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Applied Economics
Quarter 3- Module 2
Market Demand, Supply, Market
Equilibrium, and Implication of
Market Pricing
Applied Economics – Grade 12
Quarter 3 - Module 2: Market Demand, Supply, Market Equilibrium, and Implication of
Market Pricing
First Edition, 2021

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Applied Economics
Quarter 3 – Module 2
Market Demand, Supply, Market
Equilibrium, and Implication of
Market Pricing
Introductory Message

This Self-Learning Module (SLM) is prepared so that you, our dear

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

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Let Us Learn!

Hello, dear learners! How are you today? In the previous module, you
have learned the fundamental theories, concepts, and terms in Economics.
Those are essentially useful in understanding the fundamentals in Applied
Economics as such topics are connected in this module.

After the completion of this module, you are expected to:

 analyze market demand, market supply, market

equilibrium and implication of market pricing.
Specifically, you will be able to:

 explain the Law of Demand and Supply, and how equilibrium

price and quantity are determined;
 discuss and explain the factors affecting demand and supply; and
 compare the prices of commodities and analyze the impact on
consumers.

Let Us Try!
I hope you are having a good day and ready to begin the first part
of this module. Before proceeding to our lesson, try to read and
answer this pretest.

Pre-Test
Direction. Select the letter of the correct answer from the choices given.
1. What do you call the term used to describe the interaction between
buyers and sellers of trading or exchange?
a. Stock market
b. Trading post
c. Market
d. Market economy

2. The assumption that means all other related variables, except those
that are being studied at the moment, are held constant, is referred to
as ___:
a. Law of demand
b. Law of supply
c. Econometrics
d. Ceteris paribus

3. The price at which the quantity demanded for good is equal to the
quantity supplied of the good is called ____:

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a. Equilibrium price
b. Market equilibrium
c. Equilibrium quantity
d. Point of equilibrium

4. The ______________ states that using ceteris paribus, there is an inverse

relationship between the price of the good and the quantity demanded
for that good.
a. Law of Supply
b. Law of Demand
c. Law of diminishing marginal utility
d. Law of diminishing marginal satisfaction

5. The ______________ states that using ceteris paribus, there is a direct

and positive relationship between the price of the good and the quantity
supplied for that good.
a. Law of Supply
b. Law of Demand
c. Law of diminishing marginal utility
d. Law of diminishing marginal satisfaction

6. What are those factors other than the price can influence the demand
and supply of a good?
a. Substitution effect
b. Income effect
c. Non-price variables
d. Profit motivation effect

7. The purchasing power of a person's money income is referred to as:

a. purchasing capacity
b. real income
c. income value
d. income effect

8. The graphical illustration of the supply schedule is called:

a. supply curve
b. quantity supplied
c. demand curve
d. demand schedule

9. Which of the following will NOT shift the market supply curve of good
X?
a. A change in the cost of inputs used to produced good X.
b. A change in the technology used to produce good X.
c. A change in the number of sellers of goods.
d. A change in the price of good X.

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10. Alex received bad news that his salary will decrease starting next
month. What will happen to the demand curve of Joey a month after?
a. Shift to the left
b. Shift to the right
c. Shift downward
d. No change

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Lesson Basic Principles and

1 Application of Demand and

Supply
Let Us Study

Have you ever asked who decides on the prices of the goods you
buy? For many people, the answer is easy. They think the government chooses
how high or low prices should be. But this is not always true. For example,
the government decides the prices of rice, gasoline, and apartment rent. But
the costs of most goods are determined by the market price.

A market price is a price determined only by demand and supply. It also

means that the government had little say about that price. But what if the
government decided on a price that is higher than the market price? Who
would be affected? How will this affect the demand and supply for that good
or service?
In such a case, the sellers will be badly affected. Since people want lower-
priced goods, they will buy less. That means if the price goes up, they will not
buy as much. The sellers will have a lot of goods that people are not buying.

What about if the government sold the goods or services at a price lower
than the market price? In this case, remember that people want as much
profit as possible. If the government decides on a price lower than what the
market alone would have allowed, will the sellers be happy? The answer is no.
If people have to pay the sellers less for their goods, the sellers will get less
money.

In general, prices are decided upon by demand and supply. In this lesson,
we are going to study the law of supply and demand. It will also discuss the
price system and the role of the government.

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Activity 1. Picture Analysis
Directions. Analyze the picture and answer the following questions below:

(image-market rice in the Philippines-Google Search,2021)

1. How do you determine the prices of goods and services?

___________________________________________________________________________
___________________________________________________________________________

2. What will happen if the prices of basic commodities will keep on increasing?
___________________________________________________________________________
___________________________________________________________________________
3. Is there any practical way of keeping the prices of basic commodities at levels
that are accessible to the masses?
___________________________________________________________________________
___________________________________________________________________________
In an economy where prices are continuously rising, people have always
wondered what factors cause prices to fluctuate. The core of this lesson aims
to show that demand and supply are the main forces that cause prices to
increase or decrease. The lesson also tries to explain why an increase in the
price of a commodity will make consumers want to buy less of it and
producers want to sell more and why a price decrease will cause the opposite
reaction.
DEMAND

It is discernible to note that there is an increase in the demand for a

facemask, face shield, alcohol, vitamin C, and disinfectants, among others,
during this time of the pandemic. During christmas season, there is also an
increase in the demand for items like fruits, cakes, pasta, pastry products,
and even a simple gift wrapper. These events suggest that different occasions,
phenomena, and seasons of the year can cause an increase in demand. On

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the other hand, demand for primary and essential goods like rice, sugar, oil,
milk, and salt tends to be consistent all year (Dinio, 2017).

Demand is the willingness of a consumer to buy a commodity at various

prices at a given time and place. In simple terms, demand means that
someone wants something but such desire must be backed up by sufficient
purchasing power.

Demand tells us what people want. It also tells us what they can buy at
a certain time and place. Because it involves buying, it also involves at what
price people can buy it or are willing to buy it.

A demand function shows how the quantity demanded of the good

depends on its determinant, the most important of which is the price of the
good itself. This is expressed through an equation:

Qd = f (P)
This signifies that the quantity demanded for a good is dependent on
the price of that good. In your Grade 11 subject in General Mathematics, you
learned that a function involves an independent and dependent variable. The
price (independent variable) affects the quantity demanded (dependent
variable).

Law of Demand
The law of demand may be stated as "the quantity of a commodity
which buyers will buy at a given time and place will vary inversely with
the price." This means that as price increases, quantity demanded decreases,
and as price decreases, quantity demanded increases, other things are
considered constant (Law of Demand-Overview, Graphical Illustration, and
Exception, 2012).
There are three ways of explaining why people buy more or less of a
good depending on price. These are the reasons:

1. Income effect. At lower prices, an individual has greater purchasing

power. This means he can buy more goods and services. But at higher
prices, naturally, he can buy less.
2. Substitution effect. Consumers tend to buy goods at lower prices.
In case the price of a product that they are buying increases, they look
for substitutes whose prices are lower. Thus, the demand for higher-
priced goods will decrease.
3. Law of diminishing marginal utility. As consumer continues to
consume a given product, he/she will eventually get less additional
utility (satisfaction) from each unit he/she consumes (Dinio et.al, 2017).

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The Ceteris Paribus Assumption

The law of demand states that as price increases, quantity demanded

decreases, and as price decreases, quantity demanded increases. Such theory
is true if we apply the ceteris paribus assumption wherein it assumes that "all
other things equal or constant" (Villegas, 2010). Meaning, the determinants
of demand are constant and are not considered as factors that will affect
demand in the market. Thus, the law of demand, using the ceteris paribus,
can be restated as "assuming that the determinants of demand are
constant, price and quantity demanded are inversely proportional to
each other".

However, if the determinants of demand are considered significant factors

or greatly affect the demand in the market, then the ceteris paribus
assumption is dropped.

Validity of the Law of Demand

As price increases, quantity demanded decreases;
As price decreases, quantity demanded increase.

A demand schedule reflects the quantities of goods and services demanded

at different prices. To understand this fully, let us analyze a hypothetical
demand schedule of brand X in the market, as shown in Table 1.

Table 1. Hypothetical Demand Schedule of Brand X.

PRICE QUANTITY DEMANDED

From the table, it is shown
5 35 that an individual would
10 30 tend to buy more when its
price is low than when the
15 25
price is high. At a price of
20 20 P35.00, quantity
25 15 demanded by the
30 10 consumers is 5 while a
decrease of price to P5.00
35 5 increases the quantity
demanded
The demand schedule shown in Table 1 can also be understood of the
through a graphical illustration known as theconsumersdemand curve.
to 35. In many
instances, it is more convenient to express the relation between prices and
quantity demanded by means of a demand curve. Figure 1 shows the
translation of Table 1 into a graphical illustration.

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Figure 1. Graphical Illustration of a Demand Curve.

In Figure 1, price is presented on the

vertical axis and quantity demanded
on the horizontal axis. The points can
be connected in a continuous curve.
We label our demand curve with D,
which means demand, to indicate
that it is the entire demand schedule.
It can be noted that the
demand curve is sloping- down. It
shows that price and quantity
demanded are inversely
proportional. This inverse relationship between prices and quantity
demanded depicts the law of demand.

Determinants of Demand or Non-Price Determinants of Demand

If ceteris paribus assumption is dropped, non-price determinants that
also affect demand are now allowed to influence demand. These non-price
factors are:
 income;
 taste;
 expectations;
 price of related goods; and
 number of consumers or population (Villegas, 2010).

The demand function can now be expressed as:

D = f (Y, T, E, PR, NC) where Y (income); T (taste); E (expectations);

PR (price of related goods); and NC (number of consumers or population).

DEMAND is affected by income, taste, expectations of prices, price of

related goods, and number of consumers. Demand is dependent upon the
presence and working of the non-price variable or the factors affecting
demand.
Factors Affecting Demand or the Determinants of Demand
Income
If consumer income increases, the capacity to buy increases, and the
demand (not quantity demanded) will also increase even when the price does
remain the same. The opposite will happen when income decreases.
The amount of money people earn affects how much or how little they
buy. For example, the construction worker earns P10,000 every month while
the businessman earns P30,000. This means the factory worker has less
money. He can buy less than the businessman. However, when the income of

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the factory worker goes up, he can buy more. Still, this will not mean that he
can already buy as much as the businessman can. But if the income of the
businessman goes down, he can buy less.
This means that a change in income leads to a change in the demand
for goods and services. More money means more demand. Less money means
less demand.
When income increases, the behavioral tendency of the consumer will
lead them to buy normal goods. On the contrary, when income decreases, the
consumer will opt to choose inferior goods.
Tastes and preferences
Demand for goods and services increases when people like or prefer
them. Such tastes or preferences are greatly influenced by advertisement or
fashion. On the other hand, if a certain product is out of fashion, the demand
for it decreases. Factors other than advertisement and fashion may also affect
taste or preference, like infusion of culture or acculturation. For example, the
Korean wave causes an appreciation for Korean foods and items, thus
increasing demand for Korean food items. Improve taste for a product will also
cause a consumer to buy more of that product even if its price does not
change.
Price expectations
When people find out that prices are about to increase, they buy more
of these goods before the price changes. When people find out that prices are
about to go down, they will not demand these goods as much (Leano, 2012).
Why do people act like this? It is because they want to use their money
wisely. They want to economize. It means, they want to spend properly to buy
what they want or need at the best possible price. They want to save money
even after buying things.
Price of related goods
The price of related goods as substitutes or complements also
determines demand.
Substitute goods are those that are used in place of each other,
like coconut oil and palm oil, pork, beef and chicken, butter, and
margarine.
When the price of a certain good increases, people tend to buy
substitute products. For example, if the price of Kolcate toothpaste
increases, consumers buy less of Kolcate and more of the close
substitute like Klose-down or Sadee. This means that the quantity
demanded for Kolcate decreases while the demand for substitutes
(Klose-down or Sadee) increases. Therefore, if the price of one good
increases, the demand for the other good increases.

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Complement are goods that are used together such as cellphone
and sim card, burger bun and a burger patty, coffee, and creamer.
These are goods which one cannot use without the other.
For complementary goods, an increase in the price of good A will
decrease the demand for good B (a complement product), thereby
shifting the demand curve for good B to the left, indicating a
decrease in the demand. Conversely, if the price of good A
decreases, the demand for good B increases, thus shifting the
demand curve to the right.
Number of consumers or population
More people would mean more demand for goods and services. That is
why we can observe that there are more buyers in the city stores than in the
barrio stores. Conversely, less population means less demand for goods and
services. Obviously, business is not so active in the rural areas compared to
business in the urban areas.
Source: Intelligent Economist-Determinants
of Demand, 2021.

Comparison: Quantity Demanded and Demand, the Movement along the

Curve and Shifting of the Demand Curve
 QUANTITY DEMANDED is affected or influenced by the changes in
PRICE because Qd = f (P). If PRICE increases, the QUANTITY
DEMANDED decreases, and inversely when the PRICE decreases
QUANTITY DEMANDED increases on the assumption that we will not
consider the consumers' income, taste, preference, the prices of related
goods, and the population.
 As the prices increase or decrease, there is a movement along the
Demand Curve as shown in the figure below.

Figure 2. Graphical illustration of the movement along the curve.

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 DEMAND is affected by Income, Taste or Preference, Expectations of
prices, Price of related goods and the number of consumers or
population because D = f ( Y, T, E, PR, NC ). The non-price variables
or sometimes called shifters of demand (Y, T, E, PR, NC) will increase
or decrease the DEMAND (not quantity demanded) or cause the shifting
of the demand curve, as shown in the figure below.

Figure 3. Illustration on the shifting of demand curve.

 The demand curve will shift to the right or outward, indicating an

increase in DEMAND (from D1 to D2), or will shift to the left or inward
indicating a decrease in demand (from D1 to D3)

Sample Drill on the concept of QUANTITY DEMANDED and DEMAND

Question 1: What inference can you draw when the price of 8 ounce
carbonated drink increases from P12.00 to P 20.00?

Answer 1: The QUANTITY DEMANDED (not DEMAND) for a carbonated

drink will decrease. This conclusion is based on the Law of Demand, which
states that assuming other factors remain constant like the taste, income,
price of related goods, etc. when the price increases, the quantity demanded
decreases.

Question 1.2: Would there be a shifting of the demand curve?

Answer 1.2: No. There will be no shifting of the demand curve. There is,
however, a movement along the curve or a contraction of the quantity
demanded due to the increase in the price.

Question 2: Published medical study shows that prolong intake of cola drinks
will enhance memory retention and stimulate blood circulation. What will
happen to the DEMAND for cola drinks?

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Answer 2: The demand for cola drinks will increase. This will have the effect
of shaping the desirability of the product or preference, which is a non-price
determinant.

Question 2.1: What will happen to the demand curve? Will there be a
movement along the curve?

Answer 2.1: There will be a shifting of the demand curve to the right, indicating
an increase in demand. There will be no movement along the curve since the
question relates to the non-price factor (preference). The demand will move
only along the curve if the factor is about an increase or decrease of price.

Question 2.2: What will happen to the quantity demanded in question no.2?

Answer 2.2: Quantity demanded is not affected since the question relates to
a non-price factor. The increase or decrease of quantity demanded is caused
by the decrease or increase in the price.

Price of related products (substitute products)

Question 3: Durf powdered laundry soap is a close substitute product of Vive

laundry soap. What will happen if there will be an increase in the price of Vive
powdered laundry soap?
Answer 3: There will be an increase in the DEMAND for Durf. The demand
curve will shift to the right, indicating an increase in the demand for Durf,
which is a cheaper close substitute product. In the case of substitute
products, an increase in the price of one product will cause an increase in the
demand for another product. Likewise, a decrease in the price of one product
will cause a decrease in the demand for another product.
Question 3.1: What will happen to the demand for Palm cooking oil if there
will be a decrease in the price of Coconut cooking oil?

Answer 3.1: The demand for Palm cooking oil will decrease. The demand curve
will shift to the left, indicating decrease in the demand for Palm cooking oil.

Price of related products (complementary products)

Question 4: What will happen to the demand for creamer if there will be an
increase in the price of instant coffee?
Answer 4: The demand for creamer will decrease brought about by the
increase in the price of instant coffee. When one good is a complement product
of another good, an increase in the price of one good will cause decrease in the
DEMAND for another complement product. In like manner, a decrease in the
price of one product will cause an increase in the demand for the other
complement product.

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Question 4.1: What will happen to the demand curve for the creamer?
Answer 4.1: The demand curve will shift to the left, indicating a decrease in
the demand for creamer.
Question 5: A lot of people have lost their jobs during this pandemic which
would translate a loss of income for most Filipinos. What inference can you
draw to the increase in sales of NFA rice?

Answer 5: If income decreases, the demand for inferior goods will increase
and the demand curve for inferior goods will shift to the right indicating an
increase in demand for such good. We can safely judge that NFA is an inferior
good.
Question 5.1: December is the month in which most employment benefits, like
13th month pay, 14th month pay, and bonuses, are released both in public
and private employment institutions. It has been observed that there is an
increase in the sales of branded apparel, shirts, tuna, and other relatively
high valued goods. What economic scenario does this suggest?
Answer 5.1: This scenario shows an increase in income. When there is an
increase in income, consumers tend to buy normal goods. Thus, demand for
normal goods will increase, and if graphically illustrated, the demand curve
would be reflected a rightward shifting indicating an increase in the demand
for normal goods.

Note: In economics, the term inferior good does not speak of a low-quality good but goods that
consumers will tend to buy when income decreases. Likewise, normal good does not mean a
good of superior quality but goods demanded by consumers when income increases.

Let Us Practice

Activity 2. Test Your Skills!

Direction. Answer the following questions to recall the basic and fundamental
concepts about the Law of Demand.

1. Explain the mathematical expression Qd = f (P).

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
2. What is the implication on the downward sloping of the demand curve?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

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3. What do you understand by the phrase "ceteris paribus"?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
_______________________________________________________________________

4. What will happen to the "demand" for a product when the price of that
product falls?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________
______________________________________________________________________

5. What will happen to the "quantity demanded" of a product when the price
of that product increases?
________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

6. State the shifters of demand or the non-price determinants of demand.

________________________________________________________________________
________________________________________________________________________

Let Us Practice More

Activity 3. Level Up!

Directions. Explain the following situations using the economic principles

discussed in this lesson. Write your answers on a separate sheet of paper.

A. You have observed in the meat section of the grocery store you are
working with, that when the price of pork increases from P270 to P420
there is a decline in the sales of pork while sales in beef and/or chicken
meat increases by 30%.

1. What economic principle can you apply in this scenario? Support your
answer.

2. Give your insights on the impact of price increase to the customers.

3. Show the graphical illustration and label the same.

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B. Graphical illustration on the demand curve shows that the demand for
good A has shifted to the left.

Questions:

1. What inference can you create on the consumer's income?

2. Would your answer be the same should the curve for good A has
shifted to the right?

Let Us Remember

Activity 4. Sum Me Up!

1. What are the things you have learned from the discussion on the Law
of Demand and Factors Affecting Demand? How can you apply these
learnings in your real-life activities?
_____________________________________________________________________
_____________________________________________________________________

2. Cite specific real-life scenarios as to where you can use your learning
about the factors of demand.
_____________________________________________________________________
_____________________________________________________________________

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Lesson

2 The Meaning of Supply

Demand showed us the side of the consumers and their reactions to

changes in price and other determinants. In this topic, we are now looking at
the side of the supplier.

Supply is the schedule of various quantities of commodities which

producers are willing and able to produce and offer at various prices in a given
time and place. In other words, supply is the amount of goods and services
available for sale at given prices in a given period of time and place. Supply
implies the ability and willingness of sellers to sell (Pagaso, 2006).
The supply function shows the dependence of supply on the price that
affects it and is expressed as:
Qs = f (P)
The Law of Supply
The law of supply states that the quantity offered for sale will vary
directly with the price. This means that as price increases, quantity supplied
also increases; and as price decreases, quantity supplied also decreases. This
direct relationship between price and quantity supplied is the law of supply
(Pagaso, 2006). Producers are willing and able to produce and offer more
goods at a higher price than at a lower price. Obviously, sellers offer more
goods at higher prices because they make more profits. Such behavior of
sellers or producers is a natural inclination. No businessman is willing to
produce goods if he makes no profit.

The Ceteris Paribus Assumption of Supply

The law of supply is true only if we apply the assumption of ceteris
paribus. This would mean the law of supply is valid if the determinants of
supply, like cost of production, technology, number of sellers, and so forth,
are held constant.

Validity of the Law of Supply

As price increases, quantity supply also increases,

As price decreases, quantity supply also decreases.

The supply schedule shows the different quantities that are offered for
sale at various prices. The supply schedule may reflect the individual
schedule of only one producer or the market schedule showing the aggregate
supply of a group of sellers or producers. Table 2 gives you an idea of a supply
schedule.

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Table 2. Hypothetical Supply Schedule of Brand.

PRICE QUANTITY SUPPLIED

5 5 Table 2 indicates that a seller offers
10 10
a big quantity of brand Y in the
15 15
20 20 market if the price is high and
25 25 likewise, sells only a few when the
30 30 price is low.
35 35
The supply schedule as shown in Table 2 can also be illustrated in a
graphical form known as the supply curve. This is shown in Figure 5.

Figure 5. Graphical Illustration of the Supply Curve.

It can be noted that the supply

curve has an upward slope. It
shows that price and quantity
supplied are directly related to
each other. This kind of
relationship depicts the law of
supply. We label our supply
curve with S to indicate the
entire supply schedule.

NON-PRICE DETERMINANTS OF SUPPLY

The above illustration and figure show that the only factors that vary
are price and quantity supplied. But, in the real world, supply is influenced
by factors other than price. These factors are assumed constant for the
purpose of simplifying the study of the relationship between price and
quantity supplied.
If the assumption of ceteris paribus is dropped, the non-priced variables
will now affect to influence supply. These non-price variables or factors are:
 technology;
 cost of production;
 number of seller;
 prices of other goods;
 rice expectations;
 taxes and subsidies; and
 availability of raw materials.

Thus, the expression: D = f ( T, CP, NS, PG, PE, TS, AR). The so-
called non-price factors can cause an upward or downward (rightward or

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downward) change in the entire supply of the product, and this change is
referred to as a shift of the supply curve.

Figure 6: Illustration on the shifting of the supply curve.

Determinants of Supply or the Non-Price Factors of Supply

1. Technology. This refers to the method of production or how something is
produced. Having modern technology means being able to produce more. This
means more supply. If producers had to rely on old technology which uses
animals instead of machines, production would be slower. Better technology
means more supply produced and less cost of producing these goods.
2. Cost of production. This refers to the things a producer has to spend on
to keep making goods and services. This includes: raw materials, laborers,
bank loan interests, taxes, and land or building rent. An increase in the cost
of production makes it harder for the producer because he or she has to pay
more to keep producing. This is why when the cost of producing goes up, the
supply of goods most likely goes down.
Think of a factory. A factory needs workers. The owner of the factory
needs to pay the workers so that they will help him or her make goods. Wage
is a cost that the owner has to pay. It is the cost of making something. This
means that if the owner has to pay more wages, the cost of production goes
up. This means the supply of the goods will go down.
For example, businessmen don't want to sell more goods if they are not
sure that they will get as much money. If they have to pay workers more, that
means less of their profit will stay with the owners. They have to give more of
what they earn to the workers. What if sellers just increase the price when
the cost of production goes up? Won't this help them get more money? It
might, but not all the time. Remember that higher prices mean less people
will buy. This means that if the cost of production doesn't go down soon,
sellers will continue losing money. They might have to stop producing
completely.

3. Number of sellers. More sellers or more factories mean an increase in

supply. On the other hand, less sellers or factories means less supply.

19
4. Prices of other goods. Since a price increase means less demand, a
producer may choose to produce something else to continue gaining profit or
to have more profit. Let us say the price of rice goes up. If so, then a farmer
may choose to produce more corn instead because he knows that less people
will buy rice from him.

5. Price expectations. If producers expect prices to rise very soon, they

usually keep their goods and then release them in the market when the prices
are already high. Sadly, this leads producers to keep their supply of goods
until prices increase. This is called artificial shortage. This is usually what
happens when the government says that the prices of some basic goods are
about to go up.
Some basic goods are: gasoline, rice, milk, or cooking oil. What about
if producers expect a price decrease? In this case, they will lessen production.
Still, there are some exceptions, like farmers. They cannot lessen their crop
supply especially when their crops are already growing. On the other hand,
many factories increase the number of their goods due to expected price
increase.

6. Taxes and Subsidies. Certain taxes increase the cost of production.

Higher taxes discourage production because it reduces the earnings of
businessmen. That is why the government extends tax exemptions to some
new and necessary industries to stimulate their growth. Similarly, tax
incentives are granted to foreign investors in order to increase foreign
investment in the Philippines. This will result to more goods.
In the case of subsidies, there is financial assistance to producers.
Clearly, subsidies reduce the cost of production. This induces businessmen
to produce more. Transportation subsidy is one example given by the
Department of Agriculture to the pork trader to lower the entry price of pork
to the retailer.

7.Availability of raw materials. Another possible non-price determinant of

supply that can cause an upward shift of the supply curve is through
improved availability of raw materials and resources. Since more resources
can be used to produce a bigger output of the good, then supply increases.

Source: Hutchinson, D. and Victoria, U., 2021. 3.5 Other

Determinants of Supply. [online] Pressbooks.bccampus.ca.

Sample Drill, by way of question and answer, on the concept of

QUANTITY SUPPLIED and SUPPLY

Question 1: If the price of flour products increases, what will happen to the
quantity supplied for that product? Would there be shifting of the supply
curve or movement along the supply curve?

20
Answer 1: The quantity supplied for flour products will increase. The Law of
Supply states that when the price increases, the quantity supplied will also
increase, and if the price decreases, the quantity supplied also decreases. The
relationship, therefore, between the price and quantity supplied is positive
and directly proportional.

Since the question is a price factor, the one affected is the quantity
supplied, and in such case, the movement will be along the supply curve—no
shifting of the demand curve for the same reason that the variable is PRICE
and not NON-PRICE.

Figure 7. Illustration of movement along the curve.

Question 2: The month of December is an off-season for durian and avocado.

These fruits are the key ingredients in making durian and avocado flavored
ice cream. What effect does it give to the supply of durian and avocado flavored
ice cream? Explain the shifting of the supply curve.

Answer 2: The supply of durian and avocado flavored ice cream will decrease
due to the lack of available raw materials. The non-price factor that affects
the decrease in "supply" is the availability of raw materials, which will shift
the supply curve to the left, indicating a decrease in the supply.

21
Figure 8 shows
shifting of the
supply curve
inward or to the left
indicating decrease
in supply.

Figure 8. Shifting of the supply curve inward.

Question 3: Prices of agricultural products like corn, legumes, fish mill, copra
mill, et cetera. have increased. These agricultural products are used as main
ingredients in the production of animal feeds.

a. What would be the probable outcome as to the supply of animal

feeds?
b. What will happen quantity demanded for agricultural products?
c. What will happen to the quantity supplied for agricultural products?

Answer 3a: The supply for animal feeds will decrease, and the curve will shift
to the left. When the cost of production increases the supply of that product
will naturally decrease due to the additional expenses that will be incurred by
the producer. This additional cost will be shelled out by the producers for the
production of the same amount of output. With the same budget and higher
cost, the producer will only produce a smaller amount of goods.

Answer 3.b: The quantity demanded for agricultural products will decrease.
This can be supported by the Law of Demand, which states that when the
price increases for agricultural products, the quantity demanded for the said
product will decrease.

Answer 3.c: The quantity supplied for agricultural products will increase
when there is an increase in its price. This is supported by the Law of Supply,
which states that the increase in price will cause an increase in the quantity
supplied.

22
Let Us Practice

Activity 1. Test Me!

Direction. Answer the questions regarding the basic and fundamental

principles of Law of Supply and Determinants of Supply.

1. If the downward sloping of the demand curve suggests a negative,

indirect, and inverse relationship between the price and quantity
demanded, what about the upward sloping of the supply curve?
________________________________________________________________________
________________________________________________________________________

2. Explain the two mathematical expression: Qs = f (P) and D = f (T, CP,

NS, PG, PE, TS, AR).
________________________________________________________________________
________________________________________________________________________

3. What will happen to the quantity supplied when there is an increase in

the price of a product? Would there be a shifting of the supply curve?

________________________________________________________________________
________________________________________________________________________

4. Graphical presentation shows a leftward change in the supply of pork

when the Philippines was hit by the disease known as African Swine
Flu (ASF). Give your economic analysis using the basic principle on
supply.
________________________________________________________________________
_______________________________________________________________________

Let Us Practice More

Activity 2. Analyze this!

Make an economic analysis of the given situation by applying the

principles you have learned in this topic.

A. Unionized workers may be able to negotiate with management for

higher wages during the period of economic prosperity. Suppose that
workers at automobile assembly plants successfully negotiate a
significant increase in their wage package. How would the new wage
contract be likely to affect the market supply of new cars?

23
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

B. At the price of P700 per unit, the manufacturer of high valued native
bags is willing to produce 150 units in one month. At the price of P1350
per unit, what would likely be the behavior of the manufacturer as to
the number of units of production? Explain and support your answer.

________________________________________________________________________
________________________________________________________________________
________________________________________________________________________

Let Us Remember

Activity 3. Show Me The Plot 1!

Directions. Plot the following hypothetical demand schedule of pork and

supply schedule of bangus in the market in a paper and explain each graph.

Price of Beef (Per Kilo) Quantity Demanded (In Kilos)

P 150.00 90
P 140.00 100
P 100.00 130
P 75.00 150
P 60.00 170
P 40.00 200

Price of Bangus (Per Kilo) Quantity Supplied (In

Thousands)
P 120.00 700
P 100.00 650
P 90.00 600
P 75.00 500
P 60.00 400
P 50.00 300

24
Activity 4. Sum Me Up!

1. Based on the lesson about supply and the Law of Supply, I have learned
that___________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________

2. Cite specific real-life scenarios as to where you can use your learnings
about the factors of supply.
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________
_______________________________________________________________________

25
Lesson Demand and Supply in

3 Relation to the Prices of

Basic Commodities
We have seen that on the consumers' demand side, different amounts of
goods and services are a function of their prices. Similarly, producers willingly
supply different amounts of goods and services depending on their prices.
What happens when suppliers and consumers meet?

In this lesson, we will illustrate the effect of combining supply and

demand. We will also determine how the forces of demand and supply operate
through the market to produce an equilibrium price and equilibrium quantity.

Let Us Study

Alfred Marshall, a British economist, emphasized in his work

Principles of Economics (1890), that the price and output of a good are
determined by supply and demand, which acts like a "blade of scissors" in
determining the price. This is known as the market equilibrium.

Market Equilibrium

From a separate discussion of demand and supply, we now proceed with

reconciling the two. The meeting of supply and demand results in what is
referred to as "market equilibrium". As earlier said, the market referred to
here is a situation where buyers and sellers meet, while equilibrium is
generally understood as a "state of balance".

Figure 8. Market Equilibrium.

26
Market equilibrium generally pertains to a balance that exists when
quantity demanded equals quantity supplied. Market equilibrium is the
general agreement of the buyer and the seller in the exchange of goods and
services at a particular quantity. At the equilibrium point, there are always
two sides of the story, the side of the buyer and that of the seller (Villegas,
2010).

For instance, given the price of P30.00, the buyer is willing to purchase
150 units. On the seller side, he is willing to sell the quantity of 150 units at
a price of P30.00. This simple illustration simply shows that the buyer and
seller agree on one particular price and quantity, that is, P30.00 and 150
units. This is the main concept of equilibrium: that there is a balance between
price and quantity of goods bought by consumers and sold by sellers in the
market.

Table 3. Supply and Demand Schedules Indicating the Equilibrium Price

and Equilibrium Quantity

Quantity Supplied Price Quantity Demanded

50 P 10.00 250
100 P 20.00 200
150 P 30.00 150
200 P 40.00 100
250 P 50.00 50

Equilibrium Market Price

Equilibrium market price is the price agreed by the seller to offer its good
or service for sale and for the buyer to pay for it. Specifically, it is the price at
which the quantity demanded of a good is exactly equal to the quantity
supplied of the same good (Market price Definition, 2021).

Let us work through the supply and demand schedules in Table 3 to see
how supply and demand determine market equilibrium. To find the market
price and quantity, we find a price at which the amount desired to be bought
and sold just matches. If we try a price of P10.00, a producer would like to
sell 50 units while consumers want to buy 250 units. The quantity demanded
exceeds the quantity supplied. At price P40.00, a quick look shows that the
quantity supplied, which is 200 units, exceeds the quantity demanded, which
is 100 units.

We could try another process, but we can easily see that the equilibrium
price is P30.00. At P30.00, consumers' desired demand of 150 units is equal
to the desired supply, which is also 150 units. This denotes that supply and
demand orders are filled, and consumers and suppliers are satisfied.

27
Figure 9. Equilibrium price and equilibrium quantity established
by interaction between demand and supply.

What will happen when there is a market disequilibrium?

When there is a market disequilibrium, two conditions may happen: a
surplus or a shortage may occur, as shown in Figure 9.
Surplus is a condition in the market where the quantity supplied is more
than the quantity demanded. When there is a surplus, the tendency is for
sellers to lower market prices in order for the goods and services to be easily
disposed from the market. This means that there is a downward pressure to
price when there is a surplus in order to restore equilibrium in the market
(Villegas, 2010). This is depicted in Figure 9 by the arrow from point b going
down to the equilibrium point.
Generally, a surplus happens when there are more products sold in the
market by sellers, but few products are bought by consumers. This is because
the quantity of goods that buyers are willing to buy at a given price is less
than the quantity of goods that sellers are willing to sell at the same price.

28
Figure10. Demand and Supply curve showing surplus or excess supply.

At equilibrium price P1, quantity demanded and quantity supplied are

equal. However, with an increase in price at P2, the quantity demanded
decreases while quantity supplied increases that resulted in Qs > Qd
indicating an excess supply.
Shortage is basically a condition in the market in which quantity
demanded is higher than quantity supplied at a given price. As you may have
observed in Figure 9, a shortage exists below the equilibrium point. In
particular, a shortage happens when the quantity demanded is greater than
the quantity supplied at a given price.
When there is a shortage of goods and services in the market, there is
an upward pressure on prices to restore equilibrium in the market. In this
particular situation, it is the consumers that will influence that price to go up
since they will bid up prices in order for them to acquire the goods or services
that are in short supply. For as long as there is disequilibrium in the market,
prices will still go up until such situation is normalized.

Figure 11 depicts shortage or

excess demand when P1 is lowered
to P2. This will build-up upward
push on prices until restoring the
equilibrium point.

Figure 11. Shortage or excess demand.

29
The Law of Demand and Supply
When supply is greater than demand, price decreases;
When demand is greater than supply, price increases;
When supply is equal to demand, price remains constant.

This constant price is the equilibrium or market price. This means that
buyers and sellers agree on that price.
Price Controls
When the market is experiencing a surplus, there is a possibility that
producers will lose. Conversely, when the market is encountering a shortage,
there is a likelihood that consumers will be abused. What happens if
disequilibrium in the market persists for a longer period of time? If this
happens, the government may intervene by imposing price controls.
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
(Price Controls, 2021).
Republic Act No. 7581, otherwise known as The Price Act and
Republic Act No. 10623, are the governing laws on price control. These two
laws provide protection to consumers by stabilizing the prices of basic
necessities and prime commodities and prescribes measures against price
increases during emergency situations and like occasions (Republic Act No.
7581 IGOV.PH, 2021).

Two types of price controls:

1. Floor Price - is the legal minimum price imposed by the government
on certain goods and services. The setting of a floor price is undertaken
by the government if a surplus in the economy persists.
Generally, this policy is resorted to in order to prevent bigger losses on
the part of the producers. A floor price is a form of assistance to
producers by the government for them to survive in their business.

2. Price Ceiling - is the legal maximum price imposed by the government.

In most cases, a price ceiling is utilized by the government if there is a
persistent shortage of goods in the economy. The government regularly
monitors the market and imposes a maximum price on commodities,
which is to be strictly followed by producers and sellers.

A price ceiling, therefore, is imposed by the government to protect

consumers from abusive producers or sellers who take advantage of the
situation. This is usually done by the government after the occurrence of a
calamity like a typhoon or severe flooding.

30
Market Equilibrium: A Mathematical Approach

In the previous discussions, we have discussed and presented market

equilibrium through a graphical presentation. In this section, we will try to
apply a mathematical equation in determining the price and quantity
equilibrium in the market.
Equation:

Demand equation: QD = a - b (P) (1)

Supply equation: QS = a + b (P) (2)

Equilibrium condition: QD = QS (3)

Take note that in the said equations, there are three unknown variables:
QD, QS, and P where QD is quantity demanded, QS is quantity supplied, and P
is the price. Moreover, the parameter in equations (1) and (2) is a and the
coefficient is b. Given these equations, we can now determine the equilibrium
price and quantity.
Example:
Look for the PE and QE given the following information:

QD = 68 - 6P
QS = 33 + 10P
Solving the problem, we can simply state our equilibrium equation as:
a - b(P) = a + b(P)

Substituting our values, we have:

68 - 6(P) = 33 + 10(P)

Solving for the unknown (P), we simply group like terms, thus

68 - 33 = 10P + 6P
35 = 16P

Dividing both sides by 16, we get

P = 2.19

Now we have determined the price of the goods. The next problem for us
is to determine the equilibrium quantity. Since we already know the price, all
we have to do is to substitute the value of the price to our previous equations,
thus:

68 - 6 (2.19) = 33 + 10 (2.19)

31
Solving the equation, our QD = QS is equal to 54.8 or we can set the value
in the whole number. Therefore, the equilibrium quantity is equal to 55 units
and the equilibrium price is P2.19.

Let Us Practice

Activity 1. Show Me The Plot 2.

Direction. Plot the following hypothetical market demand and supply
schedules for commodity Y and explain the graph.
Quantity Supplied Price Quantity Demanded
5 P 6.00 9
6 P 7.00 8
7 P 8.00 7
8 P 9.00 6
9 P10.00 5
10 P11.00 4

Activity 2. Find My Match!

Direction. Match the items in Column A with Column B.

Column A Column B

1. General agreement of the a. Floor price

buyer and the seller in the
exchange of goods and services at
a particular quantity.
2. The legal minimum price b. Price control
imposed by the government on
certain goods and services.
3. A condition in the market c. Adam Smith
where the quantity supplied is
more than the quantity
demanded.
4. British economist who d. Market
introduced a kind of pricing equilibrium
scheme by combining the law of
demand and the law of supply.
5. The quantity of a commodity e. Shortage
which buyers will buy at a given
time and place will vary inversely
with the price.
6. The legal maximum price f. Surplus
imposed by the government.
7. This means that as price g. Alfred Marshall

32
increases quantity supplied also
increases; and as price decreases,
quantity supplied also decreases.
8. The specification by the
government of minimum or
maximum prices for certain h. Price ceiling
goods and services.
9. Basically a condition in the i. Demand
market in which quantity
demanded is higher than
quantity supplied at a given
price.
10. It means all other things j. Ceteris Paribus
equal or constant.
k. Law of Supply

Let Us Practice More!

Activity 3. Show Me The Plot 3!

Directions: Plot the following hypothetical market demand and supply
schedules for commodity X in a paper.
Quantity Demanded Price Quantity Supplied
(Units) (Peso) (Units)
150 P 30.00 900
300 25.00 800
350 20.00 700
600 15.00 600
800 10.00 400
1000 5.00 200

Answer the following questions based on the plotted graph.

1. What is the equilibrium price? Equilibrium quantity?

________________________________________________________________________
________________________________________________________________________

2. What condition exists when quantity supplied is greater than quantity

demanded?

________________________________________________________________________
________________________________________________________________________

33
3. What condition exists when the quantity demanded is greater than the
quantity supplied?
________________________________________________________________________
________________________________________________________________________

4. Given the following equation:

P/2 = 28 -Qd; and 6/5 = Qs/5 – P

Determine and show the following:

a. Price equilibrium;
b. Market equilibrium; and
c. Graphical illustration of the point of equilibrium
d. What will happen if the price equilibrium is increased to 8?
e. What will happen if the price equilibrium is decreased to 2?

Let Us Remember

Activity 4. Sum Me Up !

Based on lesson 3, I have learned that _______________________________

_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

34
Lesson
Prices of Commodities and
4 Its Impact to Consumers

Buyers and sellers play a significant role in the marketplace. A lot of

studies have been published regarding how demand and supply affect the
prices of commodities. In this module, we are more focused on discussing and
analyzing how the prices of different commodities impact the consumers.
Prices of commodities can go up, stabilize or go down. Learning an idea
of the basic knowledge on "how and why" the prices of goods and services
increase and decrease in our country can widen your understanding on what
are the factors that affect the prices of commodities and how this affects the
buying behavior and purchasing power of the consumers.
Furthermore, there are some activities that capture your interest to
better understand the lesson. These activities will measure your decision-
making and learning to approve judgment in a particular situation. It will also
give you practical scenarios that will help you in your buying decisions.

Let Us Study

Prices of Basic Commodities

Commodities are extremely important as they are essential factors in
the production of other goods. A wide array of basic commodities exists,
including coffee, rice, corn, sugar, and crude oil. These commodities are
traded constantly on the commodity market, domestically and internationally.
Prices changes as economic events unfold and trigger waves of buying and
selling. For example, let's take a look at crude oil. If the supply of oil increases,
the price of one barrel of oil will decrease. Conversely, if the demand for oil
increases, which happens during summer, the price of oil will increase.
Simply put, the prices of commodities are affected by the supply and demand
in the market. Each commodity is unique and will have a different set of
catalysts that can move the price each day.
Let us take a look at the simple diagram on the cycle of demand and
supply.

35
SUPPLY

DECREASE PRICE OF INCREASE PRICE OF

COMMODITY COMMODITY

DEMAND

Diagram 1

Buying Behavior of Filipinos

Buying behavior is the decision process and acts of people in buying and
using products (Chapter 6, Consumer Buying Behavor Notes, 2021). In terms
of buying behavior, Filipino have unique characteristics as consumers since
they buy a durable product for long-term used. It should be suited up with
their preference, behavior, brand loyalty, advertising, and value of money.

1. Preference – is the way it fits into his/her taste, beauty, hygiene,

health, and convenience.
2. Behavior brand loyalty – they prefer brand types of products.
3. Advertising – commercial affects preferences in buying products.
4. Value of money – choosing affordable products.

Basic Commodities vs. Prime Commodities

There are things that you want to buy, like cellphones, laptops, tablets,
and any gadgets you love to buy. Delicious food you can buy in the mall and
in the market. You want to buy wonderful dresses and stylish shoes. You want
expensive cars and motorcycles that fit your convenience. However, there are
things you buy for daily needs like rice, meat, beef, fruit, and vegetables.
Let us take a closer look at the comparison of basic necessities and
prime commodities as the two terms are defined under Republic Act No.
10623, otherwise known as the "Price Act".

36
(dti basic necessities – Google Search, 2021)

Let Us Practice

Activity 1. Judge This!

Directions. Compare the prices of the given basic commodities and answer
the proceeding questions.

ONE SACK OF RICE ONE SACK OF RICE

( 1.6.0 VARIETY) ( MASIPAG VARIETY)

Price: P 2,300 Price: P 1,800

Guide Questions:
1. Which will you prefer to buy from the given two varieties of rice? A sack
of rice priced at P2,300 or a sack of rice priced at P1,800? Why?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

37
2. What are the compelling factors that you considered in making your
judgment?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

Activity 2. Anticipate the Effect!

Directions. Apply the Law of demand and supply in terms of the price of
commodities. Write INCREASE or DECREASE of price.

Product Price

1. Higher Demand

2. Lower Demand

3. Higher Supply

4. Lower Supply

Let Us Practice More

Activity 3. Sound Decision Making!

1. Cite the specific product that you will still buy even though the price
will increase. Why this product?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

2. Cite a specific product that you will not buy if the price will increase?
Why this product?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

38
3. How does the price of the product influence your buying decision?
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

Let Us Assess

Activity 4. Measure Up Your Learning!

This assessment activity covers the principles, theories, and concepts

discussed regarding demand, supply, market equilibrium, and the analysis of
prices and their impact on the consumers. With your diligent effort in the
study, I am hopeful that you can still recall all the things that you have
learned in this module.

Directions. Read the questions carefully and choose the letter of the correct
choice.
1. The market equilibrium is determined by the:
a. market demand of the commodity.
b. market supply of the commodity..
c. the balancing forces of the demand and supply of the commodity.
d. any of these

2. Another term used for "equilibrium" is:

a. Deflation
b. Static
c. Growth
d. None of the above

3. Demand for computers increases despite the increase in the price.

This is due to a change in:
a. supply
b. quantity demanded
c. demand
d. none of the above

4. The following statements are correct EXCEPT:

a. Authority to tax is inherent to every state.
b. Taxes are compulsory contributions to support the state.
c. Oversees workers cannot be taxed for their income earned abroad.
d. Taxation regulates the flow of income in an economic system.

39
5. The following are the shifters of demand, EXCEPT:
a. Taxes and subsidies
b. Preference
c. Price of related goods
d. Income

6. The following are shifters of supply, EXCEPT:

a. Technology
b. Number of sellers
c. Cost of production
d. Number of consumers

7. An increase in income will cause an increase in the demand for:

a. inferior product.
b. normal product.
c. substitute product.
d. complement product.

8. When the government imposes tax on a product, one would expect:

a. decrease in the demand.
b. increase in the quantity demanded.
c. decrease in the supply.
d. increase in the quantity supplied.

9. What is the market condition when quantity demanded is greater than

quantity supplied?
a. Shortage
b. Surplus
c. Disequilibrium
d. State of balance

10. What type of price control will the government impose if surplus
exists in the economy?
a. Price freeze
b. Price flooring
c. Price ceiling
d. Price revamp

11. The market supply curve shows:

a. the effect on market demand of a change in the supply of a good or
sources.
b. the quantity of a good that the firms would offer for sale at different
prices.
c. the quantity of a good that consumers would be willing to buy at
different price.
d. All of the above are correct.

40
12. An increase in the supply of a good will cause:
a. an increase in equilibrium price and quantity.
b. a decrease in equilibrium price and quantity.
c. an increase in equilibrium price and a decrease in equilibrium
quality.
d. a decrease in equilibrium price and an increase in equilibrium
quantity.

13. When the price of the good changes, the consumer would
substitute the lower-priced good for the higher on resulting in a
decrease in the demand for expensive goods.
a. Substitution effect
b. Increase of the price of substitute goods
c. Price decrease in the normal goods
d. Price increase of inferior goods

14. What goods are usually preferred when incomes are low?
a. Normal goods
b. Substitute goods
c. Complement goods
d. Inferior goods

15. ____________ describes how consumers make decision about what

to buy given their income and prices of goods and services.
a. Consumer behavior
b. Consumer theory
c. Consumer welfare
d. Consumer choice

Let Us Enhance

Activity 5. Elevate More!

Directions. Explain and give the basis of your answer. You will be graded
based on the following rubric: Application of economic principles 60%,
coherence and logical reasoning 30 %, and sentence structure 10%.

A. What economic principles would explain why a lot of people, in the

Philippine context, patronize pirated products over the original ones?
(15 points)

41
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________
_____________________________________________________________________

B. Current news on tv shows that the price of pork is peg at P400/kilo.

Due to the surge in the price of pork allegedly due to lack of supply, the
government imposes a sixty (60) days price ceiling in the amount of
P270 to P300.

Questions: (30 points)

1. Is such move a sound economic decision?

2. If your advice is solicited on how to resolve the problem, what advice
will you give?
3. Based on your learnings, what measure/s will you do to
IMMEDIATELY address the shortage of pork supply?

Let Us Reflect

Activity 6. Let Us Apply This!

As a student, how would you apply the economic concepts and

principles that you have learned in your real-life activities?

___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________

42
43
Activity 4. Measure Activity 2. Pretest
Up Your Learning! Find My
Match! 1. C
1. C 11. b
2. D
2. D 12. d 1. d 3. A
3. C 13. a 2. a 4. B
4. C 14. d 3. f 5. A
5. A 15. a 4. g 6. C
6. D 5. i 7. A
7. B 6. h 8. A
8. C 7. k 9. D
9. A 8. b
10. B 10. A
9. e
10. j
Answer key
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