Introduction to Applied Economics
Consistent with the process of wealth-getting
Why is economics being taught in school?
In any society where we live, a number of
things are undertaken for ourselves, our family, our
community, and our country for various reasons
including among others material survival, stability, and
development. For example, we get our food from
various sources and through different means. There
are families that secure their food grains and
vegetables from their farms and gardens. But majority
of the families purchase their food in various markets.
Similarly, many of us purchase our clothes and wear
them not only to cover our bodies but also to show
our comfort, and express our tastes and prosperity.
Meanwhile, when a family constructs a nipa hut or
rents a room or acquires a condominium, or purchases
a house its intention is not only to have a place where
they can be protected from the harsh elements of the
environment but more so to enhance their level of
enjoyment.
All these activities that are intended for the
material survival of people and its community as well
as in strengthening and developing its material
capacity are the purview of economics. Since
economics covers many aspects of human life we
cannot escape the economic implications of human
actions, behaviour, and decisions from the time we are
born until death. It is in this light that economics is
being taught in schools to prepare our young citizens
on their roles as members of a society in responding
toward the goal of material survival, stability, and
growth
Revisiting Economics as a Social Science
3 strands in the development of the definition of
economics:
1. wealth (as a science of wealth-getting and
wealth-using)
2. decision-making process (as a science of
making choices)
3. allocation process (as a social science that
deals with the allocation of scarce resources to
meet the unlimited human wants)
Economics as Study of Wealth
Although the focus is on wealth, this initial
definition pertains to activities answering the two
major economic problems in any society-production
and consumption.
Economics as Study of Making Choices
In the study of economics, when we make a
choice from among alternatives, it implies that we are
foregoing or sacrificing the benefits that would have
been derived from alternatives that were not selected.
Thus, in making a decision, we have to consider a
major concept in the study of economics-opportunity
cost.
Economics as Study of Allocation
and wealth-using and the process of making choices is
the process of allocation especially of scarce resources
to answer the unlimited human wants.
5 elements in the definition of economics:
1. social science
2. resources
3. human wants
4. scarcity
5. and allocation
Economics as a Social Science
Economics is primarily a social science. As a
social science, the systematic or scientific method is
being used in the study of society and its components.
Thus, a social science can be described as the study of
the various modes and aspects of human interactions
in a group as these people aspire to preserve their
group as a social unit, to make it stable, and to
promote its growth, expansion and development. As a
social science, economics pertains to the study on how
society creates its material wealth, how it makes this
wealth available to its people with minimum
difficulties, and how it expands its wealth.
As a social science economics is related to the
other social sciences that study other dimensions of a
society. For example, in political science the creation
and utilization of power is being studied for the
preservation, stability, and growth of a society as a
political unit.
Resources and the Study of Economics
The second dimension in the definition of
economics is resources. As mentioned earlier
economics is about resources or wealth. 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.
Included in the coverage of resources are
natural resources like marine resources, timber
obtained from forest resources, agricultural lands, and
mineral resources. These various forms of natural
resources can directly provide goods for current
consumption. On the other hand, most of the yields of
natural resources are used as raw materials or
intermediate inputs for the production of other goods.
Human resources, on the other hand, are
qualities of human beings that may include labor,
intelligence, creativity, health education, talents and
many more. These various characteristics of people
give them the capacity to create value directly through
the provision of services and indirectly by becoming
factors of production.
 Lastly, we have physical resources or man-
made resources that include various types of
buildings, equipment, technology, bridges, airports,
factory plants and other physical infrastructure that
can be used to provide present and future satisfaction.
Housing facilities, office spaces, airports, and other
port facilities, for example, can directly provide
current value to their users.
One of the key characteristics of resources is
that they are limited. The limitation of resources
stems from two major factors. First, it pertains to the
length of time as well as the difficulties in producing
these resources. Several natural resources, for
example, are non-renewable since it took several
millions of years to produce them including crude oil
and mineral resources.
Second, more than the difficulties of
producing these resources, the limitation is further
intensified by the competing uses for these
resources.
Because of these physical limitations and
alternative uses of resources, the concept of
opportunity cost becomes prominent in the study of
economics.
Human Wants and Economic Analysis
The third dimension of economics pertains to
human wants. Human wants can be described as
differentiated or expanded human needs. For
example, food can be differentiated by the level of
income and the environment. Families with high levels
of income can have different tastes for food compared
with poor families.
Another factor that may differentiate food
consumption is the environment in the locality where
the consumers reside. Diet rich in starch and
carbohydrates may be due to the availability of root
crops in the area. Places near river banks and oceans
may influence the intake of fish and other seafood
among consumers.
Scarcity as a Source of Economic Problem
Why then is scarcity considered a key
economic problem? Members of a society has to
survive materially but because resources are limited in
the light of several alternative uses, this limitation
implies that society has to devise a mechanism of
utilizing these limited resources to answer human
wants of the people that will result in the highest level
of social welfare. Since the economic goals of a society
are material survival, stability and growth, a society
has to achieve these goals through the proper use of
these resources.
Allocation and the Act of Economizing
The fifth element in the definition of
economics is the concept of allocation. Allocation can
be defined as a social mechanism to respond to the
economic problem of a society.
3 major mechanism of allocation:
1. market system
2. command
3. and tradition
Market System as a Mechanism for Allocation
The normal process of allocation utilized in
many societies today is through the market system.
We normally see a market as a physical place like a
public market or supermarket or the stock market. But
sometimes transactions can be done via telephone or
now the Internet or what they call e-commerce or
electronic commerce. Thus, an appropriate description
of a market is a state when buyers and sellers transact
on the purchase or sale of a good or service. The
agreement among the players is to set the amount of
good or service to be rendered and most importantly,
the price that the output is going to be sold and
bought.
The price of a commodity is both an index of
cost or sacrifice (for producers) and benefit or
satisfaction (for buyers). To the consumer, it reflects
the cost or expense that the producer has to pay to
acquire the good or service being sold in the market.
At the same time, the consumer considers the price as
an indicator of his satisfaction or benefit or utility in
the purchase of a particular good and service.
Similarly, to the seller, the price can signal
costs and benefits. It is a cost since the price is a
summary of the unit cost of producing the good or
service. On the other side of the coin, the price is also
an indicator of benefit to the seller. The price indicates
the amount of money that the seller will receive as
payment from the consumer that bought the good or
service.
Because of this information that the price
signals to the consumers and producers, the price can
be an instrument for the allocation of resources
through the mechanism of the market system. The
problem of scarcity is addressed through the changes
in price and the corresponding response of the buyers
and sellers.
For example, in the case of a shortage, the
elimination of the excess demand can be done by
decreasing demand or increasing supply or both. In
this case the adjustment made by the market system
is to increase the price of the commodity to signal
that there is a relative scarcity of the product. When
the price the increases, the demand would decline as
consumers reduce their consumption in the light of
the relative scarcity of the commodity and because of
the high opportunity cost of consuming the good. This
reduction can partially reduce the shortage. The other
portion of the shortage can be addressed by an
increase in the amount supplied by producers. A price
increase will encourage sellers to increase the amount
they will supply since a higher price means higher
revenue and probably higher profit.
Similarly, the mechanism of the market
system can also address the problem of a surplus or
relative abundance. This wastage can be eliminated
by reducing the supply of the commodity and
increasing the demand. Under this situation, the
market system adjusts by lowering the price. A decline
in the price is an indicator of relative abundance and
as a consequence, consumers will increase their
consumption. On the other hand, given the relative
abundance of a commodity, suppliers will decide to
reduce their production. In addition, a lower price
also means lower returns and lower revenues thus
discouraging them to produce. In both cases, the
relative abundance of a commodity as indicated by a
decrease in price creates adjustments among
consumers and sellers to eliminate the excess supply.
3 basic economic questions:
1. what to produce
2. how to produce
3. for whom to produce
Command as an Allocation Mechanism
In a command system, the state or an agency
of the government may be in charge in the allocation
of resources by, using its political power in answering
the basic economic problems of production and
distribution. In times of natural calamities, disasters or
national emergencies, the command system in a
certain region may be more orderly than the market
system.
Let’s take the case of a strong typhoon
destroying crops and damaging houses as well as
business establishments in a region. The normal
operations of a market may not be present under such
abnormal circumstances but the basic needs of the
citizens have to be addressed. The incentive system of
the price changes may not be enough to temper
individuals in their consumption or encourage
producers to sell more when shortages of basic
commodities occur. Because of the imperatives of a
meeting the needs of the members of society, the
power of the state is used to allocate resources. In
cases of shortages, the government can ration basic
commodities to those in need and to those whose
capacity to buy has been severely hampered by the
natural calamity. Since the production may take a
while, the immediate solution of the government is to
temper wants of people by rationing the commodity
which is short in supply. In addition, the government
can also impose price control to prevent rapid increase
in prices. In times of national emergencies like war,
the government can even confiscate resources to be
used for the immediate needs of the state.
Tradition in the Process of Allocation
The third alternative allocation mechanism is
done through tradition. The use of tradition may be
useful in situations where the operation of the market
may not be appropriate, or the power of an organized
state has no control over a certain community. For
instance, in 2013 the devastation of Typhoon Yolanda
(Haiyan) brought havoc in the province of Leyte
destroying properties, business establishments,
government buildings, and agricultural crops. As a
consequence, the normal operations of the market
were not available while the local government
agencies were also temporarily immobilized to provide
public service because of the massive destruction.
When the mechanisms of the market and command
systems were not functioning, the basic needs of the
people have to be answered by the mechanism of
tradition. Motivated by empathy and the need to
assist those who were hungry, unclothed, and
homeless, nongovernmental organizations, citizens
from the rest of the country, and foreigners came in to
their rescue. In solidarity with our people, citizens
outside the country assisted in the construction of
temporary shelters, performed medical treatments
and operations in make shift hospitals, and in helped
rebuilding the province.
ECONOMICS AS AN APPLIED SCIENCE
We have been introduced to several concepts
in economics including scarcity, opportunity costs and
allocation among other things. These concepts will be
useful in the application of economics in various fields
particularly in understanding economic, business, and
social issues confronting our country today.
As a social science economics deals with
people and how they interact with one another to
sustain, stabilize, and develop the material dimension
of a society. In addition, economics has been
described as the allocation of resources to meet
human wants. Thus, economics is a science of
choosing an activity from alternative options that will
yield the highest benefits to society in the context of
competing uses and opportunity costs.
 Many of the principles, laws and theories
developed in economics can be applied in a number of
fields. For instance, it has several applications in
commercial sciences. In the field of accountancy, the
information generated in the recording and analysis of
transactions on the state of assets of any
establishment can be useful in making business,
pertaining to wealth accumulation and wealth
utilization. In finance, the 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.

Beyond commercial sciences, economic

theories and principles can also find several
applications in education, international trade, labor,
health, transportation, analysis of environmental
problems including pollution and overfishing in
understanding crimes and other social ills.

A FRAMEWORKK IN UNDERSTANDING DECISIONS

USING ECONOMIC ANALYSIS

 VARIATION IN BENEFITS AND COSTS DUE TO

STAGE OF RECOGNITION
 Spatial Dimensions in the Issue of
Recognition
 Temporal Dimension in the Issue of
Recognition
Basic economic problems confronting the
development of the Philippines in the 21st century:
1. Poverty and unequal distribution of income
2. Demographic changes and its economic
implications
3. Low investment in human resource
development
4. Weak Infrastructure
5. Pursuing food security
6. Slow Adoption of modern technology
7. Environmental sustainability and the country’s
development thrust
Absolute poverty- is the lack of income to buy the
basic food and necessities for subsistence living.
Poverty threshold-is the income needed to purchase
these minimum nutritional requirements and other
basic necessities for daily survival.
Poverty incidence-is the proportion of households in
the country with family income lower than the poverty
threshold or poverty line.
Relative poverty-refers to the structure on how the
national income is being distributed among
households in an economy.
-is measured by the Lorenz curve and
the Gini coefficient.
Lorenz curve shows the share of the various household
groups on the total national income.
Gini coefficient on the other hand, is a measure of
income inequality derived from the Lorenz curve.
Knowledge capital is formed through heavy
investments in higher education, science and
technology and research and development.
Technology – is the manner of processing raw
materials or intermediate inputs into transformed
outputs through the use of factor inputs.
Labor-intensive technology
a technology that is biased in the use of labor.
Capital-intensive technology
refers to the use of more capital relative to
labor in the production process.
APPLICATION OF SUPPLY AND DEMAND ANALYSIS
Introduction
The analysis of supply and demand is a
simplified version of the analysis of benefits and costs.
This simple model of demand and supply analysis is
also a persuasive tool in understanding economic and
business realities, issues, and problems.
The economic problem of scarcity calls for an
allocation mechanism in light of limited resources and
expanding human wants. A popular mechanism for
allocation being utilized by many economies today is
the market system. The market system is based on the
interactions of buyers and sellers of a commodity to
determine the price and level of output of a good or
service.
The market system is a powerful tool for
allocation because the changes in price from market
transactions create incentives and disincentives on
buyers and sellers to address disparities between
demand and supply. The instrument of allocation is
the market price which is determined by the
interactions of the buyers and sellers in an market.
These interactions of the market players are
summarized in the analysis of demand and supply.
ANALYSIS OF DEMAND AND SUPPLY
The demand curve is a schedule that shows
the level of consumption at alternative prices at a
given point in time. The demand curve of a commodity
summarizes the benefits derive by the consumers
from the purchase of a good or service. On the other
hand, the supply curve shows the amount of output
producers are willing to sell at alternative prices at a
given point in time. The supply curve incorporates the
sacrifices and costs incurred by the seller in producing
a commodity.
WHAT IS A DEMAND CURVE?
The first major actor in a market is the
consumer is the consumer whose primary objective is
to purchase a commodity because it can give him/her
benefits. His/Her inclination to purchase is indicated
by the demand curve.
A demand curve is a schedule of the
willingness and capacity of a consumer to buy a
commodity at alternative prices at a given point in
time other thing held constant. In the construction of
the demand curve it is important to consider not only
the willingness to buy but also the capacity to buy.
Everyone wants or willing to buy a good but not all is
able to buy because some do not have the capacity to
buy the good. The demand curve is derived from the
the demand of a commodity since it only reflects the
relationship between quantity demand and the price
of the commodity. When we say other things held
constant or ceteris paribus, the other factors that may
affect the demand f0r the commodity are not
changing. The only factor that influences the level of
demand or consumption is the price of the commodity
itself.
See Graph 1 for the illustration.
Graph 1 shows the indirect relationship
between price of the commodity and the quantity
bought in a demand curve. At the horizontal axis we
put the quantity demand and on the vertical axis, the
price of the commodity. Along the demand curve D, at
price P1 the quantity demand is denoted by Q1. If the
price is increased to P2, the quantity demand is
reduced to Q2. Thus, a negatively sloped demand curve
D implies an indirect relationship between price of the
commodity and quantity demand.
OTHER FACTORS AFFECTING THE DEMAND OF A
COMMODITY
To be more realistic, there is a need to
consider other factors aside from its own price that
may influence individuals in the purchase of a
commodity.
1) Income
The capacity to purchase is influenced by
the income of the consumer. A higher level of income will
give him higher capacity to consume while a lower income
will give him limited purchasing power.
2) Prices of Other Commodities
For example, if the other good is a
substitute, the increase in the price of the substitute good
may increase the demand for the commodity at hand. Thus,
when the price of beef increases, the demand for chicken
will increase since beef and chicken may be considered as
substitute goods. On the other hand, if the other good is
complementary good, a decrease in its price will impact
positively on the demand of the good being investigated.
For instance, when the price of bread decreases the
demand for butter may increase since butter and bread may
be considered as complementary goods.
3) Expectation
The expectation or prospect on what is
going to happen to the price can also influence the
demand for the commodity. (Remember our
example: the price of the US dollar). Another
example, if you believe the price of gasoline will
increase tomorrow, there is a tendency for
consumers to increase their consumption today.
4) Taste
The formation of taste is influenced by
several factors. Some of them can be shaped by
cultural values, others through peer pressure or
the power of advertising. (Remember our example:
on the celebration of New Year’s Eve to have round
fruits at their fruit plate to attract good luck).
Another example, advertising that shows that
cigarette is bad for your health has to some extent
decreased the demand for cigarette.
5) Market
The size and characteristic of the market
can also influence the demand for a commodity. An
increasing population can contribute to the
expansion of existing markets for various
commodities. (Remember our example: a lower
birth rate coupled with an ageing population).
WHY IS THE DEMAND CURVE DOWNWARD SLOPING?
As mentioned earlier, the demand curve
focuses on the relationship between the quantity
demand and the price of the commodity at a given
point in time other things held constant. The demand
curve shows a negative relationship between the price
of the goods and the quantity demand. Specifically, as
the price of a commodity declines, the quantity
increases and when the price increases, the quantity
demand declines.
Substitution and Income Effects
The inverse or negative relationship between
the price of the commodity and the quantity demand
shown in the demand curve can be explained through
the substitution effect and income effect of a price
change. The substitution effect describes the decision
of a consumer to substitute an expensive good with
cheaper goods when there is a price change. Thus, as a
price of the mangoes increases, the consumer will
make a choice of consuming cheaper papayas and
bananas to substitute for mangoes which have
become more expensive. As a consequence of the
substitution effect, there will be a decrease in the
consumption of mangoes as the price of mangoes
increases.
On the other hand, income effect refers to the
modification of the consumption of a commodity due
to the change in the purchasing power of the
consumer resulting from a price change. An increase in
the purchasing power will enable the consumer to buy
more of the good while a reduction in purchasing
power will reduce its capacity to purchase.
Suppose a consumer has an income of PHP
500 while the price of mangoes is set at PHP 20per
piece. He can buy up to 25 pieces of mangoes from his
given income. However, if the price of mangoes
increases to PHP 25 per piece he can only buy up to 20
pieces. Thus, an increase in the price of the good will
reduce quantity demand because the capacity of the
consumer to purchase is reduced with a price increase.
This confirms the negative relationship between the
price of the commodity and quantity demanded.
Principle of diminishing marginal utility
A more interesting but theoretical explanation
on the downward sloping demand curve is derived
from the principle of diminishing marginal utility.
According this major economic principle as a buyer
continues to consume a good his total satisfaction or
utility increases; however, the additional or marginal
satisfaction decreases as a buyer consumes additional
unit of good. This reduction in marginal satisfaction is
attributed to the fact that consumers can have a
feeling of satiation when they continuously increase
the consumption of a particular commodity.
Diminishing marginal utility implies that the additional
satisfaction provided by an additional commodity
consumed is lower that the additional satisfaction
given by the previous level.
For example, if the price of the good is PHP 8
per unit, and the monetary value of marginal utility of
a certain level of consumption is PHP 10, that level of
consumption is lower than the optimal since the
marginal benefit derived is still higher than the
marginal cost. This means that the net total
satisfaction can still be increased since the net
marginal satisfaction of PHP 2 is positive. The optimal
level of consumption can be reached by increasing
consumption whose marginal utility will decline until it
reaches PHP 8 which is now equal to the price of the
commodity.
CHANGES IN THE DEMAND CURVE
As discussed earlier there are several factors
that may affect the demand for a commodity. As a
consequence, changes in these factors can alter the
demand curve depending on their impact on the
demandfor a commodity. There are two major
categories of changes in demand curve-movement
along the demand curve and shift in the demand curve.
Movement along the demand curve refers to
the change in quantity demand resulting from the
change in the price of the commodity.
See Graph 2 for the illustration.
Graph 2 shows a movement along the demand
curve when a change in the price of a commodity
results in a change in quantity demand. At price P1 the
coordinate a along the demand curve D will give us the
quantity demand which is denoted by Q1. If the price
decreases to P2 (coordinate b along the demand curve)
quantity demand increases to Q2. Thus, as the price of
the commodity decreases the amount of quantity
demand increases as shown by the movement along
the demand curve D from point a to b.
Shift in the demand curve, on the other hand, are
changes in demand curve caused by any of the other
factors beside the price of the commodity. Taste, price
of other goods, income and other factor may affect
the demand of a commodity positively or negatively.
The positive or negative impacts of these
other factors do not alter the negative relationship
between the price of the commodity and the quantity
demand.
See Graph 3 for the illustration.
WHAT IS A SUPPLY CURVE?
The second major actor in a market is the
supplier whose primary purpose in selling is to
maximize profit. This inclination to sell is summarized
in the shape of the supply curve.
The supply curve is defined as a schedule
showing a direct or positive relationship between the
price of a commodity and level of output that the
seller is willing to supply at a given point in time other
thing held constant. The direct relationship means that
as the price of the commodity increases there will be
more sellers that will be induced to supply the good. In
the same light, as the price of the commodity
decreases, there will be lesser sellers that are willing
to supply the good in the market.
See Graph 4 for the illustration.
OTHER FACTORS AFFECTING SUPPLY OF A
COMMODITY
1. Price of Production inputs
2. Taxes
3. Technology
4. Expectation
WHY IS THE SUPPLY CURVE UPWARD SLOPING?
The supply curve shows a positive or direct
relationship between the price of the commodity and
the quantity supplied in the market. The main
motivation to supply goods is to gain profit which is
based on the costs of production of a firm and the
price of the commodity. There are several
interpretations on the reasons why suppliers respond
positively with price changes.
Variation in the Unit Cost of Production
The simplest reason for the direct relationship
between price and quantity supplied is due to
variation of the costs of production among producers.
Let take an example of five producers A, B, C, D, & E
with different unit costs of production. Producer A is
the most efficient with the least cost of PHP 5 per unit
cost. Producer B has PHP 7 unit cost, producer C has
PHP 10 unit cost, while producer D incurs PHP 15 13
per unit. Lastly, producer E is the most inefficient with
PHP 15 unit cost.
Suppose the market price is set at PHP 6 per
unit, at this price only producer A can supply the good
in the market while the rest of the producers are
inefficient or not competitive. On the other hand if the
price is increased and set at PHP 12 per unit, the
number of producers that can supply the market has
also increased. Producers A, B, and C can now supply
the market. Because of the price increase, formerly
inefficient producers B & C have become competitive
since their unit cost of production are now lower that
the current market price. Producers D & E remain
uncompetitive at the current market price.
Meanwhile, as the price increases to PHP 16 per unit,
the number of producers is also increased to five. All
of them are competitive and earning some profit at
the current market price because their unit costs are
lower than the current market price.
Principle of diminishing marginal productivity and
increasing marginal costs
If the price of a commodity or the marginal
revenue is higher than marginal costs, the marginal
profit is positive. This implies that the total profit can
still be increased by increasing production. This is
because the additional revenue brought about by
additional production is higher than the additional
cost which results in a positive contribution to total
profit. On the other hand, if the price of a good or the
marginal revenue is lower than marginal cost, the
marginal profit is negative. This implies that the total
profit will decline with additional production. Thus, as
long as the marginal profit is positive there is
motivation to increase production because this will
increase profit. When marginal profit reaches zero, he
firm has attained the maximum level of profit. This
means that when marginal profit is zero, price or
marginal revenue is equal to marginal cost.
CHANGES IN THE DEMAND CURVE
There are two major categories in the changes
in the supply curve- movement along the supply curve
and shift in the supply curve.
The movement on the supply curve is brought
about by changes in the price of a commodity.
See Graph 5 for the illustration.
The shift in the supply curve is caused by
changes in the other factors affecting supply except
the price of the commodity.
See Graph 6 for the illustration.
DETERMINATION OF PRICES OF COMMODITIES
EQUILIBRIUM PRICE
When buyers and sellers transact in a market
they agree on the price of the commodity and the
amount to be sold and bought. This agreed price is
called the equilibrium price. From a graphical
perspective, the equilibrium price implies that buyers
and sellers are I agreement to buy and sell the same
amount of commodity at the equilibrium price.
See Graph 7 for the illustration.
However, there are cases when there are
disagreements among buyers and sellers on the price
and quantity. In such cases disequilibrium situations
can occur. An example of a disequilibrium condition is
when the amount buyers are willing to buy is not the
same as the amount the produces are willing to sell at
a given price.
Because disequilibrium situations create
differences in the amount of commodity being bought
and sold, the market price is not stable and can bring
economic problem. If the market is efficient, these
differences create pressures though price changes to
remove the disequilibrium. Remember our example
re: shortage and surplus.
CHANGES IN EQUILIBRIUM PRICE AND OUTPUT
 Shift in the Demand Curve to the Right
 Shift in the Demand Curve to the Left
 Shift in the Supply Curve to the Right
 Shift in the Supply Curve to the Left
SIMULTANEOUS CHANGES IN DEMAND AND SUPPLY
 Shift of the Demand Curve to the Right
and Shift of the Supply Curve to the
Right (Equal Proportion)
 Shift of the Demand Curve to the Right
and Shift of the Supply Curve to the
Left (Unequal Proportion)
OTHER APPLICATIONS OF SUPPLY AND DEMAND
ANALYSIS

1. Price Ceiling
2. Price Floor
3. Application in the Labor Market (see
discussion and graphic illustration in the last
three pages)
4. Minimum Wage as Price Floor (see discussion
and graphic illustration in the last three pages)
5. Application in the Foreign Exchange Market
6. Labor Migration and the Overseas Filipino
Workers (OFW’s)
7. Determination of Rent

CONTEMPORARY ECONOMIC ISSUES FACING THE

FILIPINO ENTREPRENEUR

 Market Structures
1. Perfect Competition
2. Monopoly
3. Oligopoly
4. Monopolistic Competition
 Market Structures and Implications for
Entrepreneurs
1. Investment and Interest Rate
2. Rentals and the Cost of
Business Operations
3. Minimum Wage
4. Taxes (business permits, real
estate taxes, sales taxes, value
added taxes, income taxes and
taxes on traded goods and
services).