Learning Module in Applied

Economics (Specialized Subject) ABM

11
Module Number: 1 Lesson Number: 1
Module Title: Lesson 1: Revisiting Economics as a Social Science
OVERVIEW

In this module, you will discover economics as an applied science and its utility in
addressing the economic problems of the country. You will hear about the law of supply and
demand, and factors affecting the economic situation. You will be encouraged to share your
ideas. You will be provided different activities underlying each given objective.

This module has the following sections:

Revisiting Economics as a Social 1 day
Science
Pre-assessment 1 day
Discussion
Module 1 1 day
Activities
Formative Assessment
1 day
Synthesis and Closure of the lesson
Homework/ Follow-up Activity 1 day
MOST ESSENTIAL LEARNING COMPETENCY/IES COVERED IN THE MODULE

 Differentiate economics as social science and applied science in terms of nature and
scope. You will examine the utility and application of applied economics to solve
economic issues and problems. And lastly, you will be able to analyze and propose
solution/s to the economic problems using the principles of applied economics.

PRE-ASSESSMENT

Arrange the jumbled letters to decode the hidden word.

1. AELTWH
2. NOISDECI
3. COLLATAINO
4. ECRACS SECROUSER
5. COISAL NICSEEC

LESSON PROPER

Lesson 1: Economics as a Social Science

Learning Target/s:
a. Differentiate economics as social science in terms of nature and scope
b. Examine the utility and application of applied economics to solve economic
issues and problems.

INSTRUCTIONAL MATERIALS AND REFERENCES

For Synchronous learning, your teacher will make use of power point presentations, video
clips and other visual images during discussion of the lessons thru online platforms like Zoom,
Google Meet, Messenger Room and others. Students will also use the textbooks as reference
for the lessons.
For Asynchronous learning, your teacher will make use of the modules and soft copies of
the educational video clips and visual images or will let you access hyperlinks related to the
lessons.
For Blended learning, your teacher will use the combination of the instructional materials
from synchronous and asynchronous learning, module and the textbook.

LEARNING ACTIVITIES

1|Module Page
 Shortage Resources

Opportunity cost Scarcity

Accountancy
1. Discussion

Economics is derived from the greek word "oikonomia" which means household
management. Economics is classified as a social science because it deals with the study of
human's life and how he lives with other men.

The three strands in the development of the definition of economics:

Economics as a study of Wealth– (the utilization of wealth for the individual’s satisfaction and
society’s welfare)

Economics as a study of Making Choices– (opportunity cost, making choices based on

additional benefits that are at least equal to or more than the foregone alternatives)
Economics as a study of Allocation– (deals with the study of allocation of scarce resources to
answer the unlimited human wants)

Economics as a Social Science

Economics utilizes the scientific method of inquiry from identifying the problem,
proposing alternative tentative, answer or hypotheses or the problem at hand, gathering and
treating data, and answering the question through the conclusion. As a social science,
economics pertains to the study on how society creates its material wealth, how to make it
available to its people with minimum difficulties and how it expands.

Resources and the Study of Economics

Resources or wealth can be defined as products of nature, qualities of individuals and
man-made things which are used in producing goods or services. One of the key
characteristics of resources is that they are limited.

Land. Soil and natural resources found in nature and are not man-made.

Labor. Physical and human effort exerted in production. The income received by labors is
referred to as wage.

Capital. Man-made resources use in production of goods and services, which include
machineries and equipment’s. The owner of capital earns an income called interest.

Entrepreneurs. Organizer and coordinator of other factors of production: land, labor and
capital.

Scarcity as a Sources of Economic Problem

Scarcity can be defined as the limitation of resources to answer the expanding
human wants. Sometimes, people equate scarcity with shortage. Although these two
concepts are related, they are not identical. Shortage is a condition when the supply of a
good, service, or resource is not enough to meet the demand. Meanwhile, a surplus can also
be associated with the problem of scarcity. Surplus is a situation when the amount supplied
is greater than the amount demanded can also be considered an economic problem.

2. Activities

Identify the word that is being described in each sentence. Choose your answer
from the box.

2|Module Page
______________________1. It can be defined as the limitation of resources to answer the
expanding human wants.
______________________2. They can be defined as products of nature, qualities of
individuals and man-made things
______________________3. The information generated in the recording and analysis of
transactions on the state of assets in any establishment can be useful in making business
decisions
______________________4. It involves making choices based on additional benefits that are
at least equal to or more than the foregone alternatives.
______________________5. It is a condition when the supply of a good, service, or resource
is not enough to meet the demand.

3. Formative Assessment
(For synchronous classes, this will be your self-paced learning and will be submitted next
meeting.)
Test I: Write TRUE if the statement is correct.Write FALSE if it's incorrect then encircle the
word/s that makes the statement wrong.(2 points)

___________________________1.Sometimes, people differentiate scarcity with shortage.

___________________________2. Opportunity cost is making choices based on additional
benefits that are at least equal to or more than the foregone alternatives.
___________________________3. Economics as a study of Wealth is the utilization of
choices for the individual’s satisfaction and society’s welfare.
___________________________4. In marketing, understanding producers behavior can be
useful to firms in expanding their market share.
___________________________5. Economics as an applied science pertains to the study on
how society creates its material wealth, how to make it available and how it expands.
___________________________6. In finance, the optimal combination of human and
physical resources to be used in production will require understanding of benefit and cost.
___________________________7. Surplus is a situation when the amount supplied is
greater than the amount demanded.
___________________________8. One of the key characteritics of resources is that they are
unlimited.

___________________________9. Shortage is a condition when the supply of a good,

service, or resource is not enough to meet the demand.

___________________________10 The concept of opportunity cost became prominent in

the study of economics because of the physical limitations and alternative uses of resources.

SYNTHESIS/CLOSURE OF THE LESSON

In this lesson, you have learned that the three strands in the development of the definition of
economics are Economics as a study of Wealth, Economics as a study of Making Choice and
Economics as a study of Allocation. As a social science, economics pertains to the study on
how society creates its material wealth, how to make it available to its people with minimum
difficulties and how it expands.Resources or wealth can be defined as products of nature,
qualities of individuals and man-made things which are used in producing goods or services.
The limitation of resources to answer the expanding human wants is a source of economic
problems is called scarcity.Shortage is the condition when the supply is not enough to meet
the demands and surplus is when the amount supplied is greater than the amount

3|Module Page
demanded. Economics has several applications in commercial sciences, namely accountancy,
finance, marketing and management.

HOMEWORK/FOLLOW-UP ACTIVITY
Essay

Explain the difference between shortage and surplus.

____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________

Facebook Account: Kenneth Rodriguez Macabulos

Contact Number: 09459701452

LESSON PROPER

Lesson 2: Economics as an Applied Science

Learning Target/s:
a. Identify applied science in terms of nature and scope
b. Examine the utility and application of applied economics to solve economic issues and
problems.

4|Module Page
 INSTRUCTIONAL MATERIALS AND REFERENCES

For Synchronous learning, your teacher will make use of power point presentations, video
clips and other visual images during discussion of the lessons thru online platforms like Zoom,
Google Meet, Messenger Room and others. Students will also use the textbooks as reference
for the lessons.
For Asynchronous learning, your teacher will make use of the modules and soft copies of
the educational video clips and visual images or will let you access hyperlinks related to the
lessons.
For Blended learning, your teacher will use the combination of the instructional materials
from synchronous and asynchronous learning, module and the textbook.

LEARNING ACTIVITIES

1. Discussion

Scope of Economics

Macroeconomics deals with the economic behavior of the economy or its aggregates
(business, government and households). It discusses the Gross National Product, level of
employment, national income, and general level of prices.

Microeconomics deals with the economic behavior of individual units such as consumers,
firms and landowners. It discusses the price, number of workers, income and expenditures.

Economics as an Applied Science

In the previous lesson we have been introduced to several concepts in economics including
scarcity, opportunity cost, and allocation along other things. The concepts will be useful as
we discuss the application of economics in various fields particularly in economic, business,
and social issues confronting our country today.

However the study of economics has been perceived too theoretical since it deals with laws,
principles and assumptions governing human behavior in the allocation process. This
theoretical treatment may look as economics is devoid of application. But that perspective is
farther from the true concept and intent of economics. Many of the principles, laws and
theories developed in economics can be applied in number of fields.

Applied Economics is the study of economics in relation to real world situations. It is the
application of economic principles and theories to real situations, and trying to predict what
the outcomes might be. For instance, it has several applications in commercial sciences.

In accountancy, the information generated in the recording and analysis of transactions on

the state of assets in any establishment can be useful in making business decisions pertaining
to wealth accumulation and utilization.

In marketing, understanding consumer’s behavior can be useful to firms in expanding their

market share.

In finance, formation of excess funds for investment purposes can be understood through
the concept of saving which is rooted on the opportunity cost of present consumption.

In management, the optimal combination of human and physical resources to be used in

production will require understanding of benefit and cost expressed in terms of factor
productivities and factor prices.

2. Activities
Identify the word that is being described in each sentence. Choose your answer
from the box.

5|Module Page
 Marketing Microeconomics

Applied Economics Finance

Accountancy

______________________1. It is the application of economic principles and theories to real

situations, and trying to predict what the outcomes might be.
______________________2. Formation of excess funds for investment purposes can be
understood through the concept of saving which is rooted on the opportunity cost of present
consumption.
______________________3. The information generated in the recording and analysis of
transactions on the state of assets in any establishment can be useful in making business
decisions
______________________4. Understanding consumer’s behavior can be useful to firms in
expanding their market share.
______________________5. Deals with the economic behavior of individual units such as
consumers, firms and landowners. It discusses the price, number of workers, income and
expenditures.

3. Formative Assessment
(For synchronous classes, this will be your self-paced learning and will be submitted next
meeting.)

Write TRUE if the statement is correct. Write FALSE if it's incorrect then encircle the word/s
that makes the statement wrong.(2 points)

___________________________1. Microeconomics deals with the economic behavior of the

economy or its aggregates (business, government and households).
___________________________2. Applied Economics is the study of economics in relation
to real world situations.
___________________________3. Economics as a study of Wealth is the utilization of
choices for the individual’s satisfaction and society’s welfare.
___________________________4. In marketing, understanding producer’s behavior can be
useful to firms in expanding their market share.
___________________________5. Economics as an applied science pertains to the study on
how society creates its material wealth, how to make it available and how it expands.
___________________________6. In finance, the optimal combination of human and
physical resources to be used in production will require understanding of benefit and cost.
___________________________7. Many of the principles, laws and theories developed in
economics can be applied in number of fields.
___________________________8. Microeconomics deals with the economic behavior of
individual units such as consumers, firms and landowners.

___________________________9. Macroeconomics discusses the price, number of workers,

income and expenditures.

___________________________10. In finance, formation of excess funds for investment

purposes can be understood through the concept of saving which is rooted on the
opportunity cost of present consumption.

SYNTHESIS/CLOSURE OF THE LESSON

6|Module Page
In this lesson, you have learned that economics has 2 scopes -- macroeconomics which deals
with the behavior of business, government and households, and microeconomics that deals
with the behavior of individual units. Economics has several applications in commercial
sciences, namely accountancy, finance, marketing and management.

HOMEWORK/FOLLOW-UP ACTIVITY

Explain the difference between economics as a social science and economics as an

applied science.
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________

Facebook Account: Kenneth Rodriguez Macabulos

Contact Number: 09459701452

Module Number: 2 Lesson Number: 1

Module Title: Market Demand, Market Supply and Market Equilibrium
OVERVIEW

By the end of this section, you will be able to understand what economists mean by demand,
what they mean by supply, and then how demand and supply interact in a market.

This module has the following sections:

Discussion 1 day
Activities 1 day
Module 3 Formative Assessment
1 day
Synthesis and Closure of the lesson
Homework/ Follow-up Activity 1 day

7|Module Page
 MOST ESSENTIAL LEARNING COMPETENCY/IES COVERED IN THE MODULE

 Analyze market demand, market supply and market equilibrium.

LESSON PROPER

Lesson 1: Market Demand

Learning Target/s:

a. Analyze market demand.

INSTRUCTIONAL MATERIALS AND REFERENCES

For Synchronous learning, your teacher will make use of power point presentations, video
clips and other visual images during discussion of the lessons thru online platforms like Zoom,
Google Meet, Messenger Room and others. Students will also use the textbooks as reference
for the lessons.
For Asynchronous learning, your teacher will make use of the modules and soft copies of
the educational video clips and visual images or will let you access hyperlinks related to the
lessons.
For Blended learning, your teacher will use the combination of the instructional materials
from synchronous and asynchronous learning, module and the textbook.

References: https://opentextbc.ca/principlesofeconomics/chapter/3-1-demand-supply-and-
equilibrium-in-markets-for-goods-and-services/

LEARNING ACTIVITIES

1. Discussion

DEMAND FOR GOODS AND SERVICES

Economists use the term demand to refer to the amount of some good or service consumers
are willing and able to purchase at each price. Demand is based on needs and wants—a
consumer may be able to differentiate between a need and a want, but from an economist’s
perspective they are the same thing. Demand is also based on ability to pay. If you cannot
pay for it, you have no effective demand.

What a buyer pays for a unit of the specific good or service is called price. The total number
of units purchased at that price is called the quantity demanded. A rise in price of a good
or service almost always decreases the quantity demanded of that good or service.
Conversely, a fall in price will increase the quantity demanded.

Example: When the price of a gallon of gasoline goes up, people look for ways to reduce
their consumption by combining several errands, commuting by carpool or mass transit, or
taking weekend or vacation trips closer to home.

Economists call this inverse relationship between price and quantity demanded the law of
demand. The law of demand assumes that all other variables that affect demand (to be
explained in the next module) are held constant.
An example from the market for gasoline can be shown in the form of a table or a graph. A
table that shows the quantity demanded at each price, such as Table 1, is called a demand
schedule. Price in this case is measured in dollars per gallon of gasoline. The quantity
demanded is measured in millions of gallons over some time period (for example, per day or
per year) and over some geographic area (like a state or a country).A demand curve shows
the relationship between price and quantity demanded on a graph like Figure 1, with
quantity on the horizontal axis and the price per gallon on the vertical axis. (Note that this is
an exception to the normal rule in mathematics that the independent variable (x) goes on the
horizontal axis and the dependent variable (y) goes on the vertical. Economics is not math.)

8|Module Page
The demand schedule shown by Table 1 and the demand curve shown by the graph in Figure
1 are two ways of describing the same relationship between price and quantity demanded.

The graph shows a downward-sloping demand curve that represents the law of demand.

Figure 1. A Demand Curve for Gasoline. The demand schedule shows that as price rises,
quantity demanded decreases, and vice versa. These points are then graphed, and the line
connecting them is the demand curve (D). The downward slope of the demand curve again
illustrates the law of demand—the inverse relationship between prices and quantity
demanded.
Price (per gallon) Quantity Demanded (millions of gallons)
$1.00 800
$1.20
700
$1.40
600
$1.60
550
$1.80
500
$2.00
460
$2.20
420
Table 1. Price and Quantity Demanded of Gasoline
Demand curves will appear somewhat different for each product. They may appear relatively
steep or flat, or they may be straight or curved. Nearly all demand curves share the
fundamental similarity that they slope down from left to right. So demand curves embody the
law of demand: As the price increases, the quantity demanded decreases, and conversely, as
the price decreases, the quantity demanded increases.

Is demand the same as quantity demanded?

In economic terminology, demand is not the same as quantity demanded. When economists
talk about demand, they mean the relationship between a range of prices and the quantities
demanded at those prices, as illustrated by a demand curve or a demand schedule. When
economists talk about quantity demanded, they mean only a certain point on the demand
curve, or one quantity on the demand schedule. In short, demand refers to the curve and
quantity demanded refers to the (specific) point on the curve.

Determinants of Demand
1. Change in Consumer tastes and preferences
2. Change in number of buyers
3. Change in income
a. Normal goods- demand rises as consumers income rises.
b. Inferior goods- a good whose demand increases when consumer income rises.
4. Change in Prices of related goods
a. Complementary goods- goods that are consumed together.
b. Substitute goods- goods that can be consumed in place of the other.

9|Module Page
5. Change in Consumer expectations
a. Future prices-consumer's current demand increases if they expect higher future prices
and vice versa.
b. Future income- consumer's current demand increases if they expect higher future
income and vice versa.

2. Activities

Identify whether the following goods are normal, inferior, substitute or

complementary.

____________1. Snickers ____________6. Bread and butter

____________2. Hamburger and bun ____________7. Kopiko
____________3. Coca-Cola ____________8. Jollibee
____________4. Choco Mani ____________9.McDonald's
____________5. Pepsi ____________10.Starbucks coffee

3. Formative Assessment
(For synchronous classes, this will be your self-paced learning and will be submitted next
meeting.)

SYNTHESIS/CLOSURE OF THE LESSON

10 | M o d u l e P a g e
In this lesson you have learned that demand to refer to the amount of some good or service
consumers are willing and able to purchase at each price. The total number of units
purchased at that price is called the quantity demanded. The law of demand assumes that all
other variables that affect demand are held constant. Economists call this inverse relationship
between price and quantity demanded the law of demand. Demand increases or decreases
because of the determinants of demand.

HOMEWORK/FOLLOW-UP ACTIVITY

Draw a demand curve for the following situation. Be sure to label each axis. At $0 per cob,
zero farmer will sell their sweetcorn at the fatmers market. At $1 per cob, maybe 1 farmer
will sell their corn.At $2 per cob, 2 farmers will sell their corn. At $3 per cob, 3 farmers will
sell. At $4 per cob, all farmers will sell their corn.

Facebook Account: Kenneth Rodriguez Macabulos

Contact Number: 09459701452

LESSON PROPER

Lesson 2: Market Supply

Learning Target/s:

a. Analyze market supply.

INSTRUCTIONAL MATERIALS AND REFERENCES

For Synchronous learning, your teacher will make use of power point presentations, video
clips and other visual images during discussion of the lessons thru online platforms like Zoom,
Google Meet, Messenger Room and others. Students will also use the textbooks as reference
for the lessons.
For Asynchronous learning, your teacher will make use of the modules and soft copies of
the educational video clips and visual images or will let you access hyperlinks related to the
lessons.
For Blended learning, your teacher will use the combination of the instructional materials
from synchronous and asynchronous learning, module and the textbook.

References: https://opentextbc.ca/principlesofeconomics/chapter/3-1-demand-supply-and-
equilibrium-in-markets-for-goods-and-services/

LEARNING ACTIVITIES

11 | M o d u l e P a g e
 1. Discussion

SUPPLY OF GOODS AND SERVICES

When economists talk about supply, they mean the amount of some good or service a
producer is willing to supply at each price. Price is what the producer receives for selling one
unit of a good or service. A rise in price almost always leads to an increase in the
quantity supplied of that good or service, while a fall in price will decrease the
quantity supplied.

Example: When the

price of gasoline
rises, it encourages
profit-seeking firms to take
several actions:
expand exploration
for oil reserves;
drill for more oil; invest in
more pipelines and
oil tankers to bring the oil
to plants where it can be refined into gasoline; build new oil refineries; purchase additional
pipelines and trucks to ship the gasoline to gas stations; and open more gas stations or keep
existing gas stations open longer hours.
Economists call this positive relationship between price and quantity supplied—that a
higher price leads to a higher quantity supplied and a lower price leads to a lower quantity
supplied—the law of supply. The law of supply assumes that all other variables that affect
supply are held constant.

Is supply the same as quantity supplied?

In economic terminology, supply is not the same as quantity supplied. When economists refer
to supply, they mean the relationship between a range of prices and the quantities supplied
at those prices, a relationship that can be illustrated with a supply curve or a supply schedule.
When economists refer to quantity supplied, they mean only a certain point on the supply
curve, or one quantity on the supply schedule. In short, supply refers to the curve and
quantity supplied refers to the (specific) point on the curve.
Figure 2 illustrates the law of supply, again using the market for gasoline as an example.
Like demand, supply can be illustrated using a table or a graph. A supply schedule is a
table, like Table 2, that shows the quantity supplied at a range of different prices. Again,
price is measured in dollars per gallon of gasoline and quantity supplied is measured in
millions of gallons. A supply curve is a graphic illustration of the relationship between price,
shown on the vertical axis, and quantity, shown on the horizontal axis. The supply schedule
and the supply curve are just two different ways of showing the same information. Notice
that the horizontal and vertical axes on the graph for the supply curve are the same as for
the demand curve.

The graph shows an upward-sloping supply curve that represents the law of
supply.

12 | M o d u l e P a g e
Figure 2. A Supply Curve for Gasoline. The supply schedule is the table that shows
quantity supplied of gasoline at each price. As price rises, quantity supplied also increases,
and vice versa. The supply curve (S) is created by graphing the points from the supply
schedule and then connecting them. The upward slope of the supply curve illustrates the law
of supply—that a higher price leads to a higher quantity supplied, and vice versa.

Price (per gallon) Quantity Supplied (millions of gallons)

$1.00 500
$1.20 550
$1.40 600
$1.60 640
$1.80 680
$2.00 700
$2.20 720

Table 2. Price and Supply of Gasoline

The shape of supply curves will vary somewhat according to the product: steeper, flatter,
straighter, or curved. Nearly all supply curves, however, share a basic similarity: they slope
up from left to right and illustrate the law of supply: as the price rises, say, from $1.00 per
gallon to $2.20 per gallon, the quantity supplied increases from 500 gallons to 720 gallons.
Conversely, as the price falls, the quantity supplied decreases.

Determinants of supply

1. Change in resource prices

2. Change in technology
3.Change in number of sellers
4. Change in taxes and subsidies
5. Change in prices of other goods
6. Change in producer expectation

2. Activities

Identify the determinants of supply being described in the following sentences.

________________________1. An increase in the price of cucumbers decreases the supply

of watermelons.
________________________2. An expectation of a substantial rise in future log prices
decreases the supply of logs today.
________________________3. An increase in the number of tattoo parlors increases the
supply of tattoos.
________________________4. An increase on the excise tax of cigarretes decreases the
supply of cigarretes.
________________________5. The development of more effective wireless technology
increases the supply of cell phones.
________________________6. An increase in the price of crude oil decreases the supply of
gasoline.
________________________7. A decrease in the supply of microchips increases the supply
of computers.
________________________8. A decline in subsidies to state universities decreases the
supply of higher education.
________________________9. The formation of women's professional basketball leagues
increases the supply of professional basketball games.

13 | M o d u l e P a g e
________________________10. When the price of hockey sticks increases, the firm will
produce more hockey sticks and less cricket bats. As a result, the supply of cricket bats will
be reduced.

3. Formative Assessment
(For synchronous classes, this will be your self-paced learning and will be submitted next
meeting.)
Choose the letter of the best answer.

1. Which of following is the best example of the Law of Supply?

a. a producer supplies a greater quantity of products as the price increases.
b. a consumer buys fewer products are price increases.
c. a producer supplies a smaller quantity of products as the price decreases.
d. a consumer buys less products as the price decreases.

2. Which of the following headlines would cause the shift shown on the graph below in the
market for cars?

a. American incomes rise.

b. New technology makes car production more efficient.
c. More mass transit replaces the need for personal vehicles.
d. Steel, a resource used in making cars, doubles in price

3. A decrease in taxation on businesses production would most likely lead to

a. an increase in quantity supplied
b. a decrease in quantity supplied
c. an increase in supply
d. a decrease in supply

4. The movement from P1, Q1 to P2, Q2 in the image below is best described as

a. an increase in quantity supplied

b. a decrease in quantity supplied
c. an increase in supply
d. a decrease in supply

5. Claire's Bakery can produce 48 cookies per hour. Claire, the bakery owner, buys a new
convection oven. As a result of this new technology, the bakery can now produce 192
cookies per hour.
How would an economist model the change in Claire's businesses?

14 | M o d u l e P a g e
 a. movement to the right along the supply curve
b. movement to the left along the supply curve
c. the entire supply curve shifts to the right
d. the entire supply curve shifts to the left

SYNTHESIS/CLOSURE OF THE LESSON

In this lesson, you have learned that supply means the amount of some good or service a
producer is willing to supply at each price. Quantity supplied refers only to a certain point on
the supply curve, or one quantity on the supply schedule. Law of supply states that a higher
price leads to a higher quantity supplied and a lower price leads to a lower quantity supplied.
Supply increases or decreases depending on the determinants of supply.

HOMEWORK/FOLLOW-UP ACTIVITY

Create a scenario that represents each determinant of supply. You must show how your
determinant can increase or decrease your supply.

15 | M o d u l e P a g e
 Facebook Account: Kenneth Rodriguez Macabulos
Contact Number: 09459701452

LESSON PROPER

Lesson 3: Market Equilibrium

Learning Target/s:

b. Analyze market equilibrium.

INSTRUCTIONAL MATERIALS AND REFERENCES

For Synchronous learning, your teacher will make use of power point presentations, video
clips and other visual images during discussion of the lessons thru online platforms like Zoom,
Google Meet, Messenger Room and others. Students will also use the textbooks as reference
for the lessons.
For Asynchronous learning, your teacher will make use of the modules and soft copies of
the educational video clips and visual images or will let you access hyperlinks related to the
lessons.
For Blended learning, your teacher will use the combination of the instructional materials
from synchronous and asynchronous learning, module and the textbook.

References: https://opentextbc.ca/principlesofeconomics/chapter/3-1-demand-supply-and-
equilibrium-in-markets-for-goods-and-services/

LEARNING ACTIVITIES

2. Discussion

EQUILIBRIUM—WHERE DEMAND AND SUPPLY INTERSECT

Because the graphs for demand and supply curves both have price on the vertical axis and
quantity on the horizontal axis, the demand curve and supply curve for a particular good or

16 | M o d u l e P a g e
service can appear on the same graph. Together, demand and supply determine the price
and the quantity that will be bought and sold in a market.

Figure 3 illustrates the interaction of demand and supply in the market for gasoline. The
demand curve (D) is identical to Figure 1. The supply curve (S) is identical to Figure 2.
Table 3 contains the same information in tabular form.
The graph shows the demand and supply for gasoline where the two curves intersect at the
point of equilibrium.
Figure 3. Demand and Supply for Gasoline. The demand curve (D) and the supply
curve (S) intersect at the equilibrium point E, with a price of $1.40 and a quantity of 600.
The equilibrium is the only price where quantity demanded is equal to quantity supplied. At
a price above equilibrium like $1.80, quantity supplied exceeds the quantity demanded, so
there is excess supply. At a price below equilibrium such as $1.20, quantity demanded
exceeds quantity supplied, so there is excess demand.
Price (per gallon) Quantity demanded (millions of gallons) Quantity
supplied (millions of gallons)
$1.00 800 500
$1.20 700 550
$1.40 600 600
$1.60 550 640
$1.80 500 680
$2.00 460 700
$2.20 420 720
Table 3. Price, Quantity Demanded, and Quantity Supplied
Remember this: When two lines on a diagram cross, this intersection usually means
something. The point where the supply curve (S) and the demand curve (D) cross,
designated by point E in Figure 3, is called the equilibrium. The equilibrium price is the
only price where the plans of consumers and the plans of producers agree—that is, where
the amount of the product consumers want to buy (quantity demanded) is equal to the
amount producers want to sell (quantity supplied). This common quantity is called the
equilibrium quantity. At any other price, the quantity demanded does not equal the
quantity supplied, so the market is not in equilibrium at that price.

In Figure 3, the equilibrium price is $1.40 per gallon of gasoline and the equilibrium quantity
is 600 million gallons. If you had only the demand and supply schedules, and not the graph,
you could find the equilibrium by looking for the price level on the tables where the quantity
demanded and the quantity supplied are equal.

The word “equilibrium” means “balance.” If a market is at its equilibrium price and
quantity, then it has no reason to move away from that point. However, if a market is not
at equilibrium, then economic pressures arise to move the market toward the equilibrium
price and the equilibrium quantity.
Imagine, for example, that the price of a gallon of gasoline was above the equilibrium price—
that is, instead of $1.40 per gallon, the price is $1.80 per gallon. This above-equilibrium price
is illustrated by the dashed horizontal line at the price of $1.80 in Figure 3. At this higher

17 | M o d u l e P a g e
price, the quantity demanded drops from
Surplus 600 to 500. This decline in quantity reflects how
Equilibrium
consumers react to the higher price by finding ways to use less gasoline.
Moreover, at Excess demand
this higher Equilibrium
price of $1.80, price
the quantity of gasoline supplied rises from the
600 to 680, as the higher price makes it more profitable for gasoline producers to expand
Equilibrium
their output. Now, consider quantity demanded and quantity supplied are related
how quantity
at this above-equilibrium price. Quantity demanded has fallen to 500 gallons, while
quantity supplied has risen to 680 gallons. In fact, at any above-equilibrium price, the
quantity supplied exceeds the quantity demanded. We call this an excess supply or a
surplus.
With a surplus, gasoline accumulates at gas stations, in tanker trucks, in pipelines, and at oil
refineries. This accumulation puts pressure on gasoline sellers. If a surplus remains unsold,
those firms involved in making and selling gasoline are not receiving enough cash to pay their
workers and to cover their expenses. In this situation, some producers and sellers will want
to cut prices, because it is better to sell at a lower price than not to sell at all. Once some
sellers start cutting prices, others will follow to avoid losing sales. These price reductions in
turn will stimulate a higher quantity demanded. So, if the price is above the equilibrium level,
incentives built into the structure of demand and supply will create pressures for the price to
fall toward the equilibrium.
Now suppose that the price is below its equilibrium level at $1.20 per gallon, as the
dashed horizontal line at this price in Figure 3 shows. At this lower price, the quantity
demanded increases from 600 to 700 as drivers take longer trips, spend more minutes
warming up the car in the driveway in wintertime, stop sharing rides to work, and buy larger
cars that get fewer miles to the gallon. However, the below-equilibrium price reduces
gasoline producers’ incentives to produce and sell gasoline, and the quantity supplied falls
from 600 to 550.
When the price is below equilibrium, there is excess demand, or a shortage—that is, at
the given price the quantity demanded, which has been stimulated by the lower price, now
exceeds the quantity supplied, which had been depressed by the lower price. In this
situation, eager gasoline buyers mob the gas stations, only to find many stations running
short of fuel. Oil companies and gas stations recognize that they have an opportunity to
make higher profits by selling what gasoline they have at a higher price. As a result, the price
rises toward the equilibrium level. Read Demand, Supply, and Efficiency for more discussion
on the importance of the demand and supply model.

2. Activities

Choose the correct word that is being described in each sentence.

________________________1. When the price is below equilibrium.

________________________2. This word means balance.

________________________3. Quantity demanded is equal to the quantity supplied.

________________________4. Is the only price where the plans of consumers and the plans
of producers agree.
________________________5. The quantity supplied exceeds the quantity demanded.

3. Formative Assessment
(For synchronous classes, this will be your self-paced learning and will be submitted next

18 | M o d u l e P a g e
meeting.)

Write TRUE if the statement is correct. Write FALSE if it's incorrect then encircle the
word/s that makes the statement wrong.(2 points)

___________________________1.If a surplus remains unsold, firms involved in making and

selling gasoline are receiving enough cash to pay their workers and to cover their expenses.
___________________________2. Together, demand and supply determine the price and
the quantity that will be bought and sold in a market.
___________________________3. If a market is at its equilibrium price and quantity, then
it has no reason to move away from that point.
___________________________4. The below-equilibrium price reduces gasoline producers’
incentives to produce and sell gasoline, and the quantity supplied falls.
___________________________5. At any above-equilibrium price, the quantity supplied
exceeds the quantity demanded.
___________________________6. When two lines on a diagram cross, this intersection
usually means nothing.
___________________________7. , The demand curve and supply curve for a particular
good or service can appear on the same graph.
___________________________8. The equilibrium is the only price where quantity
demanded is equal to quantity supplied.

___________________________9. When the price is below equilibrium, there is excess

demand, or a surplus.

___________________________10. Decline in quantity reflects how consumers react to the

higher price.

SYNTHESIS/CLOSURE OF THE LESSON

The equilibrium price and equilibrium quantity occur where the supply and demand curves
cross. The equilibrium occurs where the quantity demanded is equal to the quantity supplied.
If the price is below the equilibrium level, then the quantity demanded will exceed the
quantity supplied. Excess demand or a shortage will exist. If the price is above the
equilibrium level, then the quantity supplied will exceed the quantity demanded. Excess
supply or a surplus will exist. In either case, economic pressures will push the price toward
the equilibrium level.

HOMEWORK/FOLLOW-UP ACTIVITY

Problem

Review Figure 3 again. Suppose the price of gasoline is $1.00. Will the quantity demanded be
lower or higher than at the equilibrium price of $1.40 per gallon? Will the quantity supplied
be lower or higher? Is there a shortage or a surplus in the market? If so, of how much?

____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________

19 | M o d u l e P a g e
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________
____________________________________________________________________________

Facebook Account: Kenneth Rodriguez Macabulos

Contact Number: 09459701452

Module Number: 3 Lesson Number: 1

Module Title: BASIC ECONOMIC PROBLEMS
OVERVIEW

This module has the following sections:

Discussion 1 day
Activities 1 day
Module 5 Formative Assessment
1 day
Synthesis and Closure of the lesson
Homework/ Follow-up Activity 1 day
MOST ESSENTIAL LEARNING COMPETENCY/IES COVERED IN THE MODULE

 Analyze the effects of contemporary economic issues affecting the Filipino

entrepreneur.

LESSON PROPER

Lesson 1: Basic Economic Problems confronting the development of the

Philippines in the 21st Century

Learning Target/s:

 Analyze the effects of contemporary economic issues affecting the Filipino

entrepreneur

INSTRUCTIONAL MATERIALS AND REFERENCES

For Synchronous learning, your teacher will make use of power point presentations, video
clips and other visual images during discussion of the lessons thru online platforms like Zoom,
Google Meet, Messenger Room and others. Students will also use the textbooks as reference
for the lessons.
For Asynchronous learning, your teacher will make use of the modules and soft copies of the
educational video clips and visual images or will let you access hyperlinks related to the
lessons.
For Blended learning, your teacher will use the combination of the instructional materials
from synchronous and asynchronous learning, module and the textbook.

LEARNING ACTIVITIES

20 | M o d u l e P a g e
 Poverty incidence
1. Discussion Absolute
poverty
Basic Economic
PovertyProblems
threshold confronting the development
Poverty of the Philippines in the 21 st
Century
Relative poverty
In this section, some of the basic economic problems confronting the Philippines will be
discussed. How does it relate to the insufficiency of resources, limited freedom, and the
formation of low dignity among the people? What are the challenges faced by a nation moving
forward into prosperity in the 21st century?
Poverty and Unequal Distribution of Income
There are two categories of poverty—Absolute Poverty pertains to the lack of income to buy
the basic food and necessities for subsistence living. Relative Poverty on the other hand
refers to the structure on how the national income is being distributed among households.
Poverty is measured in terms of poverty threshold and poverty incidence. Poverty threshold
is the income needed to purchase these minimum nutritional requirements and other basic
necessities. Poverty incidence is the proportion of households in the country with family
income lower than the poverty threshold.
Demographic Changes and its Economic Implications --measures in population growth
have implications on the growth of the economy.
Low Investment on Human Resource Development—the quality of human resources has
greater growth impact on the economy.
Weak Infrastructure—efficient infrastructures lower transaction costs of many sectors thus
creating greater income and fast economic expansion.
Pursuing Food Security—linked with the development of agriculture as a major economic
sector of a country.
Slow adoption of Modern Technology—manufacturing and services sector should be
pursued to push the rapid development of the economy.
Environmental Stability and the Country’s Developmental Thrust—excessive use of
our natural resources may compromise its ability to provide income and other benefits in the
future.

2. Activities

Identify the word that is being described in each sentences. Choose your answer
from the box.

______________________1. It refers to the structure on how the national income is being

distributed among households.
______________________2. Pertains to the lack of income to buy the basic food and
necessities for subsistence living.
______________________3. This means that the income level from employment is so low
that basic human needs can't be met.
______________________4. It is the income needed to purchase these minimum nutritional
requirements and other basic necessities.
______________________5. It is the proportion of households in the country with family
income lower than the poverty threshold.

3. Formative Assessment

21 | M o d u l e P a g e
(For synchronous classes, this will be your self-paced learning and will be submitted next
meeting.)

Identify what is being described in each sentence.

____________________________1. It is the proportion of households in the country with

family income lower than the poverty threshold.
____________________________2. Efficient infrastructures lower transaction costs of many
sectors thus creating greater income and fast economic expansion.
____________________________3. It is linked with the development of agriculture as a
major economic sector of a country.
____________________________4. The income needed to purchase these minimum
nutritional requirements and other basic necessities.
____________________________5. It is measured in terms of poverty threshold and poverty
incidence.
____________________________6. Pertains to the lack of income to buy the basic food and
necessities for subsistence living.
____________________________7. The proportion of households in the country with family
income lower than the poverty threshold.
____________________________8. Measures in population growth have implications on the
growth of the economy.
____________________________9. Is a state or condition in which a person or community
lacks the financial resources and essentials for a minimum standard of living.
____________________________10. It means that the income level from employment is so
low that basic human needs can't be met.

SYNTHESIS/CLOSURE OF THE LESSON

In this lesson,you have learned about the effects of contemporary economic issues affecting
the Filipino entrepreneur. Discussed in this section was about the basic 21st Century Economic
problems in the Philippines.

HOMEWORK/FOLLOW-UP ACTIVITY

When the price is above the equilibrium, explain how market forces move the market
price to equilibrium. Do the same when the price is below the equilibrium.

______________________________________________________________________
_
______________________________________________________________________
_
______________________________________________________________________
_
______________________________________________________________________
_
______________________________________________________________________
_

22 | M o d u l e P a g e
______________________________________________________________________
_
______________________________________________________________________
_
______________________________________________________________________
_
______________________________________________________________________
_
______________________________________________________________________
_
______________________________________________________________________
_

Facebook Account: Kenneth Rodriguez Macabulos

Contact Number: 09459701452

23 | M o d u l e P a g e