PRELIMS HANDOUT

LESSON 1: INTRODUCTION TO MICROECONOMICS

Time frame: Weeks 2-3 Objectives:
At the end of the lesson, the students should be able to:

• Define economics

• Distinguish the differences between Macro and Microeconomics

• Relate economics to their everyday life

• Determine the possible careers related to the course Course Intended Learning Outcomes:
CILO 1: Define the concepts and theories involved in economics.

CILO 2: Provide a brief discussion on the differences between Macroeconomics and Microeconomics.

BRIEF HISTORY OF ECONOMICS AND ITS MEANING

ECONOMICS is from the Greek words οἶκος [oikos], meaning family, household, and estate. While νόμος
[nomos] means custom or law. Combining the two Greek words into “oikonomos”, its direct translation will be
“one who manages the household”.

Did you know that households and economies have a lot in common? Why? Here’s the thing, household
meets a lot of decisions. A household allocates its resources among various members (who will shop at the
market? who will cook dinner? who will do the laundry?). Likewise, the economy of society also faces a lot of
decisions and finds a way to decide what jobs are needed or should be done and who will do it for them.
Different people have different jobs and tasks to do. After allocating their people, land, buildings, and machines
to different jobs and purposes, they will allocate the goods and services produced.
Economics can be about money and how people make and spend it. It can also be related to jobs,
businesses, and the government. But the core of economics is the study of choices and consequences. Why do
you think so? It is because our life is shaped by the choices that we make and the challenges we face. Now the
fundamental fact that dominates our lives is that we often want more than what we can get. However,
sometimes we are unable to get everything and that is called “scarcity”. Scarcity is our inability to get
everything and have everything all at once. In fact, it is universal since every living thing can face scarcity. Now
let us think about the things that we want and the scarcity that we may face. For example, you want an iPhone
14 and you want the latest laptop model as well. Another is that you want more time outside classes to watch
movies or play your favorite game or it can also be that you want to travel and buy a new house and a new car at
the same time. But what everyone or even society can get has limitations. They are limited by the available
productive resources. Such resources may be from nature or the natural environment, human labor, or produced
tools, materials, and equipment.
 Since we cannot get everything, we want all at once, we must decide and make choices. For example,
your family cannot afford to buy you both a brand-new laptop and the latest iPhone, so you will choose which
one to buy. You cannot study, play games, and watch a movie all at once, so you choose which one to do first.
You cannot buy a new house, a new car, and travel all at once because your salary will not suffice all the
expenses. With that, your choices may be consistent with other people's choices. It may also be affected by your
family, your socio-economic status, age, etc.
Now to further define economics, economics is a branch of social science that studies and deals with
choices that individuals, firms or businesses, governments, and entire societies make as they face scarcity which
influences their choices, and as they look at the incentive which may reconcile their choices.

THE TWO PARTS OF ECONOMICS

Economics has two parts, Macro and Microeconomics. Let us now differentiate between these two.
Macroeconomics deals with the performance of national and global economies. For example: Why does the
Philippines' employment rate fluctuate? On the other hand, microeconomics deals with the choices that
individuals and businesses make and the way they interact with markets and influence governments. For
example: Why do people stream more movies now than before?
Moreover, there are two common economic questions. (1) How do choices affect what, how, and for
whom, the goods and services are produced? (2) Do choices made in pursuit of selfinterest also promote social
interest?
To answer the first question, we take note of the words what, how, and for whom. What stands for the
products or services that we produce which may then vary across the country and across the globe. How deals
with the technologies, equipment, tools, and materials or resources used to produce the goods. For whom, stands
for the people or consumers who will benefit from or consume the goods and services that are produced. This
may also depend on the income that people earned. For example, People with smaller income can only afford a
smaller range of goods and services and only has limited options. While people with larger incomes have more
options and can buy a variety of goods and services.
Furthermore, there are also factors of production that are grouped into different categories and these are:
• Land - These are the "gifts of nature" that we use to produce goods and services. In economics, it
is the "natural resources" that we have.
• Labor - This is the work time and work effort that people commit themselves to in order to
produce goods and services.
• Capital - These are the tools, equipment, machinery, buildings, and other constructions that
businesses utilize to produce goods and services. In terms of money, this is called the financial
capital
• Entrepreneurship - This pertains to the labor, land, and capital that human resource organizes. It
is the driver of economic progress since they develop new ideas on what and how to produce
 certain goods and services. They also make decisions and weigh and bear the risks that arise
from such decisions made.
Lastly, let us define self-interest and social interest. Making a choice based on self-interest means that
you think that the choice is the best one available for you. For example, people make a choice on how to spend
their time and budget. While social interest occurs when the decision is made to contribute to society and if they
are the best for society.

MICROECONOMICS
Now let us delve deeper into the concept and terms related to Microeconomics.
Microeconomics is a social science that deals with the implications of incentives and decisions and how these
affect the utilization and distribution of resources or goods and services. It visualizes how and why various
goods and services have various values and how people or businesses conduct and benefit from efficient
production and exchange. It may also depict how individuals and businesses best coordinate and cooperate with
each other. This provides us with a
more complete and detailed understanding compared to macroeconomics. It deals with the decisions that
individuals and businesses make to allocate their resources for production, exchange, and consumption. It
analyzes what is likely to happen or the "tendencies" when individuals or businesses make their choices in
response to the changing incentives, prices, resources, and/or methods of production.
The aforementioned "individuals" previously mentioned are usually grouped into microeconomic sub-groups
like buyers, sellers, and business owners. These subgroups will then create the supply and demand for resources
through the use of money and interest rates as a pricing mechanism.
Some basic concepts of microeconomics include:

• Incentives and behaviors which pertain to how individuals or businesses will react to certain
situations that they may face
• Utility theory - Goods and services will be chosen by the consumers to purchase and consume to
maximize their happiness or "utility" but it may be subject to income constraints.
• Production theory - The study of production and/or the process of converting inputs to outputs,
where producers will choose a combination of inputs and methods to minimize their costs and
increase their profits.
• Supply and Demand theory – The combination of Utility and Production theories.
• Price theory - Through the theory of supply and demand, the prices in a competitive market are
determined. If the price demanded by the consumers is the same as the price demanded by the
producers, there will be an economic equilibrium
USES OF MICROECONOMICS
Let us now discuss the application or uses of microeconomics. Microeconomics can be used in the positive or
normative sense. Positive sense delves into economic behavior and explains what to expect if certain conditions
change. For example, the prices of cars were increased by the manufacturer, and as a result, there will be a
decrease in buyers than before. The minimum wage was increased in city A; thus, Company Z may only hire a
few workers. Meanwhile, the normative sense uses the predictions, conclusions, and explanations of positive
microeconomics to recommend what individuals, firms, and governments should do in order to achieve the most
valuable or beneficial patterns of production, exchange, and consumption among market participants. It also
answers the question "what people ought to do or ought to be".

CAREERS RELATED TO ECONOMICS

Now that we have had a glimpse of the course, let us now talk about some of the careers that economics majors
or students who took economics can pursue. Note that these are the most common but not limited to careers that
are related to economics. As a matter of fact, economics as a course is very versatile and flexible. First and
foremost, of course, an economics major can be an economist. They may pursue higher education such as a
master's or Ph.D. or work in private firms, government, and international organizations. Second, an educator.
Economics majors can also educate and inspire students on the role of economics in a personal or business
manner. Third, a market research analyst who deals with data on buying patterns and forecasts the possible
success of a product and the price that consumers are willing to pay for. Fourth, a financial analyst who
analyzes the trends and fluctuations in interest rates, stock, and bond prices and predicts the cost of borrowing
and returns on investments. Fifth, a budget analyst who tracks and keeps an eye on a business or organization's
cash flow, receipts, and payments and prepares a budget plan that shows the prediction of future cash flows.
Last but not the least, an economics major can be a banker who can apply their knowledge on wealth, assets,
and value and analyzes elements of business, and make projections.
LESSON 2: SCARCITY AND CHOICE: THE FUNDAMENTAL ECONOMIC
PROBLEM
Time frame: Week 4 Objectives:
At the end of the lesson, the students shall be able to:

• Understand the relationship between Scarcity and Choice

• Differentiate opportunity cost and money cost
• Determine when the markets are efficient or inefficient
• Explain when the markets produce fair or unfair outcomes Course Intended Learning Outcomes:
CILO 3: Recognize and discuss in detail the concepts, theories, and principles of microeconomics and relate
them to everyday life and to the business or banking field.

SCARCITY AND CHOICE

This part will focus on the relationship between scarcity and choice. Let us first review the meaning of scarcity
which was discussed in lesson one. In the first lesson, we were made aware that the fundamental fact that
dominates our lives is that we often want more than what we can get. However, sometimes we are unable to get
everything and that is called “scarcity”. Scarcity is our inability to get everything and have everything all at
once. In fact, it is universal since every living thing can face scarcity.
We all know that our resources are generous. However, we must face and accept the fact that it will never be
unlimited. For example, you might be a multi-millionaire right now because you just won the lottery but no
matter how big your money is, it will soon diminish until you are left with none if you used up all of it. This is
also the same with the country’s national budget, for example. It may seem that it is vast and unlimited, but the
truth is, it is still limited. Even clean air, it may seem limitless but after a few years’ time, with all the pollution
and environmental destruction happening, clean air will soon be diminished and replaced with carbon dioxide or
carbon monoxide. Another example is water. Though we have vast oceans and seas, only a few percent of these
water bodies remain potable due to water pollution and contamination. So, with scarcity or the so-called
limitations, decision-makers will have to make choices on how to properly utilize them to make the most out of
them. With that, we make optimal decisions which is the most desirable alternative among the possibilities
being permitted by our available resources which are always scarce in a way.
In economics, whether macro- or microeconomics, we are always faced with the fact that resources are limited
and that it is never enough to do all the things however we might want to do with them. Thus, we should always
make a choice.
Now let us talk about resources, these are the instruments or materials provided by nature or by individuals
which are being utilized to create goods and services. Earlier in lesson one, we discussed the groups of factors
of production namely land, labor, capital, and entrepreneurship. Now we label them as four types of resources.
To define, the four types of resources are (1) Natural resources which include soil or land, minerals, water, and
air; (2) Labor or human resources which is a very scarce resource due to time limitations since we only have 24
hours a day and that the number of skilled workers is not unlimited. (3) Capital or financial resources being
utilized to create goods and services. (4) Entrepreneurship which is known as the individuals, businesses, or
firms tying up the 3 aforementioned resources together to control them, make decisions, bear risks, and drive
economic progress.
Let me now ask you a question, which is more fundamental, the scarcity of physical resources or the scarcity of
funds? Baumol, Blinder, and Solow (2018) pointed out that the scarcity of physical resources is more
fundamental than the scarcity of funds because they are irreplaceable. For example, fuel is not unlimited; the
same with energy, and other earthly resources such as iron, copper, uranium, and the like.
As mentioned earlier, human effort is also scarce as there are only 24 hours a day so we will often make a
choice and prioritize the things that we want to do or enjoy first. This is also similar to goods produced by
human effort. They are also limited because they need fuel, energy, labor, and other scarce resources as inputs.
For example, we can manufacture a lot of motorcycles but we also have to increase the use of labor, fuel, and
energy. But this increase will also bring about cutting back on some other expenses.
Again, all resources are scarce virtually which means that people have only less of them than they would like.
Thus, we make choices among the limited set of possibilities and deal with the inevitable fact that to decide on
having more of one thing will also mean that we or other people will have less of something else. For example,
car manufacturers will have more profits if they raise their car prices, as a result, the buyers will have lesser
money if they buy the car at a higher price. Another is that we can work all we want all day long but in return,
we will have less time to spend with our family.

OPPORTUNITY COST AND MONEY COST

In this part, we will talk about opportunity cost and money cost. Opportunity cost is something that you give up
in exchange for something that you want to do or buy. Thus, the opportunity cost of any decision is the value of
the next higher or best alternative that makes the decision maker sacrifice. For example, when you choose to
spend most of your time working in the office, it may mean that you will not be able to spend your time with
your family on that day. Another is that if you spend your money to watch a movie in the cinema, then that
money cannot be spent on something else.

In terms of money cost, this is also commonly known as “nominal cost”. Money cost is the expense or cost of
acquiring desired goods or services in terms of cash. For example, the price assigned for each service they have
at a salon is the money cost. Another example is the price written in supermarkets for each product or goods.
Money cost is also known as the expense of producing a certain product made by a business or firm. For
example, if the price of making a laptop is Php 25 000, then it can be said that “the money cost of producing 1
laptop is Php 25 000”
In a well-functioning market, goods that have high opportunity costs tend to also have high money costs.
Likewise, goods that have low opportunity costs will also have a low money cost.
But sometimes the market does not function and may assign prices or money costs that do not accurately
represent the opportunity cost. For example, making a whole dining set took a carpenter to do it for a month
with around 10 hours of work per day. The carpenter also made use of fine and high-quality materials for the
dining set. But since he lives in a rural area and does not have a wide range of markets, he may be forced to just
sell the whole set for around Php 3 000 just so it will be sold and will not be stuck at his work area. Another
example is when we get things for “free”. For example, the early settlers of America made use of natural
amenities, killed buffalos, destroyed forests, and polluted the land which has no market price yet, hence they got
everything for free at that time. But in turn, the opportunity cost will be paid off by the latter generations in
terms of lost resources. Also, if you got something for free but you had to wait a long time before you get it, you
still pay for the opportunity cost which is the value of the next best use of your time. For example, a certain
food chain will give out free burgers on their anniversary and a lot of people lined up to get a free burger, you,
who also want to get a free burger chose to line up and wait until everyone before you gets accommodated and
until it is your turn also paid for your opportunity cost of time; because if you did not line up and waited for
hours for that burger, you could have spent those hours in doing the next valuable thing for you, for example
spending more time with your pet at home or playing with your kids at home.
So how do we make decisions? How do businesses make decisions? How do you make a choice? Some
individuals make a decision based on their hunches, some may follow advice from their close family members,
and some would also follow a fortune teller. But oftentimes, when we do not have much time to think and the
information or necessary research is scarce, we will just settle on a decision that we can live with. This choice
may promise to have a fairly safe outcome. Although other decisions may yield a better outcome, some decision
makers will just tend to settle with this course which is termed as satisficing. But as economics majors or as
someone who is taking up an economics course, we are encouraged to do better than just satisficing and that is
to make an optimal decision.
An optimal decision is a choice that will best serve your objective whatever it may be. So whatever the
objective may be, we can determine whether a decision is optimal or not by weighing the consequences. Hence,
the possible result or consequences should be compared to each of the possible choices and the one which will
give more benefit or yield better results is the optimal choice.

EFFICIENCY AND EQUITY

This part will focus on efficiency and equity. But before that, let us first define the difference between inputs
and outputs. Inputs pertain to the raw materials, labor, electricity, and other resources used by a business or firm
to produce their outputs (or products). Outputs, on the other hand, are the goods and services produced by a
business or firm through the utilization of the inputs.
In the previous discussions, we were able to point out that scarcity is everywhere, and since we have limited
choices we need to make hard choices. For example, if a family wants to buy a new house in an exclusive
residential village, with that goal in mind, they will decide to cut back on some of their household expenses
such as going on monthly trips together or eating out at a buffet every week.
With these limitations, we are now to decide to allocate our resources and make at least one of these three
decisions; the first is how to utilize these resources. For example, in a company, they will decide which of these
resources will be used to produce such products, whom are the employees assigned to do certain jobs, etc. The
second will be which of the possible combinations of goods should they produce; for example, how many cars,
motors, appliances, and so on. And the third is how much of the total output of each good to distribute to each
person in the most sensible way. This is similar to the aforementioned what, how, and for whom.
Now, what is the meaning of allocating scarce resources? This pertains to the decision of society to divide their
scarce input resources among the various outputs produced in the economy as well as among various businesses
and organizations that produce the outputs.
With that, let us now move on to the concept of efficiency. Efficiency as defined by economists is the absence
of waste. This means that an economy is efficient if they do not waste its available resources and were able to
produce the goods and services that the consumers want. The economy and production are also efficient if they
use the least number of resources that the technology can accommodate, produce the products or services, and
provide them to individuals who will benefit the most from these. As part of the concept of efficiency, being
productively efficient is when the maximum amount of output possible is produced through maximizing its
resources given the available technology.
In the 1970s, Adam Smith, the father of modern economics, was amazed at how the concept of specialization
raised efficiency and productivity when he visited a pin factory. This concept of specialization is commonly
known as the division of labor which means breaking up a huge task into smaller chunks of more specialized
tasks so that each worker can become more of an expert at their particular job. For example, in the field of
medicine, many doctors have their specializations in certain fields like pulmonology, cardiology,
endocrinology, nephrology, etc. These doctors are the experts in these fields and can guide a patient in more
detail and in a more specialized manner to help them improve their quality of life. Another example is in a
factory, a certain team will be the one who will handle the procurement of the resources, then, another will
handle the assembly of these resources to create a product, now once a product was made, it will now undergo
the quality assurance team, then the packaging team, and so on. The concept of division of labor is helpful as
the workers were able to work simultaneously and harmoniously while improving their productivity and
efficiency.
Furthermore, once the resources where properly allocated and used, the products will now be distributed to the
members of society or the consumers. As such, equity pertains to how these goods and services were and should
be distributed among the consumers and how the costs will be divided. It is a process of striving to provide
fairness in an economy in terms of the procurement of goods and services, welfare, and taxation. For example, it
is not fair to charge a high-income family the same tax as tower-income families, hence, the taxes of the upper
classes are relatively higher than the lower once to achieve equity. Another is that it would be unfair if only the
rich can go to hospitals and have themselves checked in times of illness. As a result, society has public or
government hospitals to be able to provide healthcare even to the less fortunate members of society.

LESSON 3: SUPPLY AND DEMAND

Time frame: Week 5 Objectives:
At the end of the lesson, the students shall be able to:
• At the end of the lesson, the students shall be able to:

• Explain the factors influencing the demand and supply of products

• Understand how supply and demand determine the prices and quantities of a product Course Intended

Learning Outcomes:

CILO 4: Understand the law of supply and demand

CILO 5: Analyze the cost and pricing of production and demand.

SUPPLY AND DEMAND

The laws of supply and demand will explain how prices are being determined or assigned to certain products or
services and how they guide individuals and businesses in their use of resources to influence the what, how, and
for whom goods and services are being produced.
When we need something such as gadgets, accessories, clothes, coffee, a haircut, a relaxing massage, etc., we
look for a place that sells those items or offers such services. A market is a place where we can buy or get those
items. Market, by definition, is any arrangement that allows buyers and sellers to get information and do
transactions with each other. The two sides of a market are the buyers and sellers. There are also markets that
sell or provide goods such as food, clothes, shoes, laptops, etc.; and there are also markets that offer services
such as haircuts, spas, repairs, laundry, etc. There are also markets for money such as banks, and money
changers, as well as for financial securities like insurance, and stocks. A lot can be offered in the market and
only our imagination can limit them.
The intensity of competition in a market that buyers and sellers face may vary. For this lesson, our focus will be
a competitive market which is a market that has a lot of buyers and sellers, and no single buyer or seller can
affect the price. Sellers or businesses offer their items for sale if and only if the price is sufficient to cover their
opportunity cost. Then, the consumers will respond to the changing opportunity cost by looking for more
affordable or even cheaper alternatives to such expensive or pricey items.
Now, let us look at how people respond to prices as well as the forces that determine prices.
Let us first identify demand. You want something, you think you can afford it, and you plan to buy
it, it is called demand. We all have our “wants” and these are our unlimited desires or wishes in terms of goods
and services. But with scarcity, usually, a lot of our demands will never be satisfied, hence, we make a decision;
and the reflection of that decision which wants to satisfy is the demand. The term quantity demanded of a good
or service is the amount that consumers plan to buy at a particular time frame at a certain price. The law of
demand pointed out that the higher the price of goods or services, the lower the quantity demanded; and the
lower the price of a good the higher the quantity demanded. Higher prices will reduce the quantity demanded
due to the substitution effect and the income effect. The substitution effect means that even though goods and
services
are unique, they still have their alternatives or “substitutes”. Meanwhile, the income effect states that if the
prices were increased but the income remains the same, people can no longer afford to buy or pay for the things
that were usually bought before. Commonly, those goods and services that have an increase in price will be
bought less especially if the income has not increased too.
On the other hand, supply pertains to the relationship between the price of the good and the quantity supplied to
it as a whole. It also reflects a decision on which technology is feasible to use in order to produce such goods
and services. The term quantity supplied of goods or services is the amount that businesses or producers plan to
sell at a certain price. In summary, the higher the price of the goods, the higher will be the quantity supplied.
Likewise, the lower the price of the goods the smaller the quantity supplied. The quantity supplied increases as
the price increases because marginal cost increases—which means if there is an increase in the number of
goods, the marginal cost of producing these goods also increases. Remember that it is not worth it to produce
goods if the price received for the goods does not cover the marginal cost of producing them. If the price of
goods rises, producers will also be willing to sustain a higher marginal cost to increase their production. Hence,
a higher price will result in a higher quantity supplied.
Moreover, there are six main factors that cause changes in supply and these are changes in the following:
• Prices of factors in the production wherein if the price of a factor of production increases, the lowest
price that a firm is willing to accept for the goods also increases, thus, there will be a decrease in supply.
For example, last year, aircraft fuel increased, and with that, the supply of flights decreased.
• Prices of related goods produced wherein the prices of related goods that businesses produce will
influence the supply. Take the price hike of soda drinks for example—if the price of soda increases, the
business will shift from producing soda to producing energy drinks or non-carbonated juices, as a result,
the supply of soda will decrease.
• Expected future prices wherein if there will be a rise in the future price of goods, the return from selling
the good in the future will also increase and will be higher than the present.
• Number of suppliers available wherein if firms have a good or a large number of suppliers to produce a
good, the supply of the good will also increase.
• Technology is the factors of production used to produce a good such as machinery, techniques, new
innovations, etc. It will be better if there is a change in technology that allows to lower the costs of
producing a good while increasing the production.
• State of nature pertains to the natural forces that can influence production such as the natural
environment and weather. For example, if there is a typhoon that destroyed rice fields, the supply of
milled rice will decrease. Hence, good weather will result in an increase in supply particularly in
agricultural products and bad weather will result in to decrease in their supply.

MARKET EQUILIBRIUM
When the price of a good increases, the quantity demanded of a product decreases since there are fewer
people willing to spend the increased price. The opposite is also true when the price decreases, as more people
will be willing to spend for the decreased price than before. Equilibrium is when the opposing factors of supply
and demand balance each other. In a market, it manifests as buying plans and selling plans to gauge the amount
of product to buy for a specific audience. The equilibrium price is the price at which the quantity demanded is
the quantity supplied, while the equilibrium quantity is the amount bought and sold at the equilibrium price.
Price regulates the quantity demanded and supplied. If the price is too high, there will be a surplus of
supply for less demand, and when the price is low there will be a shortage of supply for a greater demand for the
product. Equilibrium is when the price is at a point in which the supply given is equal to the demand for the
product or service.
The following are examples of shortage and surplus:

• Example of shortage; Surgical face masks were very cheap before the pandemic hit, at fifty pesos
per 50 pcs. box, the demand was very low until the lockdown occurred. Now face masks are one
hundred pesos per 50 pcs. box. The demand was increased so the price had to adjust to the
increased demand while supply was limited. As the need for face masks is becoming less and
less these days, the price
of these boxes will decrease, but should the demand increase again, the price will also increase.

• Example of surplus; The tomato farms in the Philippines faced a crisis in which the products that
they harvested were not selling very well since the market is saturated with tomatoes. The price
of said tomatoes will decrease due to having a large supply that is perishable. The price has been
lowered to make consumers consider buying more tomatoes in hopes that there will be profit in
turn and not just waste products.

FACTORS AFFECTING THE PRICE

A business has to consider a lot of factors before determining and setting its prices. In this lesson, we
will discuss the four main factors that affect the prices of goods or services.
First is the product cost or the inputs such as the amount spent on researching, developing, testing,
manufacturing, packaging, and distributing the product. For example, the overall cost of producing a mid-range
laptop is around Php 25 000, which will be their baseline in determining the selling price of their laptop in the
market.
Second, firms also consider their competitors when determining their own prices. For example, if you want to
buy a polo but the price is 20% less at the other store, naturally, then you will choose the one that is cheaper or
more affordable for you. What firms usually do to establish and maintain loyal customers is to match their
prices with their competitor’s prices and sometimes offer discounts or coupons.
Third, firms also consider the response of their target markets to their offered products or services. Hence, they
should gather enough information and feasibility studies to determine the needs of their consumers and how
price sensitive they are. Oftentimes, the questions on this topic include “are my customers willing to buy this
product at this certain price?”, “How will my potential customers respond if this is the price of my product?”
“Will my potential customers believe that the value is not equal to the cost and choose an alternative or decide
they can do without the product or service?”.
Lastly, laws and regulations of the government affect the pricing strategy of companies. These regulations are
necessary to protect consumers from fraud, to ensure that the value is equal to the price they pay, to promote
competition among firms, and to encourage ethical behaviors in the world of business. Thus, we have a price
ceiling, or the maximum price that can be charged for a certain product, and a price floor, or the minimum price
that can be charged. This is to prevent over or underpricing of products and services for the benefit of both the
seller and the buyer.

REFERENCES
Baumol, J.L., Blinder A.S., Solow J.L., (2022). Basic Microeconomics. Cengage. Cengage Learning Asia Pte.
Ltd (Philippine Branch), Bonifacio Global City, Philippines.

Mankiw, N.G. (2021). Principles of Microeconomics. 9th Ed. Cengage. 200 Pier 4 Boulevard, Boston, MA
02210, USA

Parkin, M. (2023). Economics: Global Edition. 14th Ed. Pearson Education Limited. KAO Two, KAO Park,
Hockham Way, Harlow, Essex, CM17 9SR, United Kingdom