottles of wine a year, while Country B produces
six sweaters and ten bottles of wine a year. Both can produce a total of 16 units. Country A,
however, takes three hours to produce the ten sweaters and two hours to produce the six
bottles of wine (a total of five hours). Country B, on the other hand, takes one hour to produce
ten sweaters and three hours to produce six bottles of wine (a total of four hours).

Comparative Advantage
These two countries realize that they could produce more by focusing on those products
with which they have a comparative advantage. Country A begins to produce only wine, and
Country B begins to produce only cotton sweaters. Each country can now create a specialized
output of 20 units per year and trade equal proportions of both products. As such, each country
now has access to 20 units of both products.
We can see then that for both countries, the opportunity cost of producing both products
is greater than the cost of specializing. More specifically, for each country, the opportunity cost
of producing 16 units of both sweaters and wine is 20 units of both products (after trading).
Specialization reduces their opportunity cost and, therefore, maximizes their efficiency in
acquiring the goods they need. With the greater supply, the price of each product would
decrease. Thus, their choice to engage in specialization provides an advantage to the end
consumer as well.
Note that, in the example above, Country B could produce both wine and cotton more
efficiently than Country A. In other words, it takes Country B less time to produce both wine and
cotton. This is called an absolute advantage. Country B may have this advantage because of a
higher level of technology.

THE EFFECTS OF THE VARIOUS SOCIO-ECONOMIC FACTORS AFFECTING BUSINESS

AND INDUSTRY

Socio-economic Impact
Today, putting up a business is not just all about profits. It also concerned with consumer
welfare, job creation, environmental issues, uplifting the quality of life and contributing to the
economy. Let us now look at how a business can impact the consumer, the supplier and the
investors, the government, and households.

Impact on the consumer

A new business, especially one that is innovative and focused on bringing some new
product or service on the market, is always welcome to the consumer who is looking value for
his money. If the new business is selling a product that has close substitutes in the market, then
the owner of the business will try his best to win the consumers away from the existing sellers
by offering something that will benefit the buyers.
How can the new business accomplish this? One good way is to innovate the product
come up with new features that are not found in the existing competition of goods. This can be
in the form of a better appearance, a new feature or ingredient or a new convenient way of
making the product available. A new business therefore means new products or services
available to the buyers, giving them more choices.

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 Since the new seller will try to attract buyers, another strategy that could be adopted is to
improve the quality of the good making it a notch higher than those already being sold in the
market. Although this may mean high prices for better quality goods, this could cater to a market
that is more after quality than low price. Initially, businesses starts the seller may make the
product available at introductory prices lower than the other substitute in the market. This
definitely be an advantage to the price conscious buyers who have limited budgets. As long as a
new business can provide new goods and services better quality of goods and more options,
the consumers can benefit from it. But if a business comes up with a low quality good and does
not provide the consumer value for his money, then this business will have a negative impact on
the market.
Consumers - are defined as individuals or businesses that consume or use goods and
services. Customers are the purchasers within the economy that buy goods and services, and
they can exist as consumers or alone as customers.

TYPES OF CONSUMERS
Loyal Customers - make up the bedrock of any business. As the name implies, loyal
customers are those who have made a commitment to your product or service. Even though
they may comprise the smallest percentage of your overall consumer base, your loyal
customers are also the most likely to generate the majority of your income. As an added bonus,
they are far more likely to recommend your company to others.

Impulse Shoppers - are those simply browsing products and services with no specific
purchasing goal in place. This consumer segment generates significant revenue for most
retailers. This type of consumer is usually receptive to upselling and has the potential to become
a loyal customer if products and services meet or exceed their expectations and desires.
Bargain Hunters - are seeking the best deal, period, and most likely would not be swayed by
up selling techniques in fact, this may cause them to move on. This type of customer has very
little potential to become a loyal customer unless it is part of your business strategy to offer the
lowest possible price points at all times. This customer also rarely, if ever, makes purchases on
impulse. Advertising sales is the best way to appeal to those in this customer group.

Wandering Consumers - are somewhat related to impulse shoppers, but they are much less
likely to make purchases. This type of customer is more prevalent in brick- and-mortar locations,
but they do stumble into online retail venues on occasion. It is sometimes possible to make a
sale to those just wandering through provided you can stimulate their interest, but keep in mind
that many of them are simply attracted to the social interaction of shopping and have no
intention of making a purchase.

Need-Based Customers - As the name implies, need-based consumers are driven by the need
for a specific product or service. Although these customers generally make purchases decisively
and quickly once they find what they are seeking, they are easily lured away by competing
businesses. However, they are frequently converted into loyal customers. They often have
practical questions or concerns that can be addressed with a proactive social media presence.

Impact on suppliers and investors

A new business will also provide opportunities for suppliers and investors. If a new
construction company is set up, then this opens up opportunities for the other businesses that
will supply them their needs, tools, wood, cement, steel, paints, nails, screws, and decorators.
Many suppliers will now get a chance to sell to the newly established business, which means
income for them. Demand for the goods provided by the suppliers will increase. These suppliers
will now need to produce more of them and they will need to hire more workers who will earn
wages from being employed. More capital will be needed to invest in the production of these
tools and materials, generating again income for the economy. Investors get to earn returns on
their investments, with capital plowed back into more investments and generating more income
for the economy thus leading to economic growth.

Supplier - may be distinguished from a contractor or subcontractor, who commonly adds

specialized input to deliverables.
Investor - is any person or other entity (such as a firm or mutual fund) who commits capital with
the expectation of receiving financial returns. Investors can analyze opportunities from different
angles, and generally prefer to minimize risk while maximizing returns.

TYPES OF SUPPLIER
1. MANUFACTURERS AND VENDORS
When you work with manufacturers and vendors, you are working with the source of the
supply chain. They research, develop, and produce the product you purchase. Effectively,
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sourcing your materials from the manufacturer means you are not paying any additional
businesses for the handling and storing of the product.
Many manufacturers create the materials after they have been ordered. This can create a
longer wait time than what you will receive with wholesalers and distributors. But, if what you
need is not something readily available or mass-produced, manufacturers can create large
volume orders to the exact specifications you need. Manufacturers are ideal when efficiency
and intricacy are top priorities.

2. WHOLESALERS AND DISTRIBUTORS

Wholesalers and distributors are known for purchasing supplies in bulk, storing them,
and selling off in smaller quantities to businesses and retailers. They specialize in carrying
standard sizes in high volumes.
Since the product is already created, you may have limited options, but the order turn times will
be shorter.
3. INDEPENDENT AND TRADE SHOW REPS
Independent craftspeople who create their own pieces often sell their work
independently or partner with representatives who help sell their final product. Independent
craftspeople are known for one-of-a-kind intricacy, along with handmade detailing.
Sourced materials from an independent craftsperson are typically ideal for projects involving
low-volume purchasing where turn times are a lower priority.

4. IMPORTERS
When you hear talks of overseas manufacturing, the suppliers who import and export
those manufactured goods are known as importers. Importers purchase their materials from one
country, and then they sell those same materials in a different country.
When you source materials through importers, high-volume orders in standard sizes are
where you will find the most benefit. The high-volume helps to offset the costs incurred through
shipping and transporting the materials. It is not uncommon to buy from a wholesaler or
distributor who sources from importers as well.

Impact on the Government

The government will also benefit from establishment of new business, through revenues
earned on fees collected from them and on taxes imposed on the incomes of the businesses.
Before a business can be set up, it has to meet requirements to start operating first; the
business owner has to apply to start its business. Licenses have to be obtained. Organizational
fees have to be paid. On the municipal level the local government earns revenue from these
fees and licenses. This means money added to their local budget to provide social services to
the community, for the development of the company, to pay salaries of local officials and
workers, to maintain peace and order and to subsidize public schools. On the national level the
government gets to imposed taxes on the incomes earned by the business also have to pay
personal income taxes to the Bureau of Internal Revenue. For employed workers, these taxes
are regularly withheld their employers and remitted to the BIR. These tax revenue fuel
development because they are used by the government for national activities and for budget
allocation for its programs. The national government has revenues to finance its project, to pay
government officials, to build schools to improve the military and police, to promote peace and
order all over the country, to build housing for the poor, and to provide health services and
improve welfare programs for the people. A more detailed study of the government will follow in
the succeeding sections of this chapter.
Revenue – it is the income that a business has from its normal business activities, usually from
the sale of goods and services to customers. Revenue is also referred to as sales or turnover.
Tax – it is a compulsory financial charge or some other type of levy imposed on a taxpayer by a
governmental organization in order to fund government spending and various public
expenditures
BIR - The Bureau of Internal Revenue is an agency of Department of Finance. BIR collects
more than half of the total revenues of the government.

Impact on Households
New Businesses mean employment opportunities for the Filipinos. Those who have jobs
but are earning low-wages may find better paying jobs with the new companies. Unemployed
workers looking for work may have the chance of being employed by these will enable them to
buy their basic needs and even some luxuries. This means that their quality of life and their
standard of living will improve. Acquisition of wealth and assets can now follow both for the
business owners and the employees they hire. Profits earned by the owners can be invested
back into the business for expansion, or some can be withdrawn by the owners which they can
use to buy new cars or new houses. Success stories on television shows features rags to riches
stories of entrepreneurs who used to be very poor, but with hard work and persistence, were
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able to make their businesses succeed, enabling them to send their children to good expensive
schools, building big house, and buying two or more cars housed in their garaged. The owners,
because of their success, manage to acquire wealth and buy assets which are fruits of their
hard work.
With the growing focus on preserving the environment for future generations, businesses
also get to contribute their share. So called green structures for building are means used to
prevent further damage to the environment. Instilling the value of recycling and reusing of
resource among employees and family members may also become the advocacy of these
businesses. Spreading information on the dangers of global warming may be promoted by the
business owners. Thus, businesses become instruments for society to have a better place to
live in.

Impact on the Community

Corporate Social Responsibilities has become a growing trend among businesses today.
As a result of this, corporation and even small businesses have increased their focus on
projects that provide scholarships to poor but deserving students, allocating budgets for housing
for low income families such as participation in programs like the Gawad Kalinga, environmental
protection including tree planting, eliminations of pollutions, and other environment related
programs. Communities benefit from business sponsored activities that include sports fest and
wellness program, livelihood projects micro financing and even medical and dental mission.

Viability and impacts of business on community

Government Impact on business
While Government increasingly spends on socio economic service to improve business
condition size and inadequate infrastructure and support service limit the growth opportunities of
micro enterprises. Declining debt payments to local and international debtors have given way to
more spending on services like road development and education. On the other hand, size limits
business access to technology, credit and market networks in the absence of government
support services. On top of the limitation of size poor road conditions and inadequate support
industries further limit production and marketing by adding cost to doing business. Poor road
condition increases transport cost and the risk of perishability especially of agricultural and
fishery products/ High cost of electricity and real estate acquisition increase production cost
especially of manufacturers

Household Impact on Business

Although the country’s population is still young with a majority (68%) aged below 29
years old, it is gradually becoming older with declining fertility and mortality rates. More than
one-third (35%) aged 15 to 34 years old are given to sophisticated consumption / One third
(33%) aged up to 14 years old are children needing growing up care and only seven percent
(7%) aged 60 years old and above need elderly support .

Trade and Capital Movements

The external sector shapes the foreign exchange market through its trade, capital
movements, and financial flows. Trade includes factor payments such as remittances from
overseas contract workers and profit remittances of foreign companies to their home countries
capital movement include both short and long term foreign investments in the country and
Filipino investments abroad. Financial flows involve international debts and loans and their
repayments.

International trade allows countries to expand their markets and access goods and services
that otherwise may not have been available domestically. As a result of international trade, the
market is more competitive. This ultimately results in more competitive pricing and brings a
cheaper product home to the consumer.
 International trade is the exchange of goods and services between countries.
 Trading globally gives consumers and countries the opportunity to be exposed to goods
and services not available in their own countries, or which would be more expensive
domestically.
 The importance of international trade was recognized early on by political economists
like Adam Smith and David Ricardo.
 Still, some argue that international trade actually can be bad for smaller nations, putting
them at a greater disadvantage on the world stage.

Understanding International Trade

International trade was key to the rise of the global economy. In the global economy,
supply and demand—and therefore prices—both impact and are impacted by global events.

Page 35 of 37
Subject: Applied Economics – Module 1
 Political change in Asia, for example, could result in an increase in the cost of labor. This
could increase the manufacturing costs for an American sneaker company that is based in
Malaysia, which would then result in an increase in the price charged for a pair of sneakers that
an American consumer might purchase at their local mall.

ACTIVITY XIX
A. Give examples of Agri-business, Manufacturing, International Trade in our country.
Agri-business Rentals and Manufacturing International Trade
Commercial Sales

Ex: Ex: Ex: Ex:

1. 1. 1. 1.
2. 2. 2. 2.
3. 3. 3. 3.

B. EXPERIMENTAL ACTIVITY
1. Discuss how SM Mall impacts positivity on the community and the country.
2. Interview a typical mother or housewife (your mother or father) in a low income community on
how s/he budgets the income of her/his family. Further ask her/him if said family budget can still
provide for some amenities and if so, how much and to what kind?

ACTIVITY XX
A. Make your own business. It can be about services or manufacturing. Write the details of your
business and make a SWOT analysis of your business.
Rubrics: Content = 20 pts. Understanding/Application = 10pts, Original Thinking = 20 pts.

B. RESEARCH ON BUSINESS OPPORTUNITIES: Look for businesses where industry is not

yet saturated with so many firms. Once you have identified a business, prepare a business
proposal.

The business proposal should include the following:

A. A description of the good or service to be offered.
B. Target market of your product or services.
C. Proposed location and reason for the choice of this location.
D. Long term objectives of the business.
E. Estimated Capital requirements.
F. Sources of Capital.
G. Form of Business Organization: Sole Proprietorship, Partnership or Corporation.
H. Suggested pricing for the product or services.
I. Mode of promotion or advertising used.
J. Technical requirements Machines building Tools needed.
K. Socio economic Impact: Positive effect of the project

ACTIVITY XXI
A. Define the following terms in your own words and explain your answer briefly. (2 points each)
1. Agri-business 6. Import and Exports
2. Strength 7. International Trades
3. Weaknesses 8. Industry
4. Opportunities 9. Manufacturing
5. Threats 10. Customers

B. Make a SWOT analysis of the Jollibee and McDonalds located near or within your
community. Compare the two restaurants then determine which is better through the analysis
you made.

C. PROBLEM SOLVING AND CRITICAL THINKING ANALYSIS. Answer the following in

essay form.
1. Why are businesses still handicapped by inadequate infrastructure services despite
governments increasing spending on the same?
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2. How does size affect the business in both short and long run?
3. Why do we say that the county populations gradually aging?
4. Why has household consumption been marginalized through the years?
5. In our country, why do imports usually exceeds export?

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