GOVERNMENT PROPERTY

NOT FOR SALE

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Quarter 1 – Module 4:
Market Pricing

APPLIED ECONOMICS

SDO Taguig City and Pateros

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Introductory Message
For the facilitator:

This module was collaboratively designed, developed and evaluated by the

Development and Quality Assurance Teams of SDO TAPAT to assist you in helping
the learners meet the standards set by the K to 12 Curriculum while overcoming
their personal, social, and economic constraints in schooling.

As a facilitator, you are expected to orient the learners on how to use this module.
You also need to keep track of the learners' progress while allowing them to
manage their own learning. Furthermore, you are expected to encourage and assist
the learners as they do the tasks included in the module.

For the learner:

This module was designed to provide you with fun and meaningful opportunities
for guided and independent learning at your own pace and time. You will be
enabled to process the contents of the learning resource while being an active
learner.

The following are some reminders in using this module:

1. Use the module with care. Do not put unnecessary mark/s on any part of
the module. Use a separate sheet of paper in answering the exercises.
2. Don’t forget to answer Let’s Try before moving on to the other activities
included in the module.
3. Read the instruction carefully before doing each task.
4. Observe honesty and integrity in doing the tasks and checking your
answers.
5. Finish the task at hand before proceeding to the next.
6. Return this module to your teacher/facilitator once you are through with it.
If you encounter any difficulty in answering the tasks in this module, do not
hesitate to consult your teacher or facilitator. Always bear in mind that you are
not alone.

We hope that through this material, you will experience meaningful learning
and gain deep understanding of the relevant competencies. You can do it!

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 Let’s Learn

This module was designed and written with you in mind. It is here to help you
determine the implications of market pricing on economic decision making. The
scope of this module permits it to be used in many different learning situations.
The language used recognizes the diverse vocabulary level of students. The lessons
are arranged to follow the standard sequence of the course. But the order in which
you read them can be changed to correspond with the textbook you are now using.

After going through this module, you are expected to:

1. define market price
2. explain how market price is determined
3. define price ceiling and price floor
4. examine the economic consequences of a price ceiling and a price floor
5. determine the implications of market pricing on economic decision making

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 Let’s Try

Choose the letter of the best answer. Write the chosen letter on a separate sheet of
paper.

1. It refers to price that always generate a surplus.

a. price ceiling
b. price floor
c. price equilibrium
d. price system

2. It refers to price that creates shortage.

a. price system
b. price floor
c. price ceiling
d. price equilibrium

3. It signals producers as to what and how much of the product or service they
must produce.
a. price floor
b. price ceiling
c. price system
d. price

4. It refers to the agreed price of the seller and buyer.

a. market price
b. price equilibrium
c. price system
d. price

5. This occurs whenever there is interaction between buyers and sellers.

a. market
b. price
c. market price
d. market equilibrium

6. A firm adopts a ____________ when the artificially held market price is above
the equilibrium price
a. price ceiling
b. price floor
c. shortage
d. surplus

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 Lesson
Market Pricing
1
This lesson helps you determine the implications of market pricing on economic
decision making.

Let’s Recall

Equilibrium point
PRICE

Quantity Demand
Quantity Supply

Equilibrium
Price

You have learned from the previous lesson that market is the medium in
which buyers and sellers interact. The demand curve shows that the quantity
demanded varies inversely with price, while the supply curve shows that the
quantity supplied varies directly with it. When buyers and sellers agreed at a price,
a state of balance is reached between them and this state of balance is called as
market equilibrium.

Let’s Explore

Activity 1
Given the scenario, determine whether the equilibrium price and quantity increase
or decrease. Write UP if it increases and DOWN if it decreases

Scenario Pe Qe
Increase in demand Supply remains constant leads to
Decrease in demand Supply remains constant leads to
Increase in supply Demand remains constant leads to
Decrease in supply Demand remains constant leads to

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 Let’s Elaborate

Market equilibrium occurs when the buyer and seller agreed at a price. This
price is called equilibrium price. It is the price at which consumers will be willing to
take exactly the amount that sellers want to place in the market. This is also called
the market–clearing price. Equilibrium price can be determined mathematically or
graphically.
Example:

A. Given the demand function Qd=72−2 P and supply function Qs=12+ 4 P

, determine the price of coke mismo for which a product will sell in the
market.
Solution:

Solving for the equilibrium price Solving for the equilibrium quantity

Qd = Qs Qe = Qs = 72− 2P
72−2P = 12+4P = 72 −2(10)
72−12 = 6P Qe = 72 −20
60 Qe = 52 units or bottles of coke
P=
6
Pe = 10 pesos

B. Construct a demand and supply schedule for coke mismo product.

Price Qd Qs
4 64 28
6 60 36
8 56 44
10 52 52
12 48 60
14 44 68

C. Plot the demand and supply schedule

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Three Conditions Prevailing in the Market
1. Equilibrium is the condition that exists when quantity supplied, and
quantity demanded at the current price is equal. There is no tendency for
price to change when there is an equilibrium in the market.

2. Excess Supply or Surplus exist when quantity supplied exceeds quantity

demanded at the current price.

3. Excess Demand or Shortage exist when quantity demanded exceeds quantity

supplied at the current price.

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Price Interventions
1. Price Floors always generate a surplus. A firm or the government adopts a
price floor when the artificially held market price is above the equilibrium
price. Most price floors are imposed on agricultural products in order to
protect the income of farmers and encourage them to produce more. If more
products are produced, it will generate more surplus thus keeping the price
in the market at equilibrium.

[CITATION Pal18 \l 1033 ]

2. Price Ceiling creates shortage. The government implements a price ceiling

when it artificially holds the market price below the equilibrium price. Price
ceiling are imposed by the government for rental control, tuition fee ceiling,
price control on gasoline, borrowing rates, and price regulation on staple
food and utilities.

Source: http://econsallaroundtheworld.blogspot.com/2013/07/price-ceiling.html

Partial Equilibrium Analysis

1. Increase in Demand and Supply
a. When demand increases while supply remains the same, both
equilibrium price and quantity go up.
b. When supply increases while demand remains the same, the
equilibrium price goes down and quantity goes up
2. Decrease in Demand and Supply
a. When demand decreases with the supply remaining the same, both
equilibrium price and quantity fall
b. When supply decreases with demand remaining the same,
equilibrium price goes up while quantity goes down

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 Let’s Remember

Table show the Summary of the Changes in Demand/ Supply and their Effects
on Equilibrium Price and Quantity

Conditions of Demand and Supply Effect on Price and Quantity

Increase in demand Supply remains lead to Increase in Increase in
constant price quantity
Decrease in demand Supply remains lead to Decrease in Decrease in
constant price quantity
Increase in supply Demand remains lead to Decrease in Increase in
constant price quantity
Decrease in supply Demand remains lead to Increase in Decrease in
constant price quantity
Source: Cruz, M. A. (2017). Business Economics. Mandaluyong City: Anvil Publishing, Inc.

Let’s Apply

Activity 2.
Use the supply and demand graphs to answer the following questions below.

Source: ©Mrs. P's Interactive Classroom 2019

1. What is the equilibrium price and quantity in the corn market?

2. What quantity of corn is demanded at a price level of P2?
3. If the price level changes from P1 to P3, will the corn market have a surplus
or shortage? What is its size?
4. Explain why a disequilibrium will exist in the corn market as prices rise from
P1 to P2.

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 Let’s Evaluate

Choose the letter of the best answer. Write the chosen letter on a separate sheet of
paper.

1. How would one determine the equilibrium price and quantity?

a. it is the highest price and its corresponding quantity on curves
b. any price and quantity on the curves is the equilibrium
c. it is the point of intersection of the two curves
d. none of these are correct
2. It is the graph showing how much of a product a firm will sell at different
prices.
a. supply schedule
b. supply curve
c. supply graph
d. all of these are correct
3. It is a condition of the market that prevails when quantity demanded
exceeds quantity supplied at the current price
a. shortage
b. surplus
c. equilibrium
d. none of these are correct
4. It is a condition that exists when quantity supplied, and quantity demanded
at the current price is equal
a. surplus
b. shortage
c. disequilibrium
d. equilibrium
5. It is a condition in which the price is above the equilibrium level determined
by the supply and demand.
a. shortage
b. surplus
c. equilibrium
d. none of these are correct

Let’s Extend

Activity 3.
Research two instances when the Philippine government intervened in the market,
as when it imposed price controls and price ceilings. Does government
interventions beneficial or not?

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 Answer Key

Let’s Apply Let’s Try

1. B
1. P1 and 100 bushels of corn 2. C
2. 50 bushels of corn 3. D
3. A market shortage of 100 4. A
bushels of corn 5. A
4. When price rises to P2, firms 6. B
have an incentive to increase
quantity supplied to 150
bushels. However, quantity
demanded decreases to 50 Let’s Explore
bushels as buyers are less Pe Qe
willing or able to buy at a price
Up Up
of P2.
Down Down
Down Up
Up Down
Let’s Evaluate
1. C
2. B
3. A
4. D
5. B

References
Cruz, M. A. (2017). Business Economics, (pp 18-21). Mandaluyong City: Anvil
Publishing, Inc.
Laraya, J. De Leon J., & Santos, R. (2019), Applied Economics (pp. 19-26).
Mandaluyong: Books Atbp. Publishing Corp.
Tullao Jr, T. (2015). Understanding Economics in the Philippine Setting. (pp.
153-158). Quezon City: Pheonix Publishing House, Inc.
Viray Jr, E. & Avila-Bato, J., (2018). Applied Economics (pp. 9-20).
Mandaluyong: Anvil Publishing Inc.
@Mrs. P's Interactive Classroom 2019

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 Development Team of the Module
Writers: Suzanne M. Paderna
Editors:
Content Evaluator:
Language Evaluator:
Reviewers: Joana Feliza P. Guevara
Illustrator: Name
Layout Artist: Name
Management Team: DR. MARGARITO B. MATERUM, SDS
DR. GEORGE P. TIZON, SGOD Chief
Name of EPS in-charge of Learning Area
DR DAISY L. MATAAC, EPS – LRMS/ALS

For inquiries, please write or call:

Schools Division of Taguig city and Pateros Upper Bicutan Taguig City

Telefax: 8384251

Email Address: sdo.tapat@deped.gov.ph

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