Applied Economics – Grade 12

Alternative Delivery Mode

Quarter 1 – Module 2: Application of Supply and Demand
First Edition, 2020

Republic Act 8293, section 176 states that: No copyright shall subsist in any
work of the Government of the Philippines. However, prior approval of the government
agency or office wherein the work is created shall be necessary to exploitation of such
work for profit. Such agency or office may, among other things, impose as a condition
the payment of royalties.

Borrowed materials (i.e., songs, stories, poems, pictures, photos, brand

names, trademarks, etc.) included in this book are owned by their respective copyright
holders. Every effort has been exerted to locate and seek permission to use these
materials from their respective copyright owners. The publisher and authors do not
represent nor claim ownership over them.

Published by the Department of Education

Secretary: Leonor M. Briones
Undersecretary:
Assistant Secretary:
Development Team of the Module:
Development Team of the Module
Authors: Chalstan P. Cervantes
Authors:
ReniaRENIA
CHALSTAN P. CERVANTES, E. MANDALUPA
E. Mandalupa
Evaluator: Zalvy Jean P. Galindo
Evaluator: ZALVY JEAN P. GALINDO, GWENDYLOU E. DABLEO
Gwendylou E. Dableo
Management
Illustrator:Team:
Jay Michael A. Calipusan
Chairperson : Dr. Arturo B. Bayocot, CESO III
Management Team:
Regional Director
Chairperson:
Co-Chairperson: Dr.De
Dr. Victor G. Arturo B.Jr.,
Gracia Bayocot,
CESO CESO
V III
Regional Director
Asst. Regional Director
Co-Chairpersons: Dr. Victor G. De Gracia Jr., CESO V
Mala Epra B. Magna-ong
Asst. Regional Director
CES, CLMD
Mala Epra B. Magnaong
Mitglieder
CES, : Dr. Bienvenido U. Tagolimot, Jr.
CLMD
Members: EPS-ADM Dr. Bienvenido U. Tagolimot, Jr.
Regional ADM Coordinator
Ray Dr. Neil ImprogoButch M. Mahinay
Regional EPS-LR
EPS-Designate- AP
Vivian D. Echalico
EPS-LR
Printed in the Philippines by: Department of Education – Regional Office 10
Printed in the Philippines
Office Address: by ______________________________________
Zone 1, Upper Balulang Cagayan de Oro City 9000
Department
Telefax: (088)of880-7071,
Education – Bureau
(088) of Learning Resources (DepEd-BLR)
880-7072
Office Address:[email protected]
E-mail Address: Zone 1, Upper Balulang Cagayan de Oro City 9000
Telefax: (088) 880-7071, (088) 880-7072
E-mail Address: [email protected]

i
 12
Applied Economics
Quarter 1 – Module 2:
Application of Supply and Demand

This instructional material was collaboratively developed and

reviewed by educators from public and private schools, colleges and
or/universities. We encourage teachers and other education stakeholders
to email their feedback, comments, and recommendations to the Department
of Education at [email protected].

We value your feedback and recommendations.

Department of Education • Republic of the Philippines

ii
TABLE OF CONTENTS

What I Need to Know ……………………………………………………………. 1

Objectives ………………………………………………………………… 1

General Instructions……………………………………………………… 1
What I Know ……………………………………………………………………… 2

Lessons
Lesson 1: Law of supply and demand, and how equilibrium price
and quantity are determined ………………….……………. 5

Lesson 2: Factors affecting demand and supply.…………………….. 11

Lesson 3: Compare the prices of commodities and analyze the
impact on consumers.………………………………………. 18
Lesson 4: Market Structures ( perfect competition, monopoly,
oligopoly, and monopolistic competition)………………….. 25
Lesson 5: Effects of contemporary issues such as migration,
fluctuations in exchange rate, oil price increases,
unemployment, peace and order, etc. on the purchasing
power of the people…………………………………………. 34
Assessment ………………………………………………………………………. 41
References ……………………………………………………………………….. 51

iii
 WHAT I NEED TO KNOW

This module discusses the application of supply and demand. It also

discusses the factors affecting economic situation. It will help you deepen your
understanding on the market structures and effects in contemporary issues on
the purchasing power of the people. Moreover, this module will provide you with
information on the current economic situations.

This module has five lessons:

Lesson 1 – Law of supply and demand, and how equilibrium price and
quantity are determined
Lesson 2 – Factors affecting demand and supply
Lesson 3 – Compare the prices of commodities and analyze the impact
on consumers.
Lesson 4 – Market Structures (perfect competition, monopoly, oligopoly,
and monopolistic competition)
Lesson 5 – Effects of contemporary issues such as migration,
fluctuations in exchange rate, oil price increases,
unemployment, peace and order, etc. on the purchasing
power of the people

Enjoy and happy learning!

After going through this module, you are expected to;

1. explain the law of supply and demand, and how equilibrium price and
quantity are determined ABM_AE12-Ie-h-4;
2. discuss and explain factors affecting demand and supply ABM_AE12-
Ie-h-5;
3. compare the prices of commodities and analyze the impact on
consumers ABM_AE12-Ie-h-6;
4. explain market structures (perfect competition, monopoly, oligopoly, and
monopolistic competition) ABM_AE12-Ie-h-7;
5. analyze the effects of contemporary issues such as migration,
fluctuations in the exchange rate, oil price increases, unemployment,
peace and order, etc. on the purchasing power of the people
ABM_AE12-Ie-h-8;
6. point out the main ideas in the discovery of the structure of the atom and
its subatomic particles S11/12PS-IIIb-8;

1
 WHAT I KNOW

Before proceeding to the self-test activity section in this module, kindly answer
the pre-test below.

Name:___________________________________________ Score:_______
Date: _______
Multiple Choice: Encircle the letter that corresponds to the correct answer.

1. It is a condition that there is a direct relationship between the price of a

good and the quantity supplied of that good.
A. Law of Demand C. Supply Schedule
B. Law of Supply D. Surplus

2. It means that all other related variables except those that are being
studied at the moment and are held constant.
A. Ceteris Paribus C. Market Equilibrium
B. Income Effect D. Substitution Effect

3. It is a type of price where quantity demanded is equal to quantity supplied.

A. Economic price C. Normal price
B. Equilibrium price D. Unique price

4. There are Filipinos affected behaviours in buying an item when they see it
in the commercial on television. What is this term?
A. Advertisement C. Preferences
B. Demand D. Value of Money

5. It called as behaviour of Filipinos to buy an item. What is this term?

A. Durable items C. Less valuable
B. Higher Price D. Not suitable for them

6. It called as behaviour of the Filipinos in buying product that is affordable.

What is this term?
A. Advertisement C. Supply
B. Preferences D. Value of Money

7. When there is an increase of price for white sugar, customers switch to

brown sugar as an alternative. What type of good is the scenario
classified?
A. Complement goods C. Substitute goods
B. Important goods D. Valuable goods

2
8. Which type of market structures which is more competitive and many
sellers/producers competing each other with the same products?
A. Monopoly C. Oligopoly
B. Monopolistic competition D. Perfect competition

9. Which type of market structures which is less competitive and only one
few firm enjoys the activity in the market?
A. Monopoly C. Oligopoly
B. Monopolistic competition D. Perfect competition

10. The following are the causes of migration except:

A. Higher Salary C. Prosperity
B. Poverty D. Unemployment

11. Which organizational characteristics that establishes interrelationships

between the buyers and sellers in a particular market?
A. Market Structures C. Products
B. People D. Seller

12. It can increase the cost of business operations and can threaten the
profitability of business enterprises at their initial stage of operations.
A. Cost of Sales C. Price
B. Expenditures D. Taxes

13. It is the amount of foreign currency per unit of local currency.

A. Baht C. Exchange rate
B. Dollar D. Yen

14. It is an essential ingredient in maintaining economic development, social

order and political stability.
A. Executive order C. Peace and order
B. Law and order D. Policy maker

15. It is defined as the ability of any player in the market to significantly influence
the price in the market and the quantity to be produced or sold.
A. Market C. Products
B. Market Structures D. Seller

3
LESSON 1: Law of supply and demand, and how equilibrium price and
quantity are determined

WHAT’S IN

Have you tried buying goods on demand? Have you asked yourself why
the price is too high or too low? Do you believe that these form part in the
fundamental economic principle? In this lesson, you will discover why price
rises, goods falls down and vice-versa.

But before that, you have to unlock and familiarize first the unfamiliar
words that you will be encountering as you go along with the discussion in this
lesson.

WHAT’S NEW

Directions: Below are list of words related to demand and supply.

Encircle the words that can be found in the crossword
puzzle.

Supply Law Quantity

Demand Goods Equilibrium
Market Price Services
D O S M I C M I C S E R V I C E S T H G R M U N D L
E B I H G G H S D E Q W E R T A U Y O L G A W H E A
M W N J F F J A F D Q U A N T I T Y U S B R R Y R W
A T G K D D K Q WS W A C R E K J D A U Q K T G T A
N Y U L S S L WS U P P L Y U E G R N J U E G T T S
D O L P R E L A T I V E A B U T M A N C A T L D H D
N P A O Z A P E H F T S B Q I T D A I H N T Z O G F
L E Q U I L I B R I U M M O T J J R F T U S G G F
K N I U C X I T K R U F M A P H U B I K I Y F L G Y
G O O D S E E I B N O H K D K P R I C E F C E R E J

4
 WHAT IS IT

THE MARKET

A market is any activity for business set-up. It is where consumer buys

and the seller sells. It is categorized as local, national and international markets.
Some involves face-to-face contact between demander and supplier, others are
impersonal, with buyer and seller never seeing or knowing each other. The
concept of market is important because it is where a person who has excess
goods can dispose them to those who need them. This collaboration should
lead to an integral agreement between buyers and sellers on volume and price.
A purely competitive market is known to be as unique way of competition in
which there are many competing firms selling identical products or services.

DEMAND

Demand is the value of goods and services that buyers are willing to
purchase in every price. A demand schedule depicts the different quantities the
consumer is willing to buy at numerous prices. It centers on unlimited wants.

Demand function shows how the quantity demanded of a good depends

on its determinants, the most important of which is the price of the good itself,
thus, the equation :

Qd = f(p)

This denotes that the quantity demanded for a good is reliant on the price
of that good. Presented in Table 1 is a hypothetical monthly demand schedule
for an empanada for one individual, Juan. The quantity demanded is
determinable in each price with the following demand function:

Qd = 6-P/2

Table 1 Hypothetical Demand Schedule of Juan for Empanada

Price per Empanada Quantity Demanded

P0 6
2 5
4 4
6 3
8 2
10 1

5
 At price P10, Juan is willing to buy one empanada for a given period. As
price goes down to P8, the quantity he is willing to buy goes up to two . At price
of P2, he will buy five. There is an indirect relationship between the price of a
commodity and the quantity demanded for that good. The lower price allows
the consumer to buy more, but as price rises, the amount the consumer can
afford to buy tends to go down.

THE LAW OF DEMAND

The law of demand is the basic principle of economics. After observing

the behavior of price and quantity demanded in the above schedule, we can
now state the Law of Demand. Using the assumption “ceteris paribus”, meaning
all other things being constant, there is an inverse relationship between the
price of a good and the quantity demanded for that good. The higher price
consumers will demand a lower quantity of a good. The low price of the good
influences the consumer to buy more.

SUPPLY

Supply describes the total value of a good or service that is available to

customers. The supply schedule illustrates different quantities the seller is keen
to sell at various prices. The supply function shows the dependence of supply
on various determinants that affect it.
Assuming that the supply function is given as Qs = 100+5P and is used
to determine the quantities supplied at the given prices.

Table 1.2 Hypothetical Supply Schedule of James for Rice in One Week

Price of Rice in Php (per kilo ) Supply (in kilos )

20 200
40 300
60 400
80 500
100 600

As can be seen in Table 1.2, the relationship between the price of Rice
and the Quantity that James is willing to sell is direct. The greater the price, the
higher the quantity supplied.

6
THE LAW OF SUPPLY

The schedule shown above depicts a positive or direct relationship that

prevails between price and quantity supplied. As price increases, the quantity
supplied rises; as price decreases, the quantity supplied falls. This relationship
is called the LAW OF SUPPLY. A supply schedule tells us that the firms will
produce and offer for sale more of their product at a high price than a low price.

Price is the value that consumers exchange to obtain a desired product.

It is an obstacle from the viewpoint of the consumer or buyer, who is on the
paying end. The greater the price, the less the consumer will purchase. But the
supplier or seller is on the receiving end of the product’s price. To a seller, price
represents income, which serves as an incentive to produce and sell more
products. The greater the price, the higher this incentive and the higher the
quantity supplied.

Supply and Demand: MARKET EQUILIBRIUM

Demand and supply can identify how the buying decisions of households
and the selling decisions of businesses interact in determining the price of a
product and the quantity actually purchased and sold. Market equilibrium is a
condition where demand is equal to supply. The equality means that the
quantity that sellers are willing to sell is also the quantity that buyers are willing
to purchase for a price. As a market experience, equilibrium is the stability of
market demand, supply and price. It is also an agreement between how much
buyers and sellers are willing to transact. Equilibrium price is the price in the
market at which demand and supply are equal. A shortage occurs when
quantity demanded surpasses quantity supplied. While a surplus occurs when
quantity supplied exceeds quantity demanded.

Example of Determination of Market Equilibrium :

Assume a demand and supply function as the following:

(Demand) P=60-2Qd (Supply) P=30+4Qs

Where : P=price
Qd = Demand
Qs = Supply in thousands

50-2Qd = 20+4Qs

At equilibrium, P=50 and Q = 5 as illustrated by the demand-supply schedule

and graph below.

7
 Table 1.3 Demand-Supply Schedule

Demand Supply Price

58 34 1
56 38 2
54 42 3
52 46 4
50 50 5
48 54 6
46 58 7
44 62 8
42 66 9
40 70 10

8
WHAT’S MORE

Directions: To explain the law of demand and supply, indicate the

effects of the given statements of a commodity based on the following
outcomes. Write the letter of your answer based from the following
choices
A. Increase B. Decrease C. No change

1. Decrease in the price of commodity X

A. Demand for commodity X _______
B. Supply of commodity X _______

2. Anticipated increase in general price level of basic commodities

A. Demand for basic commodities _______
B. Supply of basic commodities _______

3. The price of white sugar increased by 10 pesos

A. Demand for basic commodities _______
B. Supply of basic commodities _______

4. The price of pandesal increased by 1 peso

A. Demand for Pandesal _______
B. Supply of Pandesal _________

5. The price for electronic gadgets increased by 500 pesos

A. Demand for electronic gadgets ___________
B. Supply of electronic gadgets _______

9
 WHAT I HAVE LEARNED

Directions: To explain the law of demand and supply, make a demand-supply

schedule. Assume a demand and supply function as follows:
(Demand) P=40-2Qd (Supply) P=15+4Qs

10
 LESSON 2: Know the factors affecting demand and supply

WHAT’S IN

Supply and demand are essential in the market economy. Supply and
demand influenced each other and does impact the prices of consumer goods
and services within an economy. Rising and decreasing in commodities prices,
abundance and limited supply is well understood by analyzing the impact of the
factors affecting demand and supply. Sellers and consumers play a crucial role
as to how prices are determined. As sellers, it is important to know what are the
factors affecting consumers’ demand and to come up with better strategies in
delivering good quality products and services to consumers to ensure good
value for money. As buyers, it is important to know how sellers priced their
products based on the factors affecting supply and demand. Better
understanding of this aspect helps the consumers on making wise buying
decisions. In general, both sellers and buyers will have a better understanding
and grasp as to how buying and selling activities affects the economy as a
whole.

WHAT’S NEW

Directions: Classify and determine whether the given word is a factor affecting
supply or a factor affecting demand. Write S for factors affecting supply and
write D for factors affecting demand.

________1. Number of sellers ___________ 6. Number of consumers

________2. Income ____________ 7. Taxes and Subsidies

________3. Price of Related Goods ____________ 8. Taste
________4. Price of Resources ____________ 9. Income

________5. Technology ____________ 10. Price Expectations

11
 WHAT IS IT

Non – Price Determinants of Demand:

The non-price factors once ceteris paribus assumption is dropped are now
allowed to influence demand. Cited below are the non-price factors affecting
demand:

1. Tastes and Preferences – Taste of the product affects the demand that
the buyer is willing to pay at a certain price. Once the product becomes
more desirable when it comes to the consumers taste and preferences
means the more products will be demanded at a certain price.
Unfavorable change in the consumer’s taste and preferences will lead to
decrease of the products demand.

2. Number of Consumers – An increase of number of consumers in the

marketplace leads to the increase of demand. A decline of the number
of consumers in the marketplace decreases the demand.

3. Income –The income of the consumers affects their capacity to buy a

certain product. If consumer income increases, the consumers capacity
to buy also increases. If the consumers income decreases, the
consumer’s capacity to buy a product also decreases.

4. Prices of Related Goods – An increase or decrease of the demand on

the price of a related good depends whether the related good is
classified as a substitute or a complement product.

 A substitute product is classified as a good that can be replaced in

place of another product when the preferred product is not available.
 A complementary good is classified as a product that is used
together with another good.
 Unrelated Goods is a change in the price of one product has little or
no effect on the demand for the other product. Examples are butter
and volleyball, carrots and automobiles.

5. Change in customers’ expectations - An expectation of a higher future

price increase may cause the consumers to buy more for a specific
product in order to beat the possibility of price increase, thus it increases
the current demand.

12
Non-price Determinant of Supply
1. Price of Resources – The cost of production incurred by the firm is
determined and is affected by the prices of the resources used in the
production process. Increase of the resources prices also increases
the production cost, assuming a particular product price, it potentially
reduces the profits.

2. Technology – Latest development and advancement in technology

enable firms to produce more units of output that leads to lower
production costs.

3. Taxes and Subsidies – Businesses considered taxes as an expense.

An increase of the production cost will also increase the sales of
property taxes and resulting to a reduced supply.

4. Prices of Other Goods –Companies that manufacture or sell a

particular product switched to other product line by means of
increasing its production of “other goods” when the prices of the
“other goods” increases in order to increase the profit.

5. Price Expectations –The willingness of a seller to produce or supply

a product is affected by the expectations of the product’s future price.

6. Number of Seller – The more the sellers are in the marketplace, the
greater the supply. The fewer the sellers mean there is less supply.

13
 WHAT’S MORE

Directions: Provide a concise and a brief statement to support your

answer.

1. An increase in the price of inputs leads to a decrease in supply.

Student’s
explanation:____________________________________________________
______________________________________________________________

2. If there are more producers in the market, there will be a larger supply of
products/services.

Student’s
explanation:____________________________________________________
______________________________________________________________

3. The increase in the level of production technology will increase supply.

Student’s
explanation:____________________________________________________
______________________________________________________________

4. Substitute goods are typically consumed together.

Student’s
explanation:____________________________________________________
______________________________________________________________

5. When income rises, the demand for the product will increase, when income
falls, the demand for the product will decrease.

Student’s
explanation:____________________________________________________
______________________________________________________________

14
 WHAT I HAVE LEARNED

Directions: Provide your own ideas regarding the given statement

below.

1. What are the things you learned from the discussion? How can you apply
these learnings in your real-life activities?

2. Cite specific real-life scenario as to where you can use your learnings about
the factors of Demand.

3. Cite specific real-life scenario as to where you can use your learnings about
the factors of Supply.

15
 ADDITIONAL ACTIVITIES

I. Directions: Identify the non-price determinants of supply from the following

statement. Select the answer from the given words below. Write the answer on
the space provided for each number.
- Change in resource prices - Change in prices of other goods
- Change in technology - Change in expectations
- Changes in taxes and subsidies - Change in number of suppliers

_____________________1. An expectation of a substantial rise in future

log prices decreases the supply of logs today.

_____________________2. An increase in the price of cucumbers

decreases the supply of watermelon.

_____________________3. An increase in the number of tattoo parlors

increases the supply of tattoos; the formation of women’s professional
basketball leagues increases the supply of women’s professional basketball
games.

_____________________4. An increase in the excise tax on cigarettes

reduces the supply of cigarettes; a decline in subsidies to state universities
reduces the supply of higher education.

_____________________5. The development of more effective wireless

technology increases the supply of cell phones.

_____________________6. A decrease in the price of microchips

increases the supply of computers; an increase in the price of crude oil
reduces the supply of gasoline.

16
II. Directions: Identify the non-price determinants of demand from the following
statement. Select the answer from the given words below. Write the answer on
the space provided for each number.
- Change in expectations - Change in number of buyers
- Change in the price of related goods - Change in Buyer tastes
- Change in income

____________________1. Physical fitness rises in popularity,

increasing the demand for jogging shoes and bicycles; patriotism rises,
increasing the demand for flags.

____________________2. A decline in the birthrate reduces the

demand for children’s toys.

____________________3. A rise in income increases the demand for

normal goods such as donuts, sports tickets, and necklaces while
reducing the demand for inferior goods such as used clothing, squash,
and inexpensive wine.

____________________4. A reduction in airfares reduces the demand

for bus transportation (substitute goods): a decline in the price of DVD
players increases the demand for DVD movies (complementary goods).

____________________5. Inclement weather in South America creates

an expectation of higher future prices of coffee beans.

17
LESSON 3: Compare the prices of commodities and its impact on
consumers

WHAT’S IN

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

studies have been published regarding how demand and supply affect the
commodities prices. 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, stabilized or go down. Learning an
idea of the basic knowledge on “how and why” the price of good and services
increase and decrease in our country. It widened your understanding on what
are the factors that affect the prices of commodities and how this affects the
buying behaviour 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.

WHAT’S NEW

Directions: Compare the price below of the basic commodities and answer the
proceeding questions.

1 Sack 1 Sack
Rice Corn

Price Cost-2,400.00 Pesos Price Cost-2,000.00 Pesos

18
Questions:

1. With the two variety of rice shown above, which will you prefer? A sack
of rice priced at 2,400 or a sack of corn priced at 2,000? Why?
______________________________________________________________
______________________________________________________________
______________________________________________________________
____________________________________________________________.

2. What are the things will you consider when buying products?

______________________________________________________________
______________________________________________________________
______________________________________________________________
____________________________________________________________.

WHAT IS IT

Price of basic commodities

Commence with of commodity is any tangible item that can be bought

and sold. Like an oil, rice, fruits, vegetables and meat. Price will be affected to
the demand of the commodity of the consumers. When there will be rise of price
of chicken meat also there will increase of price in a beef. It is called as
substitute goods. However, when there is low stock of rice there will be higher
increase of price of a corn is it called as complement goods. The basic prices
of commodities will be affected on supply and demand of a particular good.
Talking about supply and demand that if the price increases the demand
decreases while decreasing the price if the supply increases. Demand is the
consumer what they needs however supply is the product the consumer needs.
Look at the diagram below on the cycle of supply and demand.

19
 Supply

Decrease Price Commodity Increases Price Commodity

CYCLE OF LAW OF SUPPLY

AND DEMAND

Demand

Buying Behaviour of Filipinos

In term buying behaviour of Filipino have unique characteristics as

consumers since they buy a durable product for long term used. It should be
suit up with their preferences, behaviour brand loyalty, advertising and value of
money.

1. Preference – is the way it fit in to his/her beauty, hygiene, health and

convenience.
2. Behaviour brand loyalty – they prefer brand types of product.
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 cell phone, laptop, tablet, 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 stylist shoes. You want
expensive cars and motorcycle that fit your convenience. However there things
you buy for daily needs like rice, meat, beef, fruit, and vegetable.

20
Basic commodities is different in prime commodities, basic commodities is the
thing that you really need while prime commodities the things you like to buy
for yourself.
Example:

Basic Commodities:
o Firewood
o Charcoal
o Cooking oil
o Salt

Prime Commodities

o Cell phone
o Cars
o Tablets
o Laptop

WHAT’S MORE

Direction: Apply the Law and supply in term of price of commodities. Write
INCREASE or DECREASE of price.

Product Price

1. Higher Demand

2. Lower Demand

3. Higher Supply

4. Lower Supply

21
 WHAT I HAVE LEARNED

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

______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
_________________..

2. Cite specific products that you will not buy if the price will increase? Why?
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
_________________.

3. How does the price of the product influence your buying decision?
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
______________________________________________________________
_________.

22
 WHAT I CAN DO

Directions: Read it carefully and follow the procedure given.

1. You will choose two stores in your community.

2. Try to investigate on how they put a price to a particular product or item
in their stores.
3. Compare the Price Basic Commodity in their both store.
4. Interview a consumer on what is the impact price of commodities to
them.
5. Write a scenario on how the price is given by the two stores and try to
compare their prices of commodities.
6. Give impact to the consumers in term of price of commodities they put
to their product.

Write here:

23
 ADDITIONAL ACTIVITIES

Compare the following commodities and write the Basic Commodities and
Prime Commodities in separate column.

o Firewood
o Cars
o Tablets
o Cell phone
o Salt
o Laptop
o Charcoal
o Cooking oil

Basic Commodities Prime Commodities

24
 LESSON 4: Market Structures (perfect competition, monopoly,
oligopoly, and monopolistic competition)

WHAT’S IN

Imagine yourself in a marketplace and try to observe the types of existing

sellers and the products they are offering. What have you observed? Compare
the prices of the commodities on the same products sold by many sellers, same
products sold by few sellers and a unique product specifically sold by one seller?
Is there any significant difference with the price? In this lesson, we will be able
to identify the types of market structures and how does the price is influenced
by the number of sellers selling the same or specific products.

Before we proceed to the lesson, let’s unlock and familiarize first the unfamiliar
words that you will encounter as you go along with the discussion in this lesson.

Activity Name: “Find Me”

Direction: Encircle the words that you will find that is related to market
structures and its characteristics.

P R I C E M A R K E T A V B E C E D R P S T S S E S
B S A D G O Q A S B T M A R K E T S T R U C T U R E
C C V E E N O N E I O L O R A S B A D I A S B E D C
A G R T Y O L I G O P O L Y C E U A B C C E D B C E
A E E R A P A G H R R E E S O E Y A F E E C S E S S
M O N O P O L I S T I C C O M P E T I T I O N B R E
O A D A L L A B E A V A M A P A R A R A A N A N E R
C S C V A B N M L O A B O S E V S S I K B S B O N I
E S A S Y A C T L E L L N V T B P R V E L U C T E U
C B U Y E R S H E O R E 0 B I C O V A R E M D H R O
F M E B R R R E R A Y T P E T E W T L E B E E N M S
I E B B S I J I N M R T O R I E E B R R N R F M I L
R P L A Y E R S R I O U L T O R R N Y E O H G L N Y
M E E S E R E A S E R E Y S N T E R E N P E N O D E

25
 WHAT’S NEW

Directions: Using the words you found in the crossword puzzle

define each word based on your own thoughts and
understanding.

1. ___________________________________________________

2. ___________________________________________________

3. ___________________________________________________

4. ___________________________________________________

5. ___________________________________________________

6. ___________________________________________________

7. ___________________________________________________

8. ___________________________________________________

9. ___________________________________________________

10. __________________________________________________

11. __________________________________________________

12. __________________________________________________

13. __________________________________________________

14. __________________________________________________

15. __________________________________________________

26
 WHAT IS IT

What is a Market Structure?

Market structure (also called market forms) describes the state of

a market with regards to competition or the actual settings in the market.

It also refers to the organizational characteristics that establish

interrelationships between the buyers and sellers of a particular market. Thus,
the participation of buyers and sellers are vital.

Competition is rivalry among many sellers in a particular market. As a

student we are always competing each other like sports, quiz bees and other
school related competition activities. Thus competition may help motivates us
to perform well to achieve our goals in life.

Market has impersonal competition among sellers who compete to sell

their goods and services among purchasers who use their purchasing power to
acquire the availability of products.

The major MARKET FORMS are:

• the same product are

sold by sellers
• the consumer is more
knowledgeable of the
products(no need to
advertise)
1. Perfect competition • many buyers and
sellers competing
each others
• firms are price taker
• ease entry/ exit of
firms

27
Perfect Competition

This is a type of market form in which there are more firms that sell the
same products or render services and no one has enough market power to be
able to set prices on the product or service without losing business as the
conditions for perfect competition are strict, there are only a few markets that
are considered to be perfectly competitive thus this market form only exist to
compare with other market forms.

A perfectly competitive market assumes a huge number of companies

to sell the same products. We call these companies "price takers" because they
have no market power or ability to control prices.

 Large number of buyers and sellers: There are many buyers and sellers
who will participate in the market at a given price.
 No barriers to entry and exit: There are no barriers to entry and exit for
firms and firms are able to enter or leave the market without any issues.
 Perfect information: All buyers are expected to know the price of the
product set by all sellers and sellers are supposed to know the production
process of their competitors.
 Price taker: they have to go along with the market price

These characteristics are mostly impossible to achieve in reality and

there are many markets that are perfectly competitive. In addition, information
is always imperfect and it is not possible for buyers to know exactly the price
set by all sellers, and sellers are not willing to share their production methods
with their competitors. Nevertheless, the study of perfect competition is
important as it is used to compare with the other market forms.

28
A. Monopolistic Competition:
A market structure which has large number of firms who offer
differentiated products. It is easy to enter/ exit in the market. It is characterized
both perfect competition and monopolistic competition. The only producers of
that specific products. It allows the firm to be price maker, it means that he/
she can set the price of their products depending on the differentiation on the
firm products. Examples: Restaurant like burger restaurant, pizza restaurant.
The both offer differentiated products yet the customer must choose only one
among them to feed his/ her stomach.

B. Oligopoly:

It is an a form of market structure in which there are only few firms

producing products that range from slightly differentiated to highly differentiated.
Each firm is huge enough to influence the industry. Barriers to entry exist. Only
few firm dominated the market, but few enough so each firm alone can affect
the market. Entry is possible but is more difficult because of some barriers like
political and costly capital. Example is the gasoline industry few enough but the
decision of one firm can affect the whole economic activities.

C. Monopoly:

A monopoly is a precise form of market structure. A monopoly occur

when only one person or enterprise is the only supplier of a particular good.
Thus, monopolies are characterized by no competition within the market
producing a good or service.

 Profit maximizer: Due to lack of competitors, the business/ firm can

maximized their profit and earns high.
 Price maker: the business owner also set the price of the goods and
services offered at his/ her own preference.
 High barriers to entry: other sellers are unable to enter the market
because of some reasons
 Single seller: only one seller can participate in the market activities.

29
 WHAT’S MORE

A. Direction:
1. Cut out pictures from old magazine and paste it on the space
provided for, or draw a picture that best describe each market
structures and explain why?

1. MONOPOLY
(paste here)

2. OLIGOPOLY
(paste here)

3. MONOPOLISTIC
COMPETITION
(paste here)

4. PERFECT
COMPETITION
(paste here)

30
 Rubric for Essay
Criteria Rating(5 is highest, 1 is smallest)
The pictures pasted were 5 4 3 2 1
appropriate for the topic being asked.
The explanation is concise and 5 4 3 2 1
relevant to the topics

WHAT I HAVE LEARNED

Directions: Formulate/ create a situation in which you can easily connect the
market forms you’ve learned from this module and explain why?

Ex: sugar milling company in Bukidnon is one of the examples

that belongs to oligopoly because we only have 2 sugar milling
company which operates in producing sugar for the
consumption of the people.

1. Perfect Competition

1.1________________________________________________
________________________________________________

2.2________________________________________________
________________________________________________

2. Monopolistic Competition

2.1________________________________________________
________________________________________________

2.2________________________________________________
________________________________________________

31
3. Monopoly

3.1 ________________________________________________
________________________________________________

3.2________________________________________________
________________________________________________

4. Oligopoly

4.1________________________________________________
________________________________________________

4.2________________________________________________
________________________________________________

Rubric for Essay

Criteria Rating(5 is highest, 1 is smallest)

The situations given were relevant to 5 4 3 2 1
the topics
The explanation is concise and 5 4 3 2 1
relevant to the topics

32
 WHAT CAN I DO?

DIRECTIONS: Survey in the market and list down at least 10

famous firms then get vital information about their business and
fill in the table below.

Name of business Forms of market structure Reasons

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

Rubric for Essay

Criteria Rating(5 is highest, 1 is smallest)
Appropriately identify the market 5 4 3 2 1
structure
The justification/ reasons were 5 4 3 2 1
anchored from topics discussed

33
 LESSON 5: Effects of contemporary issues such as migration,
fluctuations in exchange rate, oil price increases, unemployment,
peace and order, etc. on the purchasing power of the people.

WHAT’S IN

Let us recall from the previous lesson, regarding market structures. The
interaction of demand and supply with consequent determination of the price is
set in an environment called a market. More than a place or state where
transactions are made between sellers and buyers. Market power is defined as
the ability of any player in the market to significantly influence the price in the
market and the quantity to be produced or sold. The aim of every player is to
enhance its market power in order to increase its profit for producers, and
satisfaction, for the consumers. A Filipino who wants to engage in any business
or become an entrepreneur should know the characteristics of the market he is
trying to enter.

WHAT’S NEW

I’m scrambled! Move Quickly!

Arrange the jumbled letters to form word/s related effects of contemporary
economic issues facing the Filipino Entrepreneurs. Write you answer on the
space provided.

1. GRAOINTMI __________________

2. TENMYOLNUEMP __________________

34
 3. GXEHANEC ATER __________________

4. EPACE & REDRO __________________

5. LOI EPRCI __________________

EASERCIN

WHAT IS IT

What is Purchasing Power?

Purchasing power is the equivalent rate of a currency expressed in

terms of the value of goods or services that a unit of money can buy. Price
increases reduce the purchasing power of money that in turn has an
adverse impact on consumers' welfare. It is vital because, all else being
equal, inflation decreases the amount of products or services you would be
able to purchase. Purchasing power of people is always affected in a
community with a contemporary issue such as migration, unemployment,
fluctuation in the exchange rate, peace and order, etc.

Migration

Economic migration forms a large part of the reason why people migrate.
Discretions to transfer can be influenced by high poverty in the country or
area of origin. Through the social systems, people receive information from
people who already migrated to other cities or countries.

Labor migration is a term used which refers to people with Filipino

citizenship who reside in another country for a restricted period of
employment. In the long term, both high and low-skilled workers who
migrated to other country increases the purchasing power and they have
extra disposable income. Thus, they afford sending their children to
reputable school with a quality education and bringing good life to the family.

35
What are the causes of migration?

1. Poverty
2. Unemployment
3. Improve standard of living
4. Higher Salary
5. Economic Security

Unemployment

Unemployment is a condition of not being currently employed. Those

not employed will encounter a reduction in their living standards, as their
income decreases. The jobless person will have less purchasing power, and
less disposable income. Thus, for people with the little means of living, they
will also adjust their spending. They will look forward to any opportunity of
help from others and limiting their purchasing power not same good as before.
Lastly people having no means at all they will become more aggressive and
worried from coming opportunities in life.

Fluctuations in exchange rate

The value of the exchange rate is important in creating national policies

especially in open economies. It is also important in guiding the exporting and
exporting of a country.

For example, the Philippine peso (PHP) in a United States dollar (USD)
in 2018 was almost P53.1424 per $ 1. The peso rate of a Japanese yen
(JPY) in 2018 was almost P0.46787 per ¥ 1. The pesos rate of Thailand
(baht) in 2018 was almost 1.6259 per TBH.

Under the fixed exchange rate, the exchange rate may also decrease.
This event is called a devaluation where the local currency amount of
currency is decreasing in other countries. This is contrary to revaluation
where the value of local currency in other countries is increasing. In these
cases, there may be devaluation or revaluation only if the government
announces it.

Greater prices lead to a diminishing in the purchasing power of a dollar.

As a result, buyers often adjust their purchasing behavior and spend less of
their disposable income. This effect of decreased purchasing power lead to
a decrease in overall consumer spending around the country.

36
Oil Price Increases

During big-time oil price increases in the country, you can hear everyone
complaining about how harder it will be to make ends meet. Some will go to the
extent of politicizing the price increase just to be able to throw some blames to
the President. It’s more than a peso increase per liter. People are complaining
because whenever there is an increase in gasoline there is a tendency of
decreasing purchasing power and spend less on the disposal of income.

Peace and Order

Peace and order is a vital element in maintaining economic development,

social order and political firmness. Through the help of the executive orders of
the government, it helps in maintaining social order, political stability.

A condition of peace and order enables the growth of funds, generates more
employment opportunities and attracts more tourists. Peace is the absence of
aggression and is characterized by healthy social and international connections,
fairness and parity.

WHAT’S MORE

Knowing What is Right

Answer the following questions briefly:

1. Why do Entrepreneur want to have a commercial space in the mall

even if price is very expensive?
________________________________________________________

________________________________________________________

2. Where do taxes go?

________________________________________________________
________________________________________________________
________________________________________________________

37
 3. Why should Entrepreneur pay the employee a salary based on
minimum wage?
________________________________________________________

________________________________________________________
_

WHAT I HAVE LEARNED

First Impression

Directions: To analyze the effects of contemporary issues, briefly explain

each term below and answer each question that follows:

Terms Explanation

1. Oil price

2. Unemployment

3. Exchange Rate

4. Migration

5. Peace and Order

38
Questions:

1. What do you think are the influences of the above term on the present
situation of the economy?
________________________________________________________
________________________________________________________
________________________________________________________
_________________________________

2. What are the effects in the economy of the following contemporary

issues? Is it negative or positive? Why?
________________________________________________________
________________________________________________________
________________________________________________________
_________________________________

39
 WHAT I CAN DO

Know Me More

Analyze the effects of the following contemporary economic issues in the

purchasing power of the people.

 __________________
__________________
Migration __________________
__________________
________

Contemporary Unemploy
Economic Issue ment


 __________________
__
__________________
__________________
Oil price __________________
increase ______

 ______________________
______________________
______________________
______________________
____
Rubrics:
Organization 10pts.
Cohesion of ideas 10pts.
Grammar 5pts.
25pts.

40
 ASSESSMENT

Name:___________________________________________ Score:_______
Date: _______

Multiple Choice: Encircle the letter that corresponds to the correct answer.

1. It is a condition that there is a direct relationship between the price of a

good and the quantity supplied of that good.
A. Law of Demand C. Supply Schedule
B. Law of Supply D. Surplus

2. It means that all other related variables except those that are being
studied at the moment and are held constant.
B. Ceteris Paribus C. Market Equilibrium
B. Income Effect D. Substitution Effect

3. It is a type of price where quantity demanded is equal to quantity supplied.

A. Economic price C. Normal price
B. Equilibrium price D. Unique price

4. There are Filipinos affected behaviours in buying an item when they see it
in the commercial on television. What is this term?
A. Advertisement C. Preferences
B. Demand D. Value of Money

5. It called as behaviour of Filipinos to buy an item. What is this term?

A. Durable items C. Less valuable
B. Higher Price D. Not suitable for them

6. It called as behaviour of the Filipinos in buying product that is affordable.

What is this term?
A. Advertisement C. Supply
B. Preferences D. Value of Money

7. When there is an increase of price for white sugar, customers switch to

brown sugar as an alternative. What type of good is the scenario
classified?
A. Complement goods C. Substitute goods
B. Important goods D. Valuable goods

41
8. Which type of market structures which is more competitive and many
sellers/producers competing each other with the same products?
A. Monopoly C. Oligopoly
B. Monopolistic competition D. Perfect competition

9. Which type of market structures which is less competitive and only one
few firm enjoys the activity in the market?
A. Monopoly C. Oligopoly
B. Monopolistic competition D. Perfect competition

10. It is payment for the use of land or buildings belonging to others.

A. Investments C. Fees
B. Rentals D. Taxes

11. It is an asset or something we purchased in the past and hope to will have
an income in the future.
A. Building C. Land
B. Investments D. Market

12. It can increase the cost of business operations and can threaten the
profitability of business enterprises at their initial stage of operations.
A. Cost of Sales C. Price
B. Expenditures D. Taxes

13. It is the amount of foreign currency per unit of local currency.

A. Baht C. Exchange rate
B. Dollar D. Yen

14. It is an essential ingredient in maintaining economic development, social

Order and political stability.
A. Executive order C. Peace and order
B. Law and order D. Policy maker

15. Which organizational characteristics that establishes interrelationships

between the buyers and sellers in a particular market?
A. Market Structures C. Products
B. People D. Seller

42
 43
What I Know
1. A
2. B
3. B
4. A
5. A
6. D
7. C
8. D
9. A
10. C
11. A
12. A
13. C
14. C
15. A
Module 2: Lesson 1
ANSWER KEY
 44 What I Have Learned
What’s More
1.a – A
1.b – B
2.a – B
2.b – A
3.a – B
3.b – A
4.a – B
4.b – A
5.a – B
D O S M I C M I C S E R V I C E S T H G R M U N D L
E B I H G G H S D E Q W E R T A U Y O L G A W H E A
M W N J F F J A F D Q U A N T I T Y U S B R R Y R W
A T G K D D K Q WS W A C R E K J D A U Q K T G T A
N Y U L S S L WS U P P L Y U E G R N J U E G T T S
D O L P R E L A T I V E A B U T M A N C A T L D H D
N P A O Z A P E H F T S B Q I T D A I H N T Z O G F
L E Q U I L I B R I U M M O T J J R F T U S G G F
K N I U C X I T K R U F M A P H U B I K I Y F L G Y
G O O D S E E I B N O H K D K P R I C E F C E R E J
What’s New
 45
What’s New
1. S
2. D
3. D
4. S
5. S
6. D
7. S
8. D
9. D
10. S
Module 2: Lesson 2
Demand-Supply Schedule
D S P
38 19 1
36 23 2
34 27 3
32 31 4
30 35 5
28 39 6
26 43 7
24 47 8
22 51 9
20 55 10
 46
Module 2: Lesson 3
Additional Activities
I.
1. Change in expectations
2. Change in prices of other goods
3. Change in number of supplies
4. Change in taxes and subsidies
5. Change in technology
6. Change in resource prices
II.
1. Change in buyer tastes
2. Change in number of buyers
3. Change in income
4. Change in the price of related
goods
5. Change in expectations
The teacher will provide a rubric.
What I Have Learned
The teacher will provide a rubric.
What’s More
What’s New

Activity 1
Answers of the students are facilitated by the Teachers the way the students give their
explanation and give respective points.

Rubrics
10 Points 6 Points 3 Points 0 Points
The statement is The statement is The statement No Answer
correct. closer to the slightly closer to
answer. the answer.

What’s More

Decrease Low Supply 4.

Increase High Supply 3.
Decrease Low Decrease 2.
Increase High Demand 1.
Price Product

What I Have Learned

Answers of the students are facilitated by the Teachers the way the students give their
explanation and give respective points.

Rubrics
10 Points 6 Points 3 Points 0 Points
The statement is The statement is The statement No Answer
correct. closer to the slightly closer to
answer. the answer.

47
What I Can Do

Answers of the students are facilitated by the Teachers the way the students give their
explanation and give respective points.

Rubrics
10 Points 6 Points 3 Points 0 Points
The statement is The statement is The statement No Answer
correct. closer to the slightly closer to
answer. the answer.

Additional Activities

Laptop Cooking oil

Cell phone Charcoal

Tablets Salt

Cars Firewood

Prime Commodities Basic Commodities

48
 49
The teacher will provide a rubric.
What I Have Learned
The teacher will provide a rubric.
What’s More
The teacher will provide a rubric.
What’s New
P R I C E M A R K E T A V B E C E D R P S T S S E S
B S A D G O Q A S B T M A R K E T S T R U C T U R E
C C V E E N O N E I O L O R A S B A D I A S B E D C
A G R T Y O L I G O P O L Y C E U A B C C E D B C E
A E E R A P A G H R R E E S O E Y A F E E C S E S S
M O N O P O L I S T I C C O M P E T I T I O N B R E
O A D A L L A B E A V A M A P A R A R A A N A N E R
C S C V A B N M L O A B O S E V S S I K B S B O N I
E S A S Y A C T L E L L N V T B P R V E L U C T E U
C B U Y E R S H E O R E 0 B I C O V A R E M D H R O
F M E B R R R E R A Y T P E T E W T L E B E E N M S
I E B B S I J I N M R T O R I E E B R R N R F M I L
R P L A Y E R S R I O U L T O R R N Y E O H G L N Y
M E E S E R E A S E R E Y S N T E R E N P E N O D E
What’s In
Module 2: Lesson 4
What I Can Do

The teacher will provide a rubric.

Module 2: Lesson 5

5. Oil Price Increase

4. Peace & Order
3. Exchange Rate
2. Unemployed
1. Migration

What’s New

What’s More

The teacher will provide a rubric.

What I Have Learned

The teacher will provide a rubric.

What I Can Do

The teacher will provide a rubric.

50
References

Books

Rosemary P. Dinio, PhD and George A. Villasis. Applied Economic First Edition.
Quezon City: Rex Book Store Inc., 2017.

Tereso S. Tullao Jr., PhD. Applied Economics for Progressive Philippines. Quezon
City: Phoenix Publishing House, Inc. 2018

Dinio, Rosemary P., PhD & Villasis, George A. (2017). Applied Economics.
Sampaloc,Manila: Rex Book Store, Inc.

Websites

https://www.myaccountingcourse.com/accounting-dictionary/commodity

https://dictionary.cambridge.org/example/english/basic-commodity

https://www.investopedia.com/ask/answers/06/commodityprices.asp
https://www.theijbmt.com

https://www.opentoexport.com/article/cap

https://simple.wikipedia.org/wiki/Perfect_competition

https://www.wikizero.com/simple/Perfect_competition

https://kids.kiddle.co/Perfect_competition

https://www.coursehero.com/file/p65h8c/Oligopoly-an-industry-structure-in-
which-there-are-a-few-firms-producing/

https://courses.lumenlearning.com/boundless-economics/chapter/introduction-
to-monopoly/

https://quizlet.com/141857191/micro-short-answer-q1-flash-cards/

https://search.creativecommons.org/

51
https://www.getrealphilippines.com/2018/10/oil-price-hike-nanaman/

https://www.investopedia.com/terms/p/purchasingpower.asp)
(https://bizfluent.com.Marketing)

https://www.bartleby.com/essay/Importance-of-Peace-and-Order-Law-in-
PK4WCYE3RZZAhttps://www.bir.gov.ph/index.php/tax-information.html

52