UNIVERSITY OF MINDANAO

Tagum College

Department of Business Administration Education

Financial Management Program

Physically Distanced but Academically Engaged

Self-Instructional Manual (SIM) for Self-Directed Learning (SDL)

Course/Subject: BE 121 – Basic Microeconomics

Name of Teacher: Rex Lord V. Ranalan

THIS SIM/SDL MANUAL IS A DRAFT VERSION ONLY; NOT FOR

REPRODUCTION AND DISTRIBUTION OUTSIDE OF ITS INTENDED USE.
THIS IS INTENDED ONLY FOR THE USE OF THE STUDENTS WHO ARE
OFFICIALLY ENROLLED IN THE COURSE/SUBJECT.
EXPECT REVISIONS OF THE MANUAL.
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Table of Contents
page

Part 1. Course Outline and Policies ...................................................... 1

Part 2. Instruction Delivery
CC’s Voice ............................................................................…….. 5
Course Outcomes .......................................................................... 5
Big Picture A: Unit Learning Outcomes ....................................... 6
Big Picture in Focus:ULOa ……………………………………………. 6
Metalanguage .......................................................................... 6
Essential Knowledge ............................................................... 7
Self-Help .................................................................................... 9
Let’s Check .................................................................................... 10
Let’s Analyze ......................................................................... 11
In a Nutshell .................................................................................... 12
Q&A List .................................................................................... 13
Keywords Index ......................................................................... 13
Big Picture in Focus:ULOb …………………………………………… 14
Metalanguage .......................................................................... 14
Essential Knowledge ............................................................... 14
Self-Help .................................................................................... 17
Let’s Check .................................................................................... 17
Let’s Analyze ......................................................................... 18
In a Nutshell .................................................................................... 19
Q&A List .................................................................................... 20
Keywords Index ......................................................................... 20

Big Picture B: Unit Learning Outcomes ............................................. 21

Big Picture in Focus:ULOa ……………………………………………… 21
Metalanguage .......................................................................... 21
Essential Knowledge ............................................................... 21
Self-Help .................................................................................... 24
Let’s Check .................................................................................... 24

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Let’s Analyze ......................................................................... 25

In a Nutshell .................................................................................... 27
Q&A List .................................................................................... 28
Keywords Index ......................................................................... 28
Big Picture in Focus:ULOb …………………………………………… 29
Metalanguage .......................................................................... 29
Essential Knowledge ............................................................... 29
Self-Help .................................................................................... 33
Let’s Check .................................................................................... 33
Let’s Analyze ......................................................................... 35
In a Nutshell .................................................................................... 36
Q&A List .................................................................................... 37
Keywords Index ......................................................................... 37

Big Picture C: Unit Learning Outcomes ......................................... 38

Big Picture in Focus:ULOa ……………………………………………… 38
Metalanguage .......................................................................... 38
Essential Knowledge ............................................................... 38
Self-Help .................................................................................... 43
Let’s Check .................................................................................... 43
Let’s Analyze ......................................................................... 44
In a Nutshell .................................................................................... 45
Q&A List .................................................................................... 46
Keywords Index ......................................................................... 46
Big Picture in Focus:ULOb ……………………………………………… 47
Metalanguage .......................................................................... 47
Essential Knowledge ............................................................... 47
Self-Help .................................................................................... 50
Let’s Check .................................................................................... 51
Let’s Analyze ......................................................................... 52
In a Nutshell .................................................................................... 53
Q&A List .................................................................................... 54

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Keywords Index ......................................................................... 54

Big Picture D: Unit Learning Outcomes ......................................... 55

Big Picture in Focus:ULOa ……………………………………………… 55
Metalanguage .......................................................................... 55
Essential Knowledge ............................................................... 55
Self-Help .................................................................................... 57
Let’s Check .................................................................................... 58
Let’s Analyze ......................................................................... 59
In a Nutshell .................................................................................... 60
Q&A List .................................................................................... 61
Keywords Index ......................................................................... 61
Big Picture in Focus:ULOb ……………………………………………… 62
Metalanguage .......................................................................... 62
Essential Knowledge ............................................................... 62
Self-Help .................................................................................... 65
Let’s Check .................................................................................... 65
Let’s Analyze ......................................................................... 66
In a Nutshell .................................................................................... 68
Q&A List .................................................................................... 69
Keywords Index ......................................................................... 69

Part 3. Course Schedule ......................................................................... 70

Online Code of Conduct .............................................................. 71
Monitoring of OBD and DED............................................................ 72

Course Outline: BE 121 – Basic Microeconomics

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Course Coordinators : Rex Lord V. Ranalan

Email : [email protected]
Student Consultation : by appointment
Mobile Number : 0997 809 0043
Phone Number : (084) 655 9591 Local 116
Date of Effectivity : August 2020
Mode of Delivery : Online Blended Delivery
Time Frame : 54 Hours
Student Workload : Expected Self-Directed Learning
Requisites : None
Credit : 3-unit Lecture
Attendance Requirements : Minimum of 95% attendance in all scheduled
virtual or face to face sessions and the Learning
Management System (LMS)

Course Outline Policy

Areas of Concern Details

Contact and Non- This 3-unit course self-instructional manual is designed

contact Hours for blended learning mode of instructional delivery with
scheduled face to face or virtual sessions. The
expected number of hours will be 54, including the face
to face or virtual meetings. A Learning Management
System (LMS), Quipper, will be used to facilitate your
learning. Other sessions may also be conducted
through online communication channels such as
Facebook, Messenger, WhatsApp, Viber, E-mail, Line,
Zoom, Skype, or any other similar applications. You
may also contact the course coordinator through a
mobile number or telephone.

Assessment Task Submission of assessment tasks shall be on the 3rd, 5th,

Submission 7th, and 9th week of the term. The assessment paper
shall be attached with a cover page indicating the title of
the assessment task (if the task is a performance), the
name of the course coordinator, date of submission,
and the name of the student. The document should be
e-mailed to the course coordinator. It is also expected
that you already paid your tuition and other fees before
the submission of the assessment task.

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

If the assessment task is done in real-time through the

features in the Learning Management System, the
schedule shall be arranged ahead of time by the course
coordinator.

Turnitin submission To ensure honesty and authenticity, all assessment

tasks are required to be submitted through Turnitin with
(if necessary)
a maximum similarity index of 30% allowed. This means
that if your paper goes beyond 30%, the students will
either opt to redo her/his paper or explain in writing
addressed to the course coordinator the reasons for the
similarity. Also, if the document has reached a more
than 30% similarity index, the student may be called for
disciplinary action following the University’s OPM on
Intellectual and Academic Honesty.

Please note that academic dishonesty such as cheating

and commissioning other students or people to
complete the task for you have severe punishments
(reprimand, warning, expulsion).

Penalties for Late The score for an assessment item submitted after the
Assignments / designated time on the due date, without an approved
Assessments extension of time, will be reduced by 5% of the possible
maximum score for that assessment item for each day
that the assessment item is late.

However, if the late submission of the assessment

paper has a valid reason, a letter of explanation should
be submitted and approved by the course coordinator. If
necessary, you will also be required to present/attach
pieces of evidence.

Return of Assignments / Assessment tasks will be returned to you within two (2)
Assessments weeks after the submission. This will be returned
through e-mail or via the Quipper.

For group assessment tasks, the course coordinator will

require some or few of the students for online or virtual
sessions to ask clarificatory questions to validate the
originality of the assessment task submitted and to
ensure that all the group members are involved.

Assignment You should request in writing addressed to the course

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Resubmission coordinator your intention to resubmit an assessment

task. The resubmission is premised on the student’s
failure to comply with the similarity index and other
reasonable grounds such as academic literacy three (3)
standards or other reasonable circumstances, e.g.,
illness, accident financial constraints.

Re-marking of You should request in writing addressed to the course

Assessment Papers and coordinator your intention to appeal or contest the score
Appeal given to an assessment task. The letter should explicitly
explain the reasons/points to contest the grade. The
course coordinator shall communicate with you on the
approval and disapproval of the request.

If disapproved by the course coordinator, you can

elevate your case to the program head or the dean with
the original letter of request. The final decision will come
from the dean of the college.

Grading System Your grades will be based on the following:

Examinations
First to Third 30%
Final 30% = 60%
Class Participations
Quizzes 10%
Assignments 5%
Research/Requirements 15%
Oral Recitation 10% = 40%
Total = 100%

Submission of the final grades shall follow the usual

University system and procedures.

Preferred Referencing Use the general practice of the APA 6th Edition.
Style

Student Communication You are required to have an e-mail account, which is a

requirement to access the LMS portal. Then, the course
coordinator shall enroll the students to have access to
the materials and resources of the course.

You may call or send SMS to your course coordinator

through his/her phone number. Online communication

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

channels, such as those stated above, may be used.

You can also meet the course coordinator in person

through the scheduled face to face sessions to raise
your issues and concerns.

Contact Details of the Dr. Gina Fe G. Israel

Dean Dean of College
E-mail: [email protected]
Phone: 0915 832 5092 / 0909 994 2314

Marck Lester L. Navales, CPA, MBA

Assistant Dean
E-mail: [email protected]
Phone: 0975 0517 851
Contact Details of the Prof. Russel J. Aporbo, MAEL
Program Head Email: [email protected]
Mobile: 0950 772 6196
Students with Special Students with special needs shall communicate with the
Needs course coordinator about the nature of his or her special
needs. Depending on the nature of the need, the course
coordinator with the approval of the program head may
provide alternative assessment tasks or extension of
the deadline for submission of assessment tasks.
However, the alternative assessment tasks should still
be in the service of achieving the desired course
learning outcomes.

Library Contact Details Clarissa R. Donayre, MSLS

E-mail: [email protected]
Phone: 0927 395 1639
Well-being Welfare Rochen D. Yntig, RGC
Support Help Desk GSTC Head
Contact Details E-mail: [email protected]
Phone: 0932 771 7219

Mersun Faith A. Delco, RPm

Psychometrician
E-mail: [email protected]
Phone: 0927 608 6037

Alfred Joshua M. Navarro

Facilitator
E-mail: [email protected]
Phone: 0977 341 6064

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Course Information – See or download the course syllabus in Quipper

CC’s Voice : Hello there! Good day! Welcome to this course BE 121: Basic
Microeconomics. Prior to your economics subject way back junior
high it was presented that economics is mainly divided into two
branches, microeconomics and macroeconomics. This course will
focus on microeconomics and will mainly deal personal decision
making (whether as a consumer or as a firm). Hence, this course will
discuss like consumer behavior, production theory, and market
structures.

CO : As a student of this course you are expected to explain and analyze

the basic concepts of microeconomics and to integrate
microeconomics concepts in various real life situations, such as:
personal resource allocation decisions, pricing mechanism in
obtaining maximum profit and output decision making.

Let us begin!

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

BIG PICTURE A

Week 1-3: Unit Learning Outcomes (ULO): At the end of the unit, you are
expected to:
a. Discuss the basic concept of economics and present the features of
microeconomics; and
b. Describe, quantify and analyze Demand and Supply.

Big Picture in Focus: ULOa. Discuss the basic concept of economics and
present the features of microeconomics.

Metalanguage

The following are terms to be remembered as we go through in studying this

unit. Please refer to these definitions as supplement in case you will encounter
difficulty in understanding the basic concepts of economics.

1. Allocation is an act of apportioning especially economic resources to be

used in the production activity.
2. Capital refers to the fixed capital (like machines and equipment, not
money) that facilitates the production process of the firm.
3. Entrepreneurial Skill refers to the ability in combining other factors of
production (land, labor, and capital)

4. For Whom to Produce is an economic question which determines the

target market of the product.
5. How Much to Produce is an economic question which determines the
volume or units of products to be produced. This can be aided with the use
of aggregation method (which produces the entire population, common in
agricultural sector) or market segmentation method (which produces the
market base on demographic profile, common in manufacturing sector).
6. How to Produce is an economic question which answers the method or
technique in producing the products. It could be labor-intensive (heavily
uses manpower), capital-intensive (heavily uses fixed capital), and
intermediate production (combination of labor and capital with closer or
equal to units of proportion).

7. Labor refers to the human-effort exerted by an individual in making the

product. It is termed also as human resource.
8. Land as an economic resource covers not just its physical attribution but
all things above and below on it (as long as it is naturally made), like
plants, trees, mines, and animals.

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

9. What Price to Produce is an economic question which determines the

price to be charged on the product. Basically it is determined under the
influence of demand and supply in the market.
10. What to Produce is an economic question which answers the kind of
products to be produced (if it is basic or primary, luxury, economic, final, or
intermediate goods). It should be noted that the resources used in
producing the said goods should be allocated greatly of what is necessary
or important in the society.

Essential Knowledge
This unit will highlight some basic concept of economics and you will learn
some features of microeconomics. It is imperative that you should have first
information about what is economics before we proceed to the core concepts of
microeconomics. These concepts will serve as a foundation as we proceed to the
succeeding topics in this module. Please note that you are not limited to exclusively
refer to these resources. Thus, you are expected to utilize other books, research
articles and other resources that are available in the university’s library e.g. ebrary,
search.proquest.com etc., and even online tutorial websites.

1. Economics is a social science that deals with the proper allocation of scarce
resources in order to satisfy human wants and needs. It has two branches:
Microeconomics which deals with the individual decision makings (i.e. Pricing
strategy of a firm, Production decision of a firm or the Production decision of an
industry) and Macroeconomics which deals with the aggregative concepts (i.e.,
national income, unemployment, inflation, etc.).

2. Economics is also concerned with the Basic Economic Activities conducted in

the economy. These activities are: Production which refers to the process of
converting factors of production (inputs of production) into a product (output).
These factors of production (also termed as economic resources) are the land,
labor, capital, and entrepreneurial skills and ability. The said outputs could be in a
form of goods or services. Production also addresses the Basic Economic
Questions (What to Produce, How to produce, How much to produce, For
whom to produce and at What price to produce); Distribution which concerns
on the transfer of a product from one location to another (which involves the
method of conventional like kalesa and push carts and non-conventional like
airplanes, cargoes, ships; Exchange which involves monetary or non-monetized
(barter system or countertrade) payments in transferring or exchanging the
product; and Consumption which is the last form of economic activity where the
product is now at hand on the consumer or buyer.

3. Microeconomics is concerned on the flow of products from producers to

consumers and flow of resources from consumers to producers. The said
mechanism leads to the concept of Circular Flow of Economic Activity which
depicts the interaction of the players in the economy (the consumers or buyers
and producers or sellers) and how they answer the basic economic questions
and they conduct the basic economic activity. The model explains that production

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

during the year is converted into factor income (implying income of the owners of
factors of production in terms of rent, interest, profit and wages) during the year,
and factor income during the year is converted into expenditure (on goods and
services during the year). Below is an illustration depicting the model:

Figure 1. Circular Flow of Economic Activity

Note that the following model holds the following assumptions:

a. There are only two sectors available in the economy: the Households and
Business Firms;
b. Households extends factor of production (land, labor, entrepreneurship, & capital)
to business firms and in return receives factor payments (rent, wage, interest,
profit) which becomes their income. The said income is then assumed that are
spent wholly and without leakages (like savings, tax deduction, spending
abroad); and
c. Business firms used the factors of production efficiently and effectively and
provide products for household’s consumption.

Base on the illustrated model we can observe the following1:

a. Total production of goods and services by firms = Total consumption of goods and
serves by the household sector.
b. Factor payments by firms = Factor incomes of the household sector
c. Consumption expenditure of household sector = Income of household sector
d. Real flows of production and consumption of firms and households = Money flows
of income and expenditure of firms and households

4. Economic System is a mechanism in a country that deals with the basic

economic activities and designed primarily to address the basic economic
questions. It has its type namely: Traditional Economy whose economic

1
http://www.transtutors.com/homework-help/micro-economics/economic-models/circular-flow-
diagram/

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

decisions are made with great influence in the past. Command Economy where
the decisions are at the hand of the government. The factors of production and
distribution are owned and managed by the state. Market Economy where
buyers and sellers decisions prevail. It is an economic system where decision
making is based on the consumers and sellers. also called as “free enterprise
system”. And Mixed Economy which combines some of the characteristics of
traditional, command, and market.

5. Features of Microeconomics
As mentioned earlier, microeconomics deals with individual decision making.
Moreover, it covers the following:
a. Price Theory
It is explained under circular flow model how resources and products are
traded in the market. The system of determining the price of the resource (how much
resources owner can get through factor payments) and price of products (how sellers
charged their commodities) is the focus of microeconomics. That is why it is termed
as price theory because microeconomics analyzes the price determination where
consumer maximizes its utility and producers their profit. This aspect will be
discussed under market equilibrium, consumer behavior and market structure
concepts.
b. Partial Equilibrium
Microeconomics is prone into using various assumptions (i.e cteris paribus) in
order to analyze the impact of a particular factor to a single unit of analyses. This is
what partial equilibrium is about. It is an analysis on equilibrium position of a
particular individual economic unit (like consumer, producer or market). It isolates the
analysis on a particular economic unit by letting other factors as constant. This
aspect will be dealt under demand, supply, production, and cost concepts.
c. Welfare Economics
Microeconomics also focuses on the welfare of its agents. It evaluates the
efficiency of resources in order to come up a maximum output that can address the
needs and wants of the consumers. Likewise it also ensures the relative desirability
on the decision of economic agents (like if it is conducive for a firm to charge on a
predetermined price) that could benefit other agents (like the consumers or
competitors).

Self Help: You can also refer to the sources below to help you further
understand the lesson:

Avila-Bato, Ma.J., et al. (2015). Microeconomics simplified. Mandaluyong City:

National Book Store
Dinio, R. et al. (2017). Introductory microeconomics. Quezon City: Rex Book Store,
Inc.
Greenlaw, S. & Taylor, T. (2017). Principles of microeconomics. Texas, U.S.A.:
OpenStax - Rice University.

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Nicholson, W., Snyder, C., & Stewart, R. (2015). Microeconomic theory: basic
principles and extensions. Hampshire, United Kingdom: Cengage
Learning EMEA.
http://www.transtutors.com/homework-help/micro-economics/economic-
models/circular-flow- diagram/

Let’s Check

Let us try the following activities to check your understanding in this unit.

Activity 1. Identification. In the space provided, write the term/s being asked in the
following statements. (One point each)

1. Economic system where the basic economic activities are

conducted base on the ancestors way of living.
2. Method of production which uses more labor than machines.
3. Economic question which considers the methods and
techniques in the production process
4. Also termed as Free Enterprise System.
5. Final users of the produced goods and services for the
satisfaction of their needs and wants.

Activity 2. True or False. In the space provided, write T if the given statement is
true and F if false. (One point each).
1. Mixed economic system sometimes referred to as Free Enterprise System.
2. Methods in production like capital intensive and labor intensive answer the
economic question: “How to produce?”
3. Salary is a factor of payment for labor on daily basis.
4. Circular flow of economic activity is a mechanism which answers the basic
economic questions and performs the basic economic activities.
5. Microeconomics studies the decision making of the government.

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Let’s Analyze

Let us try the following activity to know how deep your understanding on the
topics in this unit.

Diagramming. Construct a hypothetical Two-Sector Circular Flow Model (with

proper labeling) using the following information (16 points):

“An economist might say that universities “produce” education, using faculty
members and students as inputs. According to this line of reasoning, education is then
“consumed” by households.”
Source: Bingham, Robert C., Grant Cyril J., Walstad, Willam B. Study Guide to Accompany: Microeconomics

Follow-Up Questions:
1. What are the relevant markets in this model? (Two points)
2. What is being bought and sold in each direction? (Two points)

N.B. Use the remaining blank portion of this page in illustrating the model.

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

In a Nutshell
In this part you are going to jot down what you have learned in this unit. The
said statement of yours could be in a form of concluding statements, arguments, or
perspective you have drawn from this lesson. The first two items is done for you.

1. Economics is relevant in our lives. From simple household activities up to

societal engagement, economics is involved. Economics also tell us on how to
economize by having a good and probable decision making, setting trade-offs,
choice, and dealing with scarcity condition for us to survive in this world.
2. The focus of microeconomics is multidimensional. It does not focus only on
personal decision but to the extent on its outcome (welfare aspect).

Now it’s your turn!

3.

4.

5.

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Q&A List

You are free to list down all the emerging questions or issues in the provided
spaces below. These questions or concerns may also be raised in the LMS or other
modes. You may answer these questions on your own after clarification. The Q&A
portion helps in the review of concepts and essential knowledge.

Questions/Issues Answers

1.

2.

3.

4.

5.

Keywords Index

Aggregation Method Entrepreneurial Skills Microeconomics

Allocation Exchange Mixed Economy
Assumption Factor of Production Need/s
Basic Economic
Factor Payments Non-Conventional Method
Questions
Business Firms For Whom to Produce Opportunity Cost
Capital Households Output/s
Circular Flow Model How Much to Produce Production
Production Possibilities
Command Economy How to Produce
Frontier
Consumption Input/s Scarcity
Conventional Method Labor Traditional Economy
Distribution Land Want/s
Economic Activity Macroeconomics What Price to Produce
Economic System Market Economy What to Produce
Economics Market Segmentation

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Big Picture in Focus: ULOb. Describe, quantify and analyze Demand,

Supply.

Metalanguage
The following are terms to be remembered as we go through in studying this
unit. Please refer to these definitions as supplement in case you will encounter
difficulty in understanding the concepts of demand, supply, and market equilibrium.
1. Ceteris Paribus is a Latin word which means “other factors as constant”
2. Complement Goods are goods that are held in junk with one another and
are use together like bread and butter, coffee and sugar, or car and
gasoline.
3. Demand Curve is a tool which depicts the inverse relationship of price
and quantity demanded in a graphical form.
4. Demand Function is a tool which quantifies the inverse relationship of
price and quantity demanded in a mathematical form.
5. Demand Schedule is a tool which presents the inverse relationship of
price and quantity demanded in a tabular form.
6. Substitute Goods are goods that are held for exchange with one another
of which still belong to same product line like coke and pepsi,
7. Supply Curve is a tool which depicts the positive relationship of price and
quantity supplied in a graphical form.
8. Supply Function is a tool which quantifies the positive relationship of
price and quantity supplied in a mathematical form.
9. Supply Schedule is a tool which presents the positive relationship of
price and quantity supplied in a tabular form.

Essential Knowledge
Alfred Marshall noted that in a free enterprise system what should prevail in
the market when it comes to the determination of price to produce is the demand
and supply. It is in these tools that both sides of the market (buyer and seller) would
be better-off. In this topic you are going to learn the basics of demand, supply and
market equilibrium. Please note that you are not limited to exclusively refer to these
resources. Thus, you are expected to utilize other books, research articles and other
resources that are available in the university’s library e.g. ebrary,
search.proquest.com etc., and even online tutorial websites.

1. Demand refers to the amount (quantity demanded) of goods and services that
consumers are willing and able to buy at a given price at a particular period of
time. By fixing all other factors except its own price, a relationship between the

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

quantity being demanded and the price of the good is obtained. The said
relationship is inverse which means quantity demanded is negatively related to
price (like ceteris paribus, if price increase quantity demanded decreases
likewise if price decrease quantity demanded increases). In this case the Law of
Demand is applied. Law of Demand is an economic theory which states that:
“Ceteris paribus, if price increase quantity demanded will decrease and when
price decrease quantity demanded will increase”. The said relationship of price
and the level of its quantity demanded can be illustrated using the demand
schedule, demand curve, and demand function. Below is a graph depicting a
hypothetical demand curve where quantity demanded is inversely related to
price.

2. In demand analysis, movement along the demand curve is the term used if
price only affects quantity demanded. But if letting other factors (non-price
determinants) affects quantity demanded then shift of the demand curve is
used. These non-price determinants could be: Income, Number of Population,
Taste and Preferences, Price of Related Goods (Substitute and
Complement) and other factors. The said concepts are illustrated on the figures
below.

15
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
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3. Supply refers to the amount of goods and services that sellers are willing and
able to sell at a given price at a particular period of time. The relationship of price
and the level of its quantity supplied can be illustrated using the supply
schedule, supply curve, and supply function. The said relationship is positive
which indicates that when price increase quantity supplied also increases or
when price decrease quantity supplied also decreases. This kind of relationship
is due to profit motive of the seller and can be verified by the Law of Supply.
The Law of Supply is an economic theory which states that: “Ceteris paribus, if
price increase quantity supplied will also increase and when price decrease
quantity supplied will also decrease”. Below is a graph depicting supply curve.

4. In supply analysis, movement along the supply curve is the term used if price
only affects quantity supplied while shifting of the supply curve is used if non-
price determinants (factors) affect quantity supplied. These non-price
determinants are: Number of sellers, Expectation of Future Price,
Technology, Price of Inputs and other factors. The illustration between
movement along the supply curve and shifting of the curve is presented on the
graph below.

16
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
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Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Similar to demand analysis, the impact of said non-price factors to quantity

supplied varies which lead to the shifting of its curve either to the left or to the
right. Again bear in mind that when a non-price factor affects quantity supplied to
increase then the supply curve will shift to the right but if a non-price factor
affects quantity supplied to decrease then the supply curve will shift to the left.

Self-Help: You can also refer to the sources below to help you further
understand the lesson

Avila-Bato, Ma.J., et al. (2015). Microeconomics simplified. Mandaluyong City:

National Book Store
Curtis, D. & Irvine, I. (2017). Principles of microeconomics. Retrieved from:
http://creativecommons.org/licenses/by-nc-sa/3.0/
Dinio, R. et al. (2017). Introductory microeconomics. Quezon City: Rex Book Store,
Inc.
Shoko, H. (2015). Simplified principles of microeconomics. Retrieved from:
bookboon.com

Let’s Check
Let us try the following activities to check your understanding in this unit.

Activity 1. Matching Type. Match the items indicated in Column A to the choices in
Column B. Write your answers on the space provided before each item. Strictly NO
Erasures. (One point each).

Column A Column B
1. Supply shifts to the right a. Affected by Non-Price
Determinants of Demand
2. Affected by non-price factor b. Affected by Non-Price
Determinants of Supply
3. Only price affects QD and QS c. QS Decreases
4. Buyers decision d. QD Decreases
5. Demand shifts to the left e. Movement Along the Curve
6. Sellers/Producers decision f. Demand
7. Price Decrease g. Increase/Decrease in Price
8. Movement Along the Supply Curve h. Quantity Supplied
9. Movement Along the Demand Curve i. Shifting of the Curve
10. Price Increase j. Quantity Demanded
k. Supply

Activity 2. True or False. In the space provided, write T if the given statement is true
and F if false. (One point each).
1. Quantity demanded is zero when price drops to zero.
2. Supply curve is upward sloping due to profit motive of firms.
3. Quantity supplied may decline even when price increases.

17
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
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Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

4. If income increases the quantity demanded move upward along the

demand curve.
5. Quantity demanded is equal to quantity supplied when price is zero.

Let’s Analyze

Let us try the following activity to know how deep your understanding about
the topics of this unit.

Demand and Supply Analysis. Determine if what would happen to Demand and
Supply given the following conditions. Indicate ↑ if Quantity Demand or Supply
Increases, or ↓ if Quantity Demand or Supply Decreases. Indicate also if where the
Demand or Supply Curve shifts if it is to the right or left. (One point each)

Conditions Demand will:

Holding other factors as constant, if: Increase or Decrease? Shift to?
1. Population level increase,
2. Price of its substitute good decrease,
3. Price of its complement good increase,
4. Income increase,
5. Consumer expects that price will increase,

Conditions Supply will:

Holding other factors as constant, if: Increase or Decrease? Shift to?
1. Number of sellers increase,
2. Sellers expects price to decreases,
3. Weather condition is good,
4. Price of inputs increase,
5. Technology it adopts is advance,

18
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
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Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

In a Nutshell
In this part you are going to jot down what you have learned in this unit.
The said statement of yours could be in a form of concluding statements,
arguments, or perspective you have drawn from this lesson. The first one is
done for you.

1. Demand and supply are very useful when it comes to decision making in
any market operations (goods and services market, labor market, money
market, etc.). It illustrates both behavior of consumer and producer
respectively. Demand and supply adjusts depending on the factors
influences their behavior.

Now it’s your turn!

2.

3.

4.

5.

19
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Q&A List
In this section you are going to list what boggles you in this unit. You may
indicate your questions but noting you have to indicate the answers after your
question is being raised and clarified. You can write your questions below.

Questions/Issues Answers
1.

2.

3.

4.

5.

Keywords Index

Ceteris Paribus Law of Supply Shortage

Complement
Market Equilibrium Substitute Goods
Goods
Movement Along the Demand
Demand Supply
Curve
Movement Along the Supply
Demand Curve Supply Curve
Curve
Demand Function Non-Price Determinants Supply Function
Demand Schedule Price Ceiling Supply Schedule
Equilibrium Price Price Flooring Surplus
Equilibrium
Shifting of Demand Curve
Quantity
Law of Demand Shifting of Supply Curve

20
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
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Mabini Street, Tagum City
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Telefax: (084)655-9591 Local 116

BIG PICTURE B

Week 4-5: Unit Learning Outcomes (ULO): At the end of the unit, you are
expected to:
a. Present market equilibrium concept and describe its adjustment mechanism;
and
b. Discuss, quantify and analyze elasticity.

Big Picture in Focus: ULOa. Present market equilibrium concept and

describe its adjustment mechanism.

essential terms of the curriculum

Metalanguage

The following are terms to be remembered as we go through in studying

this unit. Please refer to these definitions as supplement in case you will
encounter difficulty in understanding the concepts of market equilibrium.
1. Equilibrium Price the amount impose/charged by the seller to the
product that consumer is willing to accept.
2. Equilibrium Quantity the amount of product that seller is willing to
sell and the consumer is willing to buy.

Essential Knowledge

Alfred Marshall noted that in a free enterprise system what should prevail in
the market when it comes to the determination of price to produce is the demand and
supply. It is in these tools that both sides of the market (buyer and seller) would be
better-off. In this topic you are going to learn market equilibrium. Please note that
you are not limited to exclusively refer to these resources. Thus, you are expected to
utilize other books, research articles and other resources that are available in the
university’s library e.g. ebrary, search.proquest.com etc., and even online tutorial
websites.

1. The interaction of demand and supply (as discussed previous unit) will determine
market equilibrium. Market Equilibrium is a condition which implies a balance
between two opposing forces, a situation in which quantity demanded and
quantity supplied are equal. In this case market clearing price is achieved where
market interaction between buyers and sellers commences. In some cases the
price that is determined is not equilibrium resulting to a disequilibrium condition of
the market where shortages and surplus happens (later we will discuss the
concepts of price control).
Below is a graphical presentation of market equilibrium depicting its two
outcomes: Equilibrium Price and equilibrium Quantity.

21
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
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Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

2. Equilibrium price and equilibrium quantity adjusts depending on the shift of the
demand or supply curve. In analyzing its adjustments, three cases are
considered: (a) The demand curve is constant while the supply curve shifts
(either to the left or to the right), (b) The supply curve is constant while the
demand curve shits (either to the left or to the right), and (c) Both curves shifts
simultaneously. Below is a summary of adjustment to equilibrium price and
quantity base on the aforementioned cases.

Table 1
Equilibrium Price and Quantity

3. Market equilibrium can also be analyze mathematically by using the demand and
supply function. Approximately, if not exact, it determines the value of the
equilibrium price and quantity. The following is an example on how to determine
equilibrium price and quantity mathematically.

22
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

4. Price Control is the specification by the government of minimum or maximum

prices for certain goods and services, when the government considers it
disadvantageous to the producer or consumer. This could be in a form of Price
Ceiling or Price Flooring.
Price Ceiling is the legal maximum price imposed by the government. It is
set below the equilibrium price which benefits consumer but creates shortage.
Price Flooring is the legal minimum price imposed by the government on
certain goods and services. It is set higher than the equilibrium price which
benefits sellers but creates surplus. Below are graphical illustrations depicting the
mechanism of price controls.

23
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Self Help: You can also refer to the sources below to help you further
understand the lesson:

Avila-Bato, Ma.J., et al. (2015). Microeconomics simplified. Mandaluyong City:

National Book Store
Curtis, D. & Irvine, I. (2017). Principles of microeconomics. Retrieved from:
http://creativecommons.org/licenses/by-nc-sa/3.0/
Dinio, R. et al. (2017). Introductory microeconomics. Quezon City: Rex Book Store,
Inc.
Greenlaw, S. & Taylor, T. (2017). Principles of microeconomics. Texas, U.S.A.:
OpenStax - Rice University.
Nicholson, W., Snyder, C., & Stewart, R. (2015). Microeconomic theory: basic
principles and extensions. Hampshire, United Kingdom: Cengage Learning
EMEA.

Let’s Check

Let us try the following activities to check your understanding in this unit.

Activity 1. Matching Type. Match the items indicated in Column A to the choices in
Column B. Write your answers on the space provided before each item. Strictly NO
Erasures. (One point each).

Column A Column B
1. Problem of Surplus a. Equilibrium
2. Problem of Shortage b. Equilibrium Quantity
3. QS is greater than QD c. Price Ceiling
4. Demand equals Supply d. Price Flooring
5. QD is greater than QS e. Equilibrium Price
f. Market Equilibrium

Activity 2. True or False. In the space provided, write T if the given statement is
true and F if false. (One point each).
1. Price control at some point creates equilibrium.
2. Market equilibrium is still attained even when there is no
adjustment in the level of supply.
3. Market equilibrium is still attained even when there is no
adjustment in the level of demand.
4. Price ceiling is only used when there is surplus of goods.
5. Price flooring is only used when there is shortage of goods.

24
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Let’s Analyze

Let us try the following activity to know how deep your understanding on the
topics on this unit.

Activity 1. Problem Solving. Solve for what is asked. Indicate your solution legibly.
Improper solution will not be credited. Round off your answers to the nearest two
decimal place. Box your final answer.

Consider the following hypothetical demand and supply function of wine (in
bottles) per day.
𝟒
QD = 200 – P
𝟓

𝟐
QS = P – 20
𝟑

a. What is the equilibrium price and quantity? (10 pts.)

b. Since its Valentines Month, the government adopts price ceiling for wine
which tend to reduce its price by 10%. How much is the level of shortage?
(5 pts.)

N.B. Use the remaining blank portion of this page to indicate your solution.

25
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Activity 2. Graphical Illustration on Market Equilibrium. Illustrate graphically if

what would happen to equilibrium price and quantity given the following hypothetical
conditions. (10 points each).

Ceteris paribus:
1. Both number of buyers and sellers increase.
2. Price of complement good increases while the cost of inputs decrease.
3. Income of consumers decease while producers adopts an advance technology in
its production.
N.B. Use the remaining blank portion of this page in illustrating the graph.

26
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

In a Nutshell

In this part you are going to jot down what you have learned in this unit. The
said statement of yours could be in a form of concluding statements, arguments, or
perspective you have drawn from this lesson. The first one is done for you.

1. It is always viewed that equilibrium is only attained under the influence of the two
tools. It may makes us wonder how equilibrium is attained in real life activities but
note, surprisingly, every market transactions that we engage rationally where we
are better off explains the attainment of equilibrium.

Now it’s your turn!

2.

3.

4.

5.

27
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Q&A List

You are free to list down all the emerging questions or issues in the provided
spaces below. These questions or concerns may also be raised in the LMS or other
modes. You may answer these questions on your own after clarification. The Q&A
portion helps in the review of concepts and essential knowledge.

Questions/Issues Answers

1.

2.

3.

4.

5.

Keywords Index

Equilibrium Price Price Ceiling Shortage

Equilibrium Quantity Price Control Surplus
Market Equilibrium Price Flooring

28
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Big Picture in Focus: ULOb. Discuss, quantify and analyze elasticity.

Metalanguage

The essential terms that will be used in this section are defined below for our
collective understanding.

1. ε is a Greek symbol Epsilon where in this topic means Elasticity

2. ∞ is a mathematical operation where in this topic means Undetermined
3. Elasticity Coefficient refers to the derived value of the elasticity.
4. Inferior Good refers to good that when income increase the quantity
demanded of the said good decrease. This good is common on necessity
items.
5. Normal Goods refers to good that when income increase the quantity
demanded of the said good also increase. This good is common on luxury
items.

Essential Knowledge

In the previous unit you have learned that the determination of price is
basically under the influence of demand and supply. You also learned that the said
price adjust depending on the adjustment of the demand and supply which then
reflects the level of quantity demanded and quantity supplied. However it not
mentioned if how much would be the degree of change in quantity demanded or
supplied if ever price adjusts on a particular level. The said mechanism, the degree
of change, can be explained by this unit’s topic which is elasticity. Please note that
you are not limited to exclusively refer to these resources. Thus, you are expected to
utilize other books, research articles and other resources that are available in the
university’s library e.g. ebrary, search.proquest.com etc., and even online tutorial
websites.

1. Elasticity refers to the degree of sensitivity of demand and supply for every
change in price or non-price factor. It measures the responsiveness of a change
in quantity demanded/supplied for every change in its determinants (price or non-
price). It is usually computed using the formula:
𝑄2−𝑄1 𝑄2−𝑄1
𝑄1 (𝑄1+𝑄2)/2
ε= 𝑃2−𝑃1 or ε= 𝑃2−𝑃1
𝑃1 (𝑃1+𝑃2)/2
(Point Elasticity Method) (Arc Elasticity Method)

where : ε is Elasticity
P is Price
Q is Quantity (Demanded/Supplied)
Note that in the succeeding concepts of this unit, we are going to use Arc Elasticity Method.

29
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
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Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

2. There are two types of elasticity, Demand Elasticity and Supply Elasticity.
Demand elasticity measures the degree of responsiveness of quantity demanded
for every change in price or non-price factor such as income and price of related
goods (substitute and complement). Supply elasticity measures the degree of
responsiveness of quantity supplied for every change in price or non-price factor
such as price of inputs and price of competing goods. The said types of elasticity
will be discussed further in the next item. As of this point let me note that for
every value of elasticity derived determines a corresponding level of sensitivity or
responsiveness. It is termed as degree of elasticity which are as follows:

Table 2
Degree of Elasticity
If the value of the elasticity Then the degree of its elasticity
coefficient is: is:
ε>1 Elastic
ε<1 Inelastic
ε=1 Unit Elastic / Unitary
ε=∞ Perfectly Elastic
ε=0 Perfectly Inelastic
Note that all elasticity coefficient value should be positive. Negative signs are omitted by
taking its absolute value.

The said degree of elasticity can also be illustrated graphically. Below is a

graphical presentation of demand and supply curves under different degrees of
elasticity.

3. As mentioned in the preceding item, there are different forms of demand

elasticity. In this unit we will only discuss price elasticity of demand, income
elasticity, and cross-price elasticity. Price elasticity of demand measures the
degree of responsiveness of quantity demanded for every change in price. Since
price and quantity demanded are inversely related then the value of its elasticity
is negative. Since we have note earlier that there shall be no negative elasticity

30
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
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coefficient then we are going to take its absolute value. Consider the following
example:

4. Income elasticity of demand measures the degree of responsiveness of

quantity demanded for every change in income. The value of income elasticity
coefficient could be positive or negative which also determines the type of good it
corresponds. If the coefficient is positive then the goods are normal and if it is
negative then the goods are inferior. Note that before you take the absolute value
of the coefficient (if necessary) determine first the type of good it corresponds.
Consider the example below:

5. Cross-Price elasticity of demand measures the degree of responsiveness of

quantity demanded for every change in price of its related good. The value of
cross-price elasticity coefficient could be positive or negative which also
determines the type of good it corresponds. If the coefficient is positive then the
goods are substitute and if it is negative then the goods are complement. Similar
to income elasticity, before you take the absolute value of the coefficient (if
necessary) determine first the type of good it corresponds. Consider the example
below:

31
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
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Mabini Street, Tagum City
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Telefax: (084)655-9591 Local 116

6. Elasticity of supply measures the degree of responsiveness of quantity supplied

for every change in its determinants. In this unit we will only consider price as its
factor thus we have Price Elasticity of Supply. Price elasticity of supply measures
the degree of responsiveness of quantity supplied for every change in price of a
particular product. We can only derive a positive elasticity coefficient in this type
of elasticity since price and quantity supplied are positively related. Consider the
example below:

32
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
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Mabini Street, Tagum City
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Telefax: (084)655-9591 Local 116

Self Help: You can also refer to the sources below to help you further
understand the lesson:

Avila-Bato, Ma.J., et al. (2015). Microeconomics simplified. Mandaluyong City:

National Book Store
Dinio, R. et al. (2017). Introductory microeconomics. Quezon City: Rex Book Store,
Inc.
Greenlaw, S. & Taylor, T. (2017). Principles of microeconomics. Texas, U.S.A.:
OpenStax - Rice University.
Lotterman, E. (2015). Real World Economics: Rising egg prices provide lesson in
markets’ elasticity. Retrieved from:
https://www.twincities.com/2015/06/13/real- world-economics-rising-egg-
prices-provide-lesson-in-markets-elasticity/
Nicholson, W., Snyder, C., & Stewart, R. (2015). Microeconomic theory: basic
principles and extensions. Hampshire, United Kingdom: Cengage Learning
EMEA.

Let’s Check
Let us try the following activities to check your understanding in this unit.

Activity 1. Multiple Choice. Choose the letter of the correct answer. Encircle the
letter of your choice. (One point each)

1. A negative income elasticity of demand means that when income increases, the
amount of the commodity purchased:
a. Decrease
b. Remain Constant
c. Be zero
d. Increase
2. If the amount of a good purchased remains the same when the price of another
commodity changes, the cross elasticity of demand between them is:
a. Negative
b. Positive
c. Zero
d. One
3. A decrease in the price of a commodity when demand is elastic causes the
quantity demanded of the consumer to:
a. Increase
b. Decrease
c. Remain constant

33
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
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Telefax: (084)655-9591 Local 116

d. Be zero
4. The demand for health care is relatively inelastic because a one percent change
in price results in:
a. More than one percent decrease in quantity demanded.
b. No change in quantity demanded.
c. Less than a one percent decrease in quantity demanded.
d. A one percent decrease in the quantity demanded.
5. If the supply for a product is perfectly elastic, what happens to price when
demand increases?
a. It increases
b. It decreases
c. It does not change
d. It depends on the magnitude of the demand change.

Activity 2. True or False. In the space provided, write T if the given statement is
true and F if false. (One point each).
1. If the value of the elasticity coefficient is zero, then the type of elasticity it
corresponds is perfect inelastic.
2. If the value of the income elasticity coefficient is zero, then the type of good
it corresponds is inferior.
3. If the value of the cross-price elasticity coefficient is zero, then the type of
good it corresponds is substitute.
4. The good is said to be elastic if the percentage change in price is greater
than the percentage change in quantity demanded.
5. Elasticity of supply refers to the percentage change in quantity supplied
over the percentage change in price.
6. Elasticity refers to the responsiveness to a change in demand for every
change in income.
7. If the value of the elasticity coefficient is -1.2 then the type of elasticity it
corresponds is inelastic.
8. Normal is the type of good if the income elasticity coefficient is equal to
one.
9. The good is said to be normal if the value is of the income elasticity is
positive and inelastic.
10. The good is said to be complement if the value is of the cross-price
elasticity is negative and elastic.

34
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Let’s Analyze
Let us try the following activity to know how deep your understanding about
the topics of this unit.

Problem Solving. Solve for what is asked and show your solution legibly. Improper
solutions will not be credited.

1. The income of Mr. Y increases by P1,000.00 from P500.00. The change of its
income leads also to an increase of its demand for Product X from 20 units by 25
units. Compute for its income elasticity of demand and determine the type of its
good and degree of elasticity. (10 pts.)

2. Suppose there are two goods: A and B. The price of Good A increases from
P40.00 to P55.00, and the quantity demand for Good B declines from 155 units
by 80 units. What is the value of its elasticity coefficient? Determine also the type
of good it corresponds the degree of its elasticity. (10 pts.)

3. Consider the following functions for Good X (pieces) per week:

Demand Function: Qd = 60 – 2P
Supply Function: Qs = 40 + 3P.

where: Equilibrium Price = P4.00

Equilibrium Quantity =52 pieces

a. Base on the demand and supply functions above, from equilibrium price and
quantity, if the price changes to P3.00, what is the value of its price elasticity
of demand? (5 pts.)
b. Referring to the given functions, from equilibrium price and quantity, what is
the value of its price elasticity of supply if the price changes to P6.00? (5
pts.)

35
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

In a Nutshell

In this part you are going to jot down what you have learned in this unit. The
said statement of yours could be in a form of concluding statements, arguments, or
perspective you have drawn from this lesson. The first one is done for you.

1. Elasticity means sensitivity which measures the degree of responsiveness.

Practically, elasticity is used in decision making, say for consumers it helps them
to economize well their resources (like income and even factors of production
they have) if ever there are changes on the factors affecting their resources. For
sellers, elasticity helps them in pricing decision of their products whenever factors
adjust. Elasticity guides also our government in their decisions particularly on Tax
implementation and distribution.

Now it’s your turn!

2.

3.

4.

5.

36
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Q&A List

You are free to list down all the emerging questions or issues in the provided
spaces below. These questions or concerns may also be raised in the LMS or other
modes. You may answer these questions on your own after clarification. The Q&A
portion helps in the review of concepts and essential knowledge.

Questions/Issues Answers

1.

2.

3.

4.

5.

Keywords
Absolute Value Flatter Price Elasticity of Demand
Complement Goods Income Elasticity Price Elasticity of Supply
Cross-Price Elasticity Inelastic Steeper
Demand Elasticity Inferior Goods Substitute Goods
Elastic Normal Goods Supply Elasticity
Elasticity Perfect Elastic Unit Elastic / Unitary
Elasticity Coefficient Perfect Inelastic

37
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

BIG PICTURE C

Week 6-7: Unit Learning Outcomes (ULO): At the end of the unit, you are
expected to:
a. Discuss and analyze Consumer Behavior concepts; and
b. Explain and examine Production Theory.

Big Picture in Focus: ULOa. Discuss and analyze Consumer Behavior

concepts.

Metalanguage

The following are terms to be remembered as we go through in studying this

unit. Please refer to these definitions as supplement in case you will encounter
difficulty in understanding the concepts of consumer behavior.
1. Budget Schedule is a table showing the combination of units of
commodities that can be bought on a given income and the prices of
commodities.
2. Utility Schedule is a table showing the total satisfaction derived for every
units of commodities consumed.

Essential Knowledge
Recall that one of the focus of economics is to satisfy the needs and wants of
individual. The said satisfaction can only be attained if consumers consume
commodities through purchases. In this unit, we will illustrate the concept of
satisfaction together with its measures. Please note that you are not limited to
exclusively refer to these resources. Thus, you are expected to utilize other books,
research articles and other resources that are available in the university’s library e.g.
ebrary, search.proquest.com etc., and even online tutorial websites.

1. Utility Theory
Utility in economics means satisfaction and is measured (in economics
perspective) either in a cardinal or ordinal manner. Cardinal method assigned a
unit value (in terms of utils) of satisfaction for every commodities consumed, say
eating an apple gives you a 100 utils. Ordinal method, on the other hand,
measures satisfaction through ranking of preferred combination of commodities,
say you prefer apple over an orange. Note that in the succeeding discussion we
will use cardinal method.
Utility can be illustrated by a utility function. Utility function illustrates the
relationship between the amount of satisfaction derived for every commodities
consumed. It describes also the pattern of satisfaction towards consumption of
commodities. Mathematically it is expressed as:

38
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U = f(Q)
where: U is the Utility measured in terms of utils; and
Q is the quantity of a commodity consumed.

Base on the above function (and on our experiences), we can say that as the
value of Q increases (which means our consumption of a commodity increase)
the level of satisfaction we derive also increases but at some point only because
when we are full on that commodity we will definitely feel dissatisfied (since too
much is bad) if we still continue to add units of the said commodity. Let say, a
first glass of water (if you are really thirsty) will give you a large utils. If not yet
satisfied, a second glass will give you another large utils but not that large
compared to the first glass. Same on the third, fourth and up to the 10 th glass
(since you are really thirsty) it gives you satisfaction but again not that large
compared to the first and even on the second glass. If you say you are already
enough on the 10th glass but someone pushes you to drink the 11 th glass of
water technically it will feel you upset, not just emotionally but also physically.
Why is this happened? As we have mentioned earlier too much is bad! Well the
utility function says that as the value of units of commodity consumed increases
the level of satisfaction derives also increase but at some point, because when a
person reaches the maximum satisfaction in consuming a particular commodity
an additional unit of it will no longer give him satisfaction instead it will make him
dissatisfied. This mechanism is also supported by the Law of Diminishing
Marginal Utility. The law states that as a consumer consumes more and more
units of specific commodity, utility from successive units diminishes, until no
additional satisfaction is derived. And that makes a consumer dissatisfied. To
illustrate the concept of the said law, consider the following hypothetical schedule
of utility of ice cream, assuming a continuous consumption.

Table 3
Utility Schedule of Ice Cream
Total Utility Marginal
Quantity
(in terms of Utility
(per scoop)
utils) (MU)
1 100 -
2 250 150
3 380 130
4 485 105
5 555 70
6 585 30
7 585 0
8 575 -10
9 525 -50
10 425 -100

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Total Utility, in the table, reflects the total satisfaction derived out of the total
number of a particular commodity consumed while marginal utility shows the
additional satisfaction derived for every additional unit of commodity consumed.
As per observed in the table, it shows the pattern of total utility which is
increasing but up to the 7th scoop of ice cream only. It happens due to the
diminishing rate of the marginal utility wherein the person who consumes the ice
cream is experiencing a declining additional satisfaction for every one additional
scoop of ice cream it takes. The value of marginal utility which is zero implicates
that the person has reached the maximum satisfaction it derives in consuming
ice cream. Beyond the 7th scoop, the person becomes dissatisfied which reflects
a negative value of marginal utility resulting to a declining value of total utility.
Again, the marginal utility determines the pattern of the total utility. It signals the
person whether to get an additional unit of a good or not base on the satisfaction
it derives. Below is a graphical illustration showing the relationship of total utility
and marginal utility.

TU, MU 700
585 585 575
600 555
525
485
500 425
380
400
300 250
Total Utility
200 150 130
100 105 Marginal Utility
70
100 30
0 -10
0 -50
-100 Quantity (per scoop)
1 2 3 4 5 6 7 8 9 10
-100
-200
Figure 13

Total Utility and Marginal Utility

As can be observed in the graph, the diminishing portion of the marginal utility
(one that still lie on the positive quadrant) reflects total utility to increase at a
declining rate. When marginal utility reaches zero the total utility is at its
maximum level. The negative portion of marginal utility indicates that total utility
is declining.

2. Indifference Curve
Indifference curve is a graphical presentation depicting different combinations
of products that yield same level of total satisfaction. Indifference curve also
depicts the condition that once commodities become scare and more valuable
consumer is willing to give up more of its other commodities in exchange to those

40
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scarce and valuable commodities while maintaining same level of total utility.
This is the reason why indifference curve is convex at the origin (see figure
below) and can be explained by the law of diminishing marginal utility. This
means that to maintain overall satisfaction, one only has to give up less of a good
with an increasing marginal utility to be regained by more consumption of another
with decreasing marginal utility. Below is an illustration of indifference curve.

3. Budget Line
Budget Line, also called as consumption possibilities line, is a line which
contains various combinations of two goods that can be purchased on a given
income out of the existing prices of the goods, assuming all income are being
spent. It tracks how much quantities of goods can be bought out of the income a
consumer has. Mathematically, it can be expressed, assuming two goods are
available (Good 1 and Good 2) and with their corresponding prices (P 1 and P2),
in this equation:
B = P1Q1 + P2Q2
where: B is the amount of Budget/Income
P1 is the price of Good 1
Q1 is the number of Quantity of Good 1
P2 is the price of Good 2
Q2 is the number of Quantity of Good 2

41
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The value of zero means that no units of Good 2 can be bought because the
entire budget is spent in buying Good 1. Using the information given, we can then
construct a budget schedule for Good 1 and 2.

Table 4
Budget Schedule
Good 1 Good 2
Combination (number of (number of
units) units)
1 10 0
2 8 4
3 6 8
4 4 12
5 2 16
6 0 20

As per observed, under various combinations (from combination 1 to 6) there

is a trade-off happens on two goods, that is, if a person want to buy more of Good 1
then technically it should compromise some units of Good 2. This happens because
the person is constrained on its budget which is basically fixed. Unless there are
changes on its income (like it increase) or changes in prices of two goods (like both
prices of the goods decreases) then a person can buy more on both goods. The
inverse relationship of the two goods can also be depicted graphically as shown
below.

12
Good 1
10

6
Budget Line
4

0 Good 2
0 4 8 12 16 20
Figure 15

Budget Line

42
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Self-Help: You can also refer to the sources below to help you further
understand the lesson

Avila-Bato, Ma.J., et al. (2015). Microeconomics simplified. Mandaluyong City:

National Book Store
Dinio, R. et al. (2017). Introductory microeconomics. Quezon City: Rex Book Store,
Inc.
Greenlaw, S. & Taylor, T. (2017). Principles of microeconomics. Texas, U.S.A.:
OpenStax - Rice University.
Nicholson, W., Snyder, C., & Stewart, R. (2015). Microeconomic theory: basic
principles and extensions. Hampshire, United Kingdom: Cengage Learning
EMEA.
Shoko, H. (2015). Simplified principles of microeconomics. Retrieved from:
bookboon.com

Let’s Check
Let us try the following activities to check your understanding in this unit.

Activity 1. Multiple Choice. Choose the letter of the correct answer. Encircle the letter
of your choice. (One point each)
1. Which of the following in the concept of Budget Line does NOT hold true?
A. It shows the various combinations of two products that can be purchased out
of the consumer’s income.
B. It shows the trade-off between the two goods purchased out of the given
income.
C. Given a fixed level of income, as the good increases, other good also
increases.
D. It represents the income of the consumer that can bought two goods
(hypothetically) given their respective prices.
2. A value of marginal utility which is zero means:
A. That there is no additional satisfaction if consumer adds a unit of product.
B. Total utility starts to decline if consumer adds a unit of product.
C. Total utility increases as consumer adds a unit of product.
D. Total utility is also zero.
3. Which of the following statements regarding marginal utility function corresponds
TRUE? (Hint: Use the formula of MU)
Statement A: Marginal utility is zero as consumption increases holding total utility
constant
Statement B: Marginal utility declines as total utility and consumption increases.
Statement C: Marginal utility is undetermined if consumption is constant and total
utility increases.
Statement D: Marginal utility declines if total utility declines while consumption is
held constant.
A. A and C
B. A and D
C. B and C

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D. B and D
4. When would Total Utility curve starts to decline?
A. When there is additional unit consumed
B. When Marginal Utility diminishes
C. When Marginal Utility reaches 0
D. When Marginal Utility becomes negative

Activity 2. True or False. In the space provided, write T if the given statement is true
and F if false. (One point each).
1. Marginal Utility increases as individual also increases its level of
consumption.
2. Total Utility increases as consumer consumes less of the commodity.
3. Budget line shows the combination of goods that can be purchased given
its budget and the prices of the said goods.
4. Any combination of two goods in an indifference curve can have different
total utility when one good increase while the other decreases.
5. Marginal Utility decreases as individual also increases its level of
consumption.

Let’s Analyze

Let us try the following activity to know how deep your understanding about
the topics of this unit.

Problem Solving. Solve for what is asked and show your solution legibly. Improper
solutions will not be credited. Use separate sheet for your solution.

1. Consider the following utility schedule and compute for the missing values. (2
pts. each).
TU MU
Q (Unit
(Total (Marginal
Purchased)
Utility) Utility)
0 0 -
1 20 ?
2 ? 30
3 ? 25
4 85 ?
5 ? 5
6 90 ?
7 ? -10
8 ? -20
Suppose the consumer has an income of P350.00. He decided to spend all of its
income by buying two goods: Good A and Good B. The price of Good A is P50.00
and Good B is P100.00. If he buys 5 units of Good A, how much is the Good B? (5
pts.)

44
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Telefax: (084)655-9591 Local 116

In a Nutshell
In this part you are going to jot down what you have learned in this unit. The
said statement of yours could be in a form of concluding statements, arguments, or
perspective you have drawn from this lesson. The first one is done for you.

1. Consumers gain satisfaction the moment they consume a particular commodity.

The said satisfaction is merely determined by the taste and preference towards
the product. Again the said satisfaction can only be obtained if it consumes a
product. The way how consumer maximizes its satisfaction depends on the
budget or income it has and the amount or number of commodities it can
purchase given the said budget.

Now it’s your turn!

2.

3.

4.

5.

45
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Q&A List
In this section you are going to list what boggles you in this unit. You may
indicate your questions but noting you have to indicate the answers after your
question is being raised and clarified. You can write your questions below.

Questions/Issues Answers
1.

2.

3.

4.

5.

Keywords Index

Budget Line Marginal Utility Utility Function

Budget Schedule Ordinal Method Utility Schedule
Cardinal Method Quantity Utils
Indifference Curve Total Utility
Law of Diminishing Marginal
Utility Utility

46
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
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Big Picture in Focus: ULOb. Explain and examine Production Theory.

Metalanguage

Please proceed to Essential Knowledge part since this unit introduces topic
where descriptions or definitions of essential terms are also given.

Essential Knowledge
In the previous unit you have learned consumer behavior. Consumers buy for
their own satisfaction. However, said commodities cannot be bought if firms have no
incentive to produce (profit motives). The link of consumer satisfaction and the ability
of the firms to produce are already illustrated under the circular flow model. But in
this unit, we will discuss the concept of production in detail. Please note that you are
not limited to exclusively refer to these resources. Thus, you are expected to utilize
other books, research articles and other resources that are available in the
university’s library e.g. ebrary, search.proquest.com etc., and even online tutorial
websites.

1. Production Analysis
Production is an economic activity that converts inputs into a particular or
various outputs. The said inputs are the factors of production and the outputs could
be goods or services. The relationship of the said inputs and outputs can be
expressed in to a production function. Production function is a mathematical function
showing the relationship between quantities of various inputs used an the maximum
output that can be produced with those inputs per unit of time. Below is an example
of a general production function:
O = f(I)
where: O are outputs
I are inputs

Production can be analyzed under short-run or long-run conditions. The

difference of the two depends on the kind of input being used in the activity, whether
it is fixed or all are variable. Fixed Input is any economic resources which do not
easily change when market conditions indicate that a change in output is desirable
(example: land, building, equipment) while Variable Input is any input that can be
easily adjust for every change in output to be produced (example: labor, raw
materials). Thus, Short-Run is a time period where in a firm is using at least a fixed
input in its production activity while Long-Run is a time period where all inputs being
used are held variable.
Under short-run analysis there are three concepts of production we can
determine: Total Product, Average Product, Marginal Product. Total Product (TP)
refers to the total output produced in using both fixed and variable inputs. Average
Product (AP) refers to the output produced per unit of input. It is expressed
mathematically as: AP = TP/I. the average products reflects the productivity aspect
of the input, like it tells how effective your inputs are in producing outputs. Marginal
Product (MP) is the additional output produced for every additional input used.

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Mathematically, MP = (TP2 – TP1) / (I2 – I1). Marginal product signals the firm
whether it is still necessary to hire an additional input or not considering the
additional output it can produce. It would be practical for a firm to hire only input if it
could yield a certain level of output that benefits the firm. To understand the three
concepts, consider the following hypothetical production schedule of a firm
considering only its labor held as variable while other inputs are fixed.

Table 5
Production Schedule
Marginal Product
Average
Total Product (MP)
Labor Product (AP)
(TP) MP = (TP2 – TP1) / (I2
AP = TP/I
– I1)
1 100 - 100
2 180 80 90
3 280 100 93
4 420 140 105
5 540 120 108
6 630 90 105
7 680 50 97
8 680 0 85
9 650 -30 72
10 570 -80 57

As can be observed in the table the value of total product is increasing as the
number of labor increases, but up to 8 laborers only since the firm already reaches
the highest number of units produced by the said number of labors. Beyond eight
laborers, the firm is experiencing a declining number of outputs produced. Why is
this happened? Well, try to look at the marginal product column. The value of MP is
increasing from two to 4 workers. This condition is termed as increasing marginal
returns. This condition happens when the marginal product of the additional input
exceeds than that of the previous input. This yields a benefit to the firm because its
inputs are becoming more productive. This can be seen also on the value of the AP
at laborers 1 to 4 where laborers are becoming more and more productive. Firm, in
its initial operation, encounters this condition.
Now observe the Marginal Product beyond 4 laborers. Additional products
starts to decline for every additional laborer (like up to 8 laborers). This condition is
termed as decreasing marginal returns which happens when the additional input
contributes less output than the previous input. This is supported by the Law of
Diminishing Marginal Returns which states that a firm will get a less and less extra
output when it adds input while holding other inputs fixed. As successive units of
variable inputs are added to a fixed set of inputs, beyond some point, the additional
product attributable to each additional unit of variable input will decline. This can be
seen on the table where TP is increasing (from four laborers to eight laborers) but on
a slower rate because the marginal product declines. The additional laborers in this
case are becoming no match to previous laborers because it contributes less than
the previous laborers. This can be observed also on the value of the AP where it

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declines which implicates less productive laborers. Beyond the zero MP, firm will
encounter a declining total product, which yields a negative return on its side.
In general, the marginal product tells us on what would happen to total
product considering the “additional” mechanism of its inputs. It signals the firm
whether it would continue to add inputs or not. On the other hand, Average Product
let firm determines whether its inputs are powerful or not when it comes to
production.

2. Isoquant and Isocost

To illustrate the resource combination in the long-run (where all inputs are
held varied) this unit will introduce the concept of isoquant. Isoquant is a curve
(similar to indifference curve) that consist of different combination of inputs which
yields same level of output. The isoquant depicts the condition where firm decides to
manage its resources (trade-off aspect) by producing same level of output. This is
supported by the marginal rate of substitution which shows the inverse relationship
of inputs while still producing same level of outputs. Below is an illustration of an
isoquant.

Base on the illustration above, both point A and B yield same level of output,
20 units. It also depicts the condition on what type of technology do firm adopts, like
point A is a capital intensive while point B is labor intensive. Note that whatever of
combination of labor and capital firm acquires it would still yield same level of output,
as per mechanism of the marginal rate of substitution. If firm wants to increase its
output then it should increase all its inputs. In this case the isoquant will shift upward.
The said upward shifting is only finite because once the number of inputs reaches its
maximum limits of outputs produced the law of diminishing marginal returns
becomes operative.
Isocost, on the other hand, is a curve that consists of different combinations of
inputs (say labor and capital) that can be purchased out of the given budget or
income. The structure of the isocost is downward sloping due to a limited income
hence firm is facing a trade off on what input would it prioritize that would still
conform on its income. Below is a graphical presentation of a typical isocost
(assuming a fixed level of income, price of labor and price of capital).

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The isocost depends on the adjustment of prices of inputs and income. If price
changes isocost may rotate (fan-in or fan-out) or shift (upward or downward) and if
income change isocost may shift upward or downward.

3. Returns to Scale
Returns to Scale illustrates the idea of what would happen to outputs if firm
increases its inputs. Though it is assumed that when firm increases its input, output
will also increase. However, when it comes to its proportion aspect, an increase in
inputs would yield a different level of return. Hence, returns to scale will illustrate the
effects of scale increases of inputs on the quantity produced. There are three cases
under this condition, namely:
a. Increasing Returns to Scale
This indicates that an increase in inputs would yield a more than
proportionate increase in output. Say, firm A doubles its inputs and the
resulting output is more than double, the said firm is experiencing this kind
of returns to scale.
b. Constant Returns to Scale
This condition happens when an increase in inputs yields a
proportionate increase in outputs. It is like when a firm doubles its inputs
the resulting output also doubles.
c. Decreasing Returns to Scale
When firm increases its inputs but the resulting output is less than the
proportionate increase then the firm is experiencing decreasing returns to
scale. It is like when a firm doubles it inputs but the resulting output is less
than double.

Self Help: You can also refer to the sources below to help you further
understand the lesson:

Avila-Bato, Ma.J., et al. (2015). Microeconomics simplified. Mandaluyong City:

National Book Store
Dinio, R. et al. (2017). Introductory microeconomics. Quezon City: Rex Book Store,
Inc.
Shoko, H. (2015). Simplified principles of microeconomics. Retrieved from:

50
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

bookboon.com
Villegas, B. (2010). Guide to economics for Filipinos. Manila: Sinag-Tala Publisher

Let’s Check

Let us try the following activities to check your understanding in this unit.

Activity 1. Multiple Choice. Choose the letter of the correct answer. Encircle the letter
of your choice. (One point each)

1. Which resource of which quantity cannot be readily be changed when change in

output is desirable?
A. Variable input
B. Fixed input
C. Investment input
D. Labor input
2. Which of the following describes the mechanism of Law of Diminishing Returns?
A. An additional unit of input beyond some point will tend to increase output.
B. Marginal product will continuously increase as input increases.
C. Marginal product will continuously decrease as input increases.
D. Marginal product will continuously increase at some point and then declines
as input continuously increases.
3. It occurs when the marginal product of the previous worker hired to do the same
task.
A. Increasing Marginal Returns
B. Decreasing Marginal Returns
C. Constant Marginal Returns
D. Decreasing Returns to Scale
4. The value of marginal product which is zero means:
A. No output produced.
B. No additional output produced.
C. No additional input which yield no additional output.
D. There is an additional input but no additional output.
5. Which of the following may result to isocost when price of both inputs increases.
A. Shifts upward
B. Shifts downward
C. Fan-in
D. Fan-out

Activity 2. True or False. In the space provided, write T if the given statement is true
and F if false. (One point each).

1. In the production function concept, the higher the inputs used, total product
increase.

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2. As inputs used decline, the output increases.

3. In a short-run analysis, as total product increases holding inputs used
constant, marginal product declines.
4. As total product increases and inputs used decline, average product
decreases.
5. Isocost shifts downward when prices of commodities decreases.

Let’s Analyze

Let us try the following activity to know how deep your understanding about
the topics of this unit.

Problem Solving. Solve for what is asked and show your solution legibly. Improper
solutions will not be credited. Use separate sheet for your solution.

1. Consider the following tabular presentation, assuming that the only variable
resource is labor.
AMOUNT OF AMOUNT OF
LABOR (I) OUTPUT (TP)
1 3
2 8
3 12
4 15
5 17
6 18
7 17

a. Solve for the Marginal Product and Average Product. (2 points each)
b. At what number of labor do diminishing marginal returns becomes
operative? (3 points)
Identify the range of outputs where firm is experiencing increasing and
decreasing marginal returns.

52
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
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Mabini Street, Tagum City
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Telefax: (084)655-9591 Local 116

In a Nutshell

In this part you are going to jot down what you have learned in this unit. The
said statement of yours could be in a form of concluding statements, arguments, or
perspective you have drawn from this lesson. The first one is done for you.

1. Basically, firms produce for profit motive. The capacity of firms to produce is
determined on the inputs it has and the cost it will incur in obtaining the said
inputs. Firms benefits in its production when it operates until when the value of
the marginal product is equal to zero. In this condition, firm uses its input
efficiently.

Now it’s your turn!

2.

3.

4.

5.

53
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
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Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Q&A List

You are free to list down all the emerging questions or issues in the provided
spaces below. These questions or concerns may also be raised in the LMS or other
modes. You may answer these questions on your own after clarification. The Q&A
portion helps in the review of concepts and essential knowledge.

Questions/Issues Answers

1.

2.

3.

4.

5.

Keywords

Average Product Isoquant Production Function

Decreasing marginal Law of Diminishing
Returns Marginal Returns Production Schedule
Fixed Input Long-Run Analysis Quantity
Increasing Marginal
Returns Marginal Product Short-Run Analysis
Inputs Outputs Total Product
Isocost Production Variable Input

54
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
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BIG PICTURE D

Week 8-9: Unit Learning Outcomes (ULO): At the end of the unit, you are
expected to:
a. Discuss and present cost, revenue, and profit concept; and
b. Explain, evaluate and analyze market structure.

Big Picture in Focus: ULOa. Discuss and present cost, revenue, and profit
concept.

Metalanguage
The following are terms to be remembered as we go through in studying this
unit. Please refer to these definitions as supplement in case you will encounter
difficulty in understanding the concepts of Cost and Profit concepts.
1. Marginal Approach is an approach in analyzing economic profit where
Marginal Revenue and Marginal Cost are used in determining profit
maximization.
2. Normal Profit is a term on economic profit analysis where Total Revenue
is equal to Total Cost. It is just the same on the business term “Break-
Even”.
3. Super-Normal Profit is an economic term that refers to an excess profit
over normal profit. The plain word “Profit” in business is synonymous to
this term.
4. Total Approach is an approach in analyzing economic profit where Total
Revenue and Total Cost are used as a tool of analysis.

Essential Knowledge
In the previous unit you have learned the production aspect of the firm. The
profit orientation of the firm does not depend only on the number of output it
produces but also the amount of cost it incurs and the revenue it generates. This unit
will discuss concepts of cost, revenue, and profit. Please note that you are not
limited to exclusively refer to these resources. Thus, you are expected to utilize other
books, research articles and other resources that are available in the university’s
library e.g. ebrary, search.proquest.com etc., and even online tutorial websites.

1. Cost of Production
For every production activity, firms always incur expenses which generally
termed as costs. In economics it is called Economic Cost which involves both
Implicit and Explicit Costs. Implicit costs, also termed as imputed costs, are costs
which represent a company’s opportunity costs of utilizing resources it already owns.
When an owner has a building and use it personal for its business operation rather
than letting it for rent to gain a rental fee then the owner incurs an implicit cost.
Explicit costs, on the other hand, are costs that are retrospective in nature and
involve an actual cash outlay. All expenses that a firm incurs for its daily operations
are part of explicit costs. Economic costs can be analyzed either in the short-run or
long-run. The difference of the two depends on the kind of cost it incurs in the
production, whether it has Fixed Cost or all costs are Variable. The firm is in the

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Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116
short-run analysis if incurs a fixed cost while it is in the long-run if all costs it incurs
are variable.
Fixed Costs are costs which are independent on the production output of the
firm. This means that whether a firm produces or not, this type of cost still present.
Common examples of these costs are rent expense, utilities, and interest payments.
Variable Costs are costs that are dependent on the output of the firm. It may
increase or decrease depending on the output produced by the firm. Examples for
these type of costs are labor expense, cost of raw materials and commissions. The
sum of fixed costs and variable costs is termed as Total Cost. Mathematically it is
expressed as:

TC = FC + VC
where: TC is Total Cost
FC is Fixed Cost
VC is Variable Cost (which is dependent on output)

Example:
Suppose Firm A produces 1,000 units of Product X that incurs a total
fixed cost of P50,000.00 and a variable cost per unit of P100.00. How much is
the total cost of Firm A?

Solution:
TC = FC + VC
TC = 50,000 + (1000)(100)
TC = 50,000 + 100,000

TC = 150,000
Other costs that are related to Total Cost are Average Cost and Marginal
Cost. Average Cost (AC) refers to the cost per unit of output. It can be computed
using this formula: AC = TC/Q. Marginal Cost (MC) is the additional cost per
additional unit of output. It can be computed using this formula: MC = (TC2 –
TC1)/(Q2 – Q1).

2. Economic Profit Concept

A. Revenue
Revenue, both in economics and business parlance, refers to the total income
earned after outputs are sold at a particular price. It is obtained by multiplying the
number of outputs sold to the level of price of the product. Mathematically it is
expressed as:
TR = PxQ
Where: TR is Total Revenue
P is Price of the product
Q is the number of products sold

Like if a firm sell 50 units of a good that costs P20.00 each, then the total
revenue is:
TR = PxQ
TR = (20)(100)

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116
TR = P2,000.00

Other concepts that are related to total revenue are Average Revenue and
Marginal Revenue. Average Revenue (AR) is the revenue per unit of product sold. It
is obtained by dividing the number of units sold to the total revenue earned, that is,
AR = TR/Q. Price and Average Revenue are the same. Marginal Revenue (MR) is
the additional revenue per additional output sold. Mathematically, MR = (TR2 –
TR1)/(Q2 – Q1). Marginal Revenue, together with marginal cost, is used in
determining the level of output to produce where a firm can generate a maximum
profit.

B. Economic Profit
Economic Profit simply refers to the gain received by the firm in its
production activity. It is the difference between the revenue (TR) earned and the total
economic cost (TC). Mathematically:
π = TR – TC
where π is Economic Profit
TR is Total Revenue
TC is Total Cost

Rule: if: TR > TC then the firm earn Super-Normal Profit

if: TR < TC then the firm earn Loss
if: TR = TC then the firm earn Normal Profit

Under profit maximization, firm can derived maximum profit by producing

output where Total Revenue is greater than Total Cost or when Marginal Revenue
equals to Marginal Cost.

Self-Help: You can also refer to the sources below to help you further
understand the lesson

Avila-Bato, Ma.J., et al. (2015). Microeconomics simplified. Mandaluyong City:

National Book Store
Dinio, R. et al. (2017). Introductory microeconomics. Quezon City: Rex Book Store,
Inc.
Shoko, H. (2015). Simplified principles of microeconomics. Retrieved from:
bookboon.com
Villegas, B. (2010). Guide to economics for Filipinos. Manila: Sinag-Tala Publisher

57
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116
Let’s Check

Let us try the following activities to check your understanding in this unit.

Activity 1. Identification. In the space provided, write the term/s that corresponds to
the following statements. (One point each)

1. Is the revenue per unit of product sold.

2. Refers to the gain received by the firm in its production
activity
3. Refers to the cost per unit of output.
4. Costs that are retrospective in nature and involve an actual
cash outlay.
5. Costs which are independent on the production output of the
firm.

Activity 2. True or False. In the space provided, write T if the given statement is
true and F if false. (One point each).
1. Marginal Revenue increases when Total Revenue increase while output is
constant.
2. A firm is under long-run analysis if it has only fixed input used in production.
3. A firm gains profit if Total Cost is less than Total Revenue.
4. Opportunity cost is an example of explicit cost.
5. Profit is zero when total variable cost is equal to total revenue.

58
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Let’s Analyze
Let us try the following activity to know how deep your understanding about
the topics of this unit.

Problem Solving. Solve for what is asked and show your solution legibly. Improper
solutions will not be credited. Use separate sheet for your solution.

1. Consider the following functions: (10 points each)

TR = 20Q
TC = 100 + 5Q
where: TR is Total Revenue and TC is Total Cost

a. How much is the output to be produced if the firm expects a profit of

P2,000.00?
b. How much is the Total Cost at profit P2,000.00?

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

In a Nutshell
In this part you are going to jot down what you have learned in this unit. The
said statement of yours could be in a form of concluding statements, arguments, or
perspective you have drawn from this lesson.

1.

2.

3.

4.

5.

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Q&A List
In this section you are going to list what boggles you in this unit. You may
indicate your questions but noting you have to indicate the answers after your
question is being raised and clarified. You can write your questions below.

Questions/Issues Answers
1.

2.

3.

4.

5.

Keywords Index

Average Cost Implicit Cost Quantity

Average Revenue Marginal Approach Revenue
Economic Cost Marginal Cost Super-Normal Profit
Economic Loss Marginal Revenue Total Approach
Economic Profit Normal Profit Total Cost
Explicit Cost Opportunity Cost Variable Cost
Fixed Cost Price

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Big Picture in Focus: ULOb. Explain, evaluate and analyze market structure.

Metalanguage

The following are terms to be remembered as we go through in studying this

unit. Please refer to these definitions as supplement in case you will encounter
difficulty in understanding the concepts of Market Structure.
1. Market structure refers to all features of a market that affects the
behavior and performance of firms in the market and the degree of product
differentiation.
2. Efficiency also refers to the productivity of inputs.

Essential Knowledge

This unit will discuss basic concepts of market structure. This will highlight the
different types of market structure and their respective characteristics. Please note
that you are not limited to exclusively refer to these resources. Thus, you are
expected to utilize other books, research articles and other resources that are
available in the university’s library e.g. ebrary, search.proquest.com etc., and even
online tutorial websites.

1. Pure Competition
Is a market structure mainly characterized by a large number of sellers (small
enough) which cannot affect the price of its competitors. The said market structure
can be observed in agricultural sector (products it offers). Aside from having a large
number of buyers, pure competition is also characterized by the following:
A. Offers homogenous products
Homogenous means similar and identical. Buyers cannot distinguish the
product from one seller to another because in the mind of the buyers it is identical.
Due to this characteristic, sellers cannot control price and simply follow what is being
dictated in the market under the influence of demand and supply. Sellers are price
takers in this market structure.
B. Easy entry and exit
This characteristic implies that there is no barrier that prohibits new firms to
venture or existing firms to leave. Due to capital requirement which is small enough,
new firms can enter if there is an opportunity to make profit while existing firms can
easily exit (without minding its fixed cost) if it incurs losses successively. This
characteristic determines the short-run and long-run profit orientation of the firm.
C. Efficiency in price and output
Under this market structure firms offer products at a lower price. This is due to
the kind of product it offers which is homogenous and the number of competitors it
has. This leads to efficiency in pricing where buyers benefit a lot and large supply of
the products due to competition. In order for firms to stay in the business they must
operate under the peak efficiency (lower price and large volume of output/products).

2. Monopoly

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116
Is a market structure that exists when there is a sole producer in a given
industry. From the word itself, “mono” implies that there is single producer of a
particular good or service. It also means that the firm serves as the industry of a
particular market. Say in the utility market, Meralco is the sole power distributor in
Greater Manila Area.
Aside from being a single seller/producer, monopoly is also characterized by
the following:
A. Offers unique products
A monopolist offers products that have no close substitutes. This makes the
monopolist control the industry and could manipulate the pricing level of the product.
Though in reality the product being offered may have a substitute but not close
enough that consumers may prohibit buying the product (say generator or lamp on
power/electricity).
B. Price maker
Since monopolist offers a unique product it can also control its price. This
makes the sole seller a price maker. If it wants to increase its price then it should
produce lesser of the product and if its wants to decrease its price then it should
produce more of it. But do you think it can charge price excessively?
C. Impossible Entry
Monopolist can block new firms in entering the industry. This means that it
can set barriers that would prohibit new firms in operating a business and becomes a
competitor of the monopolist. The said barriers includes: (a) Sole ownership of a vital
resource; (b) Legal barriers like government franchises and licenses; and (c)
Economies of scale.
D. Goodwill Advertisement
Since there is no competition exists in this market structure, monopolist is not
encouraged in promoting extensively its product. However, in order to provide public
information regarding the services it offers, monopolist provides goodwill
advertisement. This may include announcement regarding changes in price or
warnings, safety tips, etc.

3. Monopolistic Competition
Authored by Edward H. Chamberlin, monopolistic competition is a market
structure where there are many small sellers acting independently. It is one of the
intermediate market structures (the other one is oligopoly) that lies between pure
competition and monopoly. Thus some characteristics in this market structure can be
observed both on the previous aforementioned market structures. Apart from having
many small sellers, it is also characterized by the following:
A. Differentiated products
Firms under this market structure offer products that are similar but not
identical. This is termed as differentiated products. Manufactured goods like hygienic
products, restaurant services, malls and banks are example of this. Products are the
same but they differ in terms on the quality.
B. Price differentiation
This characteristic implies that firms, due to product differentiation, have some
sort of control over the price it charges on its products (but not absolute than
monopoly). The price being charged highly depends on the kind and quality of the
product towards it competitors.
C. Easy entry and exit

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 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116
Similar to pure competition new firms and existing firms are free to enter and
exit respectively. There may be a barrier under these market structure but it is
relatively small enough that cannot prevent new firms to enter and existing firms to
exit.
D. Advertising
Because of product differentiation firms under this market structure spends
significant amount on advertising and promotion to capture consumers and earns
profit. Advertising became the main tool for firms in order to create imaginary
differences about their products against their competitors. Once effective, this leads
to an increase of sales.

4. Oligopoly
Another form of market structure where there are few firms competing on a
particular industry is oligopoly. Firms in this market structure are greatly
interdependent with one another. Hence it formulates its own strategy/ies in relation
to what its rivals will make. Oligopoly, as a market structure, is also characterized by
the following:
A. Offers homogenous or differentiated products
Oligopolies are classified as pure or differentiated. If firms produce an
identical product it is called pure oligopoly (i.e. oil and cement industry). If it produces
differentiated product then it is called as differentiated oligopoly (i.e. car and beer
industry).
B. Barriers to entry
Under this market structure, existing firms can prevent new firms in entering
the market that creates competition. Because of these barriers existing firms faces
an intense competition resulting into some price and non-price methods of
competition. The said barriers could be exclusive financial requirements, control over
essential resource, patent rights, and some legal barriers.
C. Presence of collusion
Collusion is a secret agreement between two or more firms in order to
achieve certain objectives. It is classified into two types: perfect collusion and
imperfect collusion. Perfect collusion, also termed as cartel, is a formal
organization of all firms on a given industry that adheres rigorously to a definite
agreement in terms of pricing and output determination. Imperfect collusion is a
tacit informal agreement between all firms in establishing price and output.
Collusion creates large profit among firms in the industry due to less
competition. It also decreases oligopolistic uncertainty since firms are now well
coordinated with one another and possibly it can block new firms in entering the
market since firms under collusion act as a monopolists.

64
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

Self-Help: You can also refer to the sources below to help you further
understand the lesson

Avila-Bato, Ma.J., et al. (2015). Microeconomics simplified. Mandaluyong City:

National Book Store
Dinio, R. et al. (2017). Introductory microeconomics. Quezon City: Rex Book Store,
Inc.
Essays, UK. (2018). Analysis of market structures. Retrieved from
https://www.ukessays.com/essays/economics/analysis-market-structures-
8029.php?vref=1
Greenlaw, S. & Taylor, T. (2017). Principles of microeconomics. Texas, U.S.A.:
OpenStax - Rice University.
Nicholson, W., Snyder, C., & Stewart, R. (2015). Microeconomic theory: basic
principles and extensions. Hampshire, United Kingdom: Cengage Learning
EMEA.
Shoko, H. (2015). Simplified principles of microeconomics. Retrieved from:
bookboon.com
Villegas, B. (2010). Guide to economics for Filipinos. Manila: Sinag-Tala Publisher

Let’s Check

Let us try the following activities to check your understanding in this unit.

Activity 1. Matching Type. Match the following terms indicated in Column A if under
what concept it is related provided in Column B. Write your answers on the space
provided before each item. Strictly NO Erasures. (One point each).

Column A Column B
1. Collusion a. Oligopoly
2. Differentiated products b. Pure Competition
3. Unique products c. Monopoly
4. Homogenous products d. Monopolistic Competition
5. Absolute price control e. Market Structure

Activity 2. True or False. Identify the following statements if it is true or false. Write
T if it is true and F if false. Indicate your answers on the space provided before each
item. Strictly NO Erasures. (One point each).

1. Monopolistic firms have great control on its price due to product

differentiation.
2. Monopoly can charge excessively due to price control.
3. Pure competitive firm can slightly control the level of its price.
4. Oligopolists can control their prices absolutely.
5. Monopolist can increase its price while increasing the level of its
output produced.

65
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116
Let’s Analyze

Let us try the following activities to know how deep your understanding about
the topics of this unit.

Activity 1. Essay. Given the following conditions, explain your answer in a detailed
and concise form. (10 points each)

1. Explain how advertising benefits monopolistically competitive firms.

2. What makes oligopoly differs when it comes to pricing strategy to monopolistic

competition?

3. Explain the difference in terms on pricing strategy between having homogenous

products in pure competition and a homogenous product under oligopoly.

66
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116
Research Activity. Choose an existing firm or business (local or international) and
conduct a market structure analysis considering the major characteristics presented
in the unit. Justifications should base on the related literatures gathered. You may
also write your critique regarding the said issue. Follow the format indicated below
and the sample template:

Font Size: 12 pts.

Font Style: Arial
Spacing: Single-Spaced
Alignment: Justified
Margin: 1 inch (left, right, upper, and lower margin)
Bond Size: A4

Sample Template:

Robert S. Sy SST 212

Market Structure Analysis Prof. Rex Lord V. Ranalan

ABC Company: A Market Structure Analysis

Brief Background of ABC Company

ABC Company is under Monopoly: A Justification

Personal Contention about ABC Company on why it is Monopoly

References (minimum of seven online sources, APA format)

67
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116
In a Nutshell
In this part you are going to jot down what you have learned in this unit. The
said statement of yours could be in a form of concluding statements, arguments, or
perspective you have drawn from this lesson. The first one is done for you.

1. Market structure provides information that would aid firms (new or old) in decision
making aspect regarding the market environment. Though each market structure
has its own advantages and disadvantages it could still be of good use in order
for firms to maximize its profit.

Now it’s your turn!

2.

3.

4.

5.

68
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116
Q&A List
In this section you are going to list what boggles you in this unit. You may
indicate your questions but noting you have to indicate the answers after your
question is being raised and clarified. You can write your questions below.

Questions/Issues Answers

1.

2.

3.

4.

5.

Keywords Index

Advertising Homogenous Products Price Differentiation

Barriers to Entry Imperfect Collusion Price Maker
Collusion Market Structure Price Takers
Monopolistic
Differentiated Oligopoly Competition Product Differentiation
Efficiency Monopoly Pure Competition
Free Entry and Exit Oligopoly Pure Oligopoly
Goodwill Advertisement Perfect Collusion Unique Product

69
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116

COURSE SCHEDULES

Please be mindful of the schedules below to avoid future problems in complying with
your requirements.

Activity Date Where to submit

Big Picture A: ULOa Let’s Check
August 20, 2020 CF’s email
and Analyze Activities
Big Picture A: ULOa In a Nutshell August 22, 2020 CF’s email
Big Picture A: ULOa Q and A List August 24, 2020 via Zoom app
Big Picture A: ULOb Let’s Check
August 25, 2020 CF’s email
and Analyze Activities
Big Picture A: ULOb In a Nutshell August 27, 2020 CF’s email
Big Picture A: ULOb Q and A List August 28, 2020 via Zoom app
First Examination September 4,
Quipper LMS
2020
Big Picture B: ULOa Let’s Check September 8,
CF’s email
and Analyze Activities 2020
Big Picture B: ULOa In a Nutshell September 10,
CF’s email
2020
Big Picture B: ULOa Q and A List September 12,
via Zoom app
2020
Big Picture B: ULOb Let’s Check September 15,
2020 CF’s email
and Analyze Activities
Big Picture B: ULOb In a Nutshell September 15,
2020 CF’s email
Big Picture B: ULOb Q and A List September 16,
via Zoom app
2020
Second Examination September 18,
Quipper LMS
2020
Big Picture C: ULOa Let’s Check September 22,
2020 CF’s email
and Analyze Activities
Big Picture C: ULOa In a Nutshell September 24,
2020 CF’s email
Big Picture C: ULOa Q and A List September 25, via Zoom app
2020
Big Picture C: ULOb Let’s Check September 26,
CF’s email
and Analyze Activities 2020
Big Picture C: ULOb In a Nutshell September 26,
2020 CF’s email
Big Picture C: ULOb Q and A List September 28, via Zoom app
2020
Third Examination October 2, 2020 Quipper LMS
Big Picture D: ULOa Let’s Check
October 8, 2020 CF’s email
and Analyze Activities
Big Picture D: ULOa In a Nutshell October 8, 2020 CF’s email
Big Picture D: ULOa Q and A List October 9, 2020 via Zoom app
Big Picture D: ULOb Let’s Check October 13, 2020 CF’s email

70
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116
and Analyze Activities
Big Picture D: ULOb In a Nutshell October 13, 2020 CF’s email
Big Picture D: ULOb Q and A List October 14, 2020 via Zoom app
October 15-16,
Final Examination Quipper LMS
2020

Please note that this schedule may change from time to time. It is advisable that you
always keep in contact with your teacher for updates and always check your LMS or
Group Chatrooms.

Online Code of Conduct

 All teachers/Course Coordinators and students are expected to abide by an

honor code of conduct, and thus everyone and all are exhorted to exercise self-
management and self-regulation.
 Faculty members are guided by utmost professional conduct as learning
facilitators in holding DED conduct. Any breach and violation shall be dealt with
properly under existing guidelines, specifically on social media conduct (OPM
21.15) and personnel discipline (OPM 21.11).
 All students are likewise guided by professional conduct as learners in attending
DED courses. Any breach and violation shall be dealt with properly under existing
guidelines, specifically in Section 7 (Student Discipline) in the Student Handbook.
 Professional conduct refers to the embodiment and exercise of the University’s
Core Values, specifically in the adherence to intellectual honesty and integrity;
academic excellence by giving due diligence in virtual class participation in all
lectures and activities, as well as fidelity in doing and submitting performance
tasks and assignments; personal discipline in complying with all deadlines; and
observance of data privacy.
 Plagiarism is a serious intellectual crime and shall be dealt with accordingly. The
University shall institute monitoring mechanisms online to detect and penalize
plagiarism.
 All borrowed materials uploaded by the teachers/Course Coordinators shall be
properly acknowledged and cited; the teachers/Course Coordinators shall be
professionally and personally responsible for all the materials uploaded in the
online classes or published in SIM/SDL manuals.
 Teachers/Course Coordinators shall devote time to handle DED courses and
shall honestly exercise due assessment of student performance.
 Teachers/Course Coordinators shall never engage in quarrels with students
online. While contentions intellectual discussions are allowed, the
teachers/Course Coordinators shall take the higher ground in facilitating and
moderating these discussions. Foul, lewd, vulgar and discriminatory languages
are absolutely prohibited.
 Students shall independently and honestly take examinations and do
assignments, unless collaboration is clearly required or permitted. Students shall
not resort to dishonesty to improve the result of their assessments (e.g.
examinations, assignments).

71
 DEPARTMENT OF BUSINESS ADMINISTRATION EDUCATION
Financial Management Program
Mabini Street, Tagum City
Davao del Norte
Telefax: (084)655-9591 Local 116
 Students shall not allow anyone else to access their personal LMS account.
Students shall not post or share their answers, assignment or examinations to
others to further academic fraudulence online.
 By handling DED courses, teachers/Course Coordinators agree and abide by all
the provisions of the Online Code of Conduct, as well as all the requirements and
protocols in handling online courses.
 By enrolling in DED courses, students agree and abide by all the provisions of
the Online Code of Conduct, as well as all the requirements and protocols in
handling online courses.

Monitoring of OBD and DED

 The Deans, Asst. Deans, Discipline Chairs and Program Heads shall be
responsible in monitoring the conduct of their respective DED classes through the
LMS. The LMS monitoring protocols shall be followed, i.e. monitoring of the
conduct of Teacher Activities (Views and Posts) with generated utilization graphs
and data. Individual faculty PDF utilization reports shall be generated and
consolidated by program and by department.
 The Academic Affairs and Academic Planning & Services shall monitor the
conduct of LMS sessions. The Academic Vice Presidents and the Deans shall
collaborate to conduct virtual CETA by randomly joining LMS classes to check
and review online the status and interaction of the faculty and the students.
 For DED, the Deans and Program Heads shall come up with monitoring
instruments, taking into consideration how the programs go about the conduct of
DED classes. Consolidated reports shall be submitted to Academic Affairs for
endorsement to the Chief Operating Officer.

Course prepared by:

REX LORD V. RANALAN

Course Faculty/Facilitator

Course reviewed by:

REGI C. AARON, MBA

Financial Management Program Head

Approved by:

GINA FE G. ISRAEL, EdD

Dean of College

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