Department of Education

Region III
Division of City of San Fernando
San Fernando East District
DEL CARMEN INTEGRATED SCHOOL

City of San Fernando (P)

Detailed Lesson Plan in Economics

WEEK 5

I.OBJECTIVES
A. Content Standard:
The learner demonstrates an understanding of the law of supply and demand, and the factors
affecting the economic situation
B. Performance Standard:
The learners shall be able to conduct a survey of current economic situations within the vicinity
C. Learning Competency / Most Essential Learning Competency (MELC):
Determine the implications of market pricing on economic decision making

II.CONTENT
A. Elasticity of Supply and Demand
B. Market Pricing
C. Application of market pricing on economy

III.LEARNING RESOURCES
A. References
1. Leano, R. (2016). Applied Economics for Senior High School
B. Other Learning Materials
1. Google Slideshare
IV.PROCEDURE
A. Reviewing previous lesson or presenting the new lesson

Hello, Class! Welcome to our Applied Economics class!

P 130 – Grande size

If milk tea will increase its price by 50% will you still buy it? Will you still buy the same quantity and
at the same frequency?

How about if there is another brand of milk tea selling for lower price at the same size?

B. Establishing a purpose for the lesson

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When it comes to the business market, prices are everything. Prices are responsible (either partly
or fully) for the decisions that producers and consumers make. Can you remember the last time that
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 you visited a business and wanted to make a purchase but decided against it because you thought
that the price was too high? Or, how about deciding to make an impulse purchase because you felt
as if you were getting a pretty good deal price-wise?

If you experienced either of these scenarios, then you understand that prices have a major effect on
producers and consumers and the decisions that they make.

Before we delve further into the relationship between prices and producers, it is important that we
understand terms that are commonly used. Let's begin with supply. Simply stated, supply can be
defined as the numerical quantity of a tangible item that businesses, organizations, and other
institutions have for redistribution. On the flip side, demand in this context is the desire of
consumers for a specific product.

Prices have an immense affect on the decision making of producers and can be explained by the
law of supply. The law of supply states that the quantity of a good increases when the price
decreases. The law of supply is a primary example of how pricing can affect decision making with
producers. For example, let's assume that you work for a company that produces smartphones.
Your company has been made aware that a rival company will be introducing a newer smartphone
in three months, which has the same features but at a lower cost.

Your company has chosen to lower the price of their current smartphone along with trying to sell it
to other retail stores to try and get ahead of the competition. In anticipation of additional sales from
the lowering of prices, there must be additional supplies (or smartphones) purchased.

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C. Presenting examples/instances of the new lesson
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The law of supply and demand is an economic theory that explains how supply and demand are related
to each other and how that relationship affects the price of goods and services. It's a fundamental
economic principle that when supply exceeds demand for a good or service, prices fall. When demand
exceeds supply, prices tend to rise.
There is an inverse relationship between the supply and prices of goods and services when demand is
unchanged. If there is an increase in supply for goods and services while demand remains the same,
prices tend to fall to a lower equilibrium price and a higher equilibrium quantity of goods and services. If
there is a decrease in supply of goods and services while demand remains the same, prices tend to
rise to a higher equilibrium price and a lower quantity of goods and services.
The same inverse relationship holds for the demand for goods and services. However, when demand
increases and supply remains the same, the higher demand leads to a higher equilibrium price and vice
versa.
Supply and demand rise and fall until an equilibrium price is reached.

For example, suppose a luxury car company sets the price of its new car model at P1,200,000. While
the initial demand may be high, due to the company hyping and creating buzz for the car, most
consumers are not willing to spend P1,200,000 for an auto. As a result, the sales of the new model
quickly fall, creating an oversupply and driving down demand for the car. In response, the company
reduces the price of the car to P1,000,000 to balance the supply and the demand for the car to reach
an equilibrium price ultimately.

D.Discussing new concepts and practicing new skills

Price Elasticity

Increased prices typically result in lower demand, and demand increases generally lead to
increased supply. However, the supply of different products responds to demand differently, with
some products' demand being less sensitive to prices than others. Economists describe this
sensitivity as price elasticity of demand; products with pricing sensitive to demand are said to be
price elastic. Inelastic pricing indicates a weak price influence on demand. The law of demand still
applies, but pricing is less forceful and therefore has a weaker impact on supply.
Price inelasticity of a product may be caused by the presence of more affordable alternatives in the
market, or it may mean the product is considered nonessential by consumers. Rising prices will
reduce demand if consumers are able to find substitutions, but have less of an impact on demand
when alternatives are not available. Health care services, for example, have few substitutions, and
demand remains strong even when prices increase.

ACTIVITY 1: Kung ang sagot mo ay bibili ka pa rin ng milktea kahit na nagtaas na ang presyo ito ba
ay nagpapakita ng Price Elasticity or Price Inelasticity?

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E.Discussing new concepts and practicing new skills #2

PRICE ELASTICITY OF DEMAND

It is the degree of responsiveness of quantity demanded of a commodity due to change in price,

other things remaining the same.

In other words, the price elasticity of demand is the percentage change in quantity demanded due
to certain percentage change in price

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 F.Developing Mastery

Types or degrees of price elasticity of demand

1. Perfectly Elastic Demand (EP = ∞)

2. Perfectly Inelastic Demand (EP = 0)

3. Relatively Elastic Demand (EP> 1)

4. Relatively Inelastic Demand (Ep< 1 )

5. Unitary Elastic Demand ( Ep = 1)

Types or degrees of price elasticity of demand

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