APPLIED

ECONOMICS
Lesson 4: Implications
of Market Pricing in
Making Economic
Decisions
As we go
further, let us try
to recall the
concepts of TRUE OR FALSE
market demand, Directions: Write TRUE if the statement
market supply is correct and FALSE if incorrect. Write
and market your answer in your notebook.
equilibrium.
Please perform
this.
TRUE
1. The equilibrium point is
the level where the demand
and supply curves intersect.
 2. If the price is above the
FALSE
equilibrium level, the quantity
demanded is greater than the
quantity supplied.
 3. If the price is below the
FALSE equilibrium point, the quantity
demanded is lesser than the
quantity supplied.
 4. The law of demand applies
TRUE
during online sales of computers
when consumers rush to buy
products at 30% discounts.
 5. The law of supply applies when
the producers supply more masks
TRUE at a higher price; selling at higher
quantity at a higher price increases
revenue.
 6. If the price is below the
equilibrium level, then the quantity
TRUE
demanded will exceed the quantity
supplied.
 7. Shortage will exist if the
TRUE price is below the
equilibrium point.
 8. The law of supply and demand
TRUE
explains the interaction between
the sellers of a product and the
buyers.
 9. The demand curve is always
TRUE downward sloping due to the law
of diminishing marginal utility.
TRUE
10. The supply curve
shows an upward slope.
  A shortage is when there is an excess
demand for the quantity supplied. While
surplus is excess in supply.
For example, if there are 10 bottles of
water and there are 20 students who want
The Marketing drinking these, then there will be only 10
Price System students whose demands are met while the
others will not be able to be given anything.
There is shortage in the supply.
 If producers make too many bottles of water
and consumers cannot buy them , there will
be surplus.
PRICE
PRICE
 Price acts as a signal for shortages and
surpluses which help firms and consumers
respond to changing market conditions.
 If a good is in shortage – price will tend to
rise. Rising prices discourage demand, and
encourage firms to try and increase supply.
 If a good is in surplus – price will tend to fall.
Falling price encourage people to buy, and
cause firms to try and cut back on supply.
 Prices help to redistribute resources from
goods with little demand to goods and
services
 The market price is the point that the
supply and demand curves intersect.
The chart shows a surplus – the
quantity is greater than demand.
When quantity is greater than
demand it causes prices to go
down.
WHO CONTROLLS THE PRICES?
  The producers can make what they
PRICES want and consumers are free to
ARE purchase what they want. This means
MARKET that customers live in a market
economy. When prices are high,
DRIVEN supply increases as many firms join
the market (Judge, S. 2020).
 The high prices attracted the producers
to join the market.
 In shortage, quantity is less than the
demand; it causes prices to go up due to
scarcity.
 Example of which is the shortage in
masks and ethyl alcohol in the market.
There is shortage in the supply, thus,
price tends to go up or tends to go
higher (Judge, S. 2020).
  DIRECTION: Identify if the situation
QUIZ would likely lead to SHORTAGE or
SURPLUS.
1. A designer raises the price of jeans by 50%. This will
likely lead to a____________.
2. A limited quantity of popular dolls are released
right before Christmas. This will likely lead to a
___________.
3. A clothing store creates a limited line of t-shirts
featuring a popular singer. This will likely lead to a
______________.
4. A company raises the price of their new computer
by $100 at the same time their competitor releases a
new, cheaper model. This will likely lead to a
_____________.
5. There are empty candy shelves at Walmart on the
day before Halloween.
 DIRECTIONS: Plot or graph the data. Analyze data
and describe the curve whether there is surplus or
TEST II. Graph shortage. Interpret the results.
 PRICE OF A SUPREME MARKET DEMAND
PIZZA
2 20

1. What price 4 15
could lead to
6 10
shortage?
8 5
10 0
 PRICE OF A SUPREME MARKET SUPPLY
PIZZA
2 2

2. What price 4 6
could lead to
6 10
surplus?
8 14
10 18
 Directions: Give the meaning of the
ASSIGNMENT:
Make Meaning following words/phrases. You may
Internet use the internet to substantiate
Assisted your ideas.
Activity 1. Price Elasticity
(in your
notebook) 2. Price Elasticity of Demand
3. Price Elasticity of Supply