ACTIVITY 1

DEMAND AND SUPPLY

 What will happen to the equilibrium price and quantity on the following
possible demand and supply shifts? Show your graph (draw an initial
market for each condition before the shift of either demand and supply
curve to determine the new equilibrium price and quantity).

INCREASE OR INCREASE OR
SHIFT TO THE
DECREASE IN DECREASE IN
CONDITION LEFT OR TO
EQUILIBRIUM EQUILIBRIUM
THE RIGHT?
PRICE ? QUANTITY ?
DEMAND SHIFTS
1. Increase in
income: X is a
normal good
2. Increase in
income: X is an
inferior good
3. Decrease in
income: X is a
normal good
4. Decrease in
income: X is an
inferior good
5. Increase in the
price of a
substitute for
good X
6. Increase in the
price of a
complement for
good X
7. Decrease in the
price of a
substitute for
good X
8. Decrease in the
price of a
complement for
good X
SUPPLY SHIFTS
9. Increase in the
cost of production
cost of good X
10. Decrease in the
cost of production
of good X
ACTIVITY 2
ELASTICITY

Suppose that an increase in the price of ampalaya (bitter gourd) from PhP40
to PhP80 per kilo raises the amount that farmer Juan produces from 1,000 to
1,200 kilos.

a. What is farmer Juan’s PES for ampalaya? Show your computation.

b. What do you think are the reasons for Juan’s PES for ampalaya?