APPLIED ECONOMICS

DEMAND
- Is a relationship between quantity and price. Defined as
the different quantities of a resources, good or services
that consumers are willing and able to buy at any given
time at various possible prices.

Quantity DEMANDED
- Decrease as the price of the commodity rises.
- Increases as the price of the commodity falls.

QD P QD P
 Law of DEMAND
- Describes the rationing effect of prices. It states that all
other things being constant, the quality of the product
that consumers are willing to and able to buy increases.

DEMAND Schedule
- Is a table showing the quantities of a product that would
be purchased at various price at a given time and place.
 Example:
Suppose I would like to sell T-shirt for the coming Foundation day.
I decided to conduct survey to know if the students are interested to
buy your T-shirts. I need to ask if they are willing to spend
Php100.00 up to Php300.00 for T-shirts.

PRICE (Php) Quantity Demanded

300.00 10

250.00 20

200.00 30

150.00 40

100.00 50
 Price T-shirts

Demand
Curve
300

250
200
150
100
0 QD T-shirts
10 20 30 40 50

Figure 1 – Demand for T-shirts

 Determinants of Demand

4. Prices Related Goods

1. Consumer tastes  Substitute Goods
and preferences  Prices of
2. Consumer’s Complementary
Income Goods
5. Expectations of Future
3. Population Prices
 Price Price

0 QD QD
0

Increase in Decrease in
Demand Demand
 Elasticity of Demand

- Demand curve represents the relationship

between price and quantity demanded. If the
price of necessity goods increases, people
would buy less.
- Elasticity describes how much a change in
price the quantity demanded.
 SUPPLY
- Defined as the number of items that sellers are willing
and able to sell in the market at different prices during
some specified period of time.

Quantity SUPPLIED
- The number of goods that individuals are willing and
able to sell at a particular price during a particular
period of time.
QS P QS P
 Law of SUPPLY
- States that sellers will offer more of an item at a high
price and less at low price. It simply shows the direct
relationship between price and quantity supplied.

SUPPLY Schedule
- Shows the quantity of items sellers would offer for sale
at different price.
 Example:
Suppose I would like to sell T-shirt for the coming Foundation day.
I decided to conduct survey to know if the students are interested to
buy your T-shirts. I need to ask if they are willing to spend
Php100.00 up to Php300.00 for T-shirts. Supply Schedule below:

PRICE (Php) Quantity Demanded

300.00 50

250.00 40

200.00 30

150.00 20

100.00 10
 Price T-shirts
Supply
Curve

300

250
200
150
100
0 QS T-shirts
10 20 30 40 50

Figure 1 – Supply for T-shirts

 Determinants in Supply

1. Technological Progress
2. Number of Sellers
3. Cost of Production
4. Expectations of Future
Price
 Price Price

0 QS 0 QS

Increase in Decrease in
Supply Supply
 Elasticity of Supply

- Is measured as the ratio of

proportionate change in the quantity
supplied to the proportionate change
in price.
 Determinants of the Elasticity of Supply

1. Limited Amount of raw materials

2. Difficulty of producing goods
3. Time Period
>Market
> Short run
> Long run
4. Production surplus
5. Inventories
 U M
SUPPLY AND DEMAND : R I
LI B
U I
E Q
ET
R K
M A

- Refers to a condition where a market price

is established through competition such that
amount of goods or services purchased by
buyers is equal to the amount of goods or
services produced by sellers.
 Demand and Supply
of
Tshirts

QS-QD
PRICE QD QS +surplus;--shortage
300.00 10 50 +40
250.00 20 40 +20
200.00 30 30 0
150.00 40 20 -20
100.00 50 10 -40
 Price Market Equilibrium

D S

300

250
200
150
100
0 Quantity
10 20 30 40 50

Figure 1 –Demand and Supply of T-shirts

 QUIZ
The following table represents the market for rice. Plot the data on a
demand and supply graph and identify the equilibrium price and
quantity. Explain what would happen if the price is set at Php 30.00
and shown on this graph. Explain what would happen if the price is
set at Php 15.00, and this on the graph.
Quantity Demand Price Quantity Supply
90 5.00 60

85 10.00 65

80 15.00 70

75 20.00 75

70 25.00 80

65 30.00 85

60 35.00 90
 Prices of Basic Commodities
Commodities – are raw materials or primary agricultural products that can be
sold and bought in the market.

Basic Consumer Goods in the Philippines

1. Oil Products
2. Processed and Manufactured Commodities
2.1 Canned goods
2.2 Processed milk
2.3 Instant noodles
2.4 Bread
2.5 Commercial Rice
2.6 Sugar
2.7 Cooking oil
2.8 Meat and poultry
2.9 Fish and vegetables
2.10 Basic medicines
 What causes commodities price to change?

• When supply exceeds demand, prices fall and when demand is greater
than supply prices rise.

 When people’s income increases, their purchasing power increases and

result to greater demand for commodities.
 Demand for crude oil as more people buy automobiles and greater
demand for commercial rice, meat, poultry, sugar, etc. among others.
 Changes in technology and decrease in production costs, output
increases.
 Natural disaster can also cause prices to change.
 Production costs can also cause price to rise or fall like the
implementation of salary standardization law, minimum wage law.
 What can be done to stabilize prices of basic
commodities?

1. Maintain an adequate food stock in the local, regional

and national level.
2. More investments on infrastructure projects that
promote irrigation in the local and regional levels.
3. Implementation of House Bill No. 24190 (an Act
Granting Stand –by Power to the President of the
Philippines to control and stabilize Prices of Prime
Commodities in times of shortage, emergency and/or
calamity).
 Labor Supply and Wages

LABOR FORCE – defined as people who are willing and

able to work. And labor force population consists of the
employed and unemployed 15 years old and over.
LABOR FORCE = Employed + Unemployed
The size of the labor force is used to determine the
unemployment rate.
UNEMPLOYMENT Rate = Unemployed/labor force) *100
 A person is unemployed if he/she is willing and able to work
actively looking for job but not suitable job available.
 Person who are voluntarily idle or not actively looking for a job
are not classified as unemployed.
LABORFORCEPARTICIPATIONrate = (Labor force/Civilian Non-
Institutionalized Population) *100
 Civilian Non-Institution Population - everyone living in the
Philippines who is 15 or older except inmates of institutions such
as prisons, home for the aged and mental hospitals.
 Underemployment – is a situation where employed persons
express their desire to have an additional hours of work in their
present job, or have additional job, or to have job with longer
working hours.
 Labor Supply – is the number of hours people are willing
and able to supply at a given wage rate.

EMPLOYMENT SECTORS in the Philippines

1. Agricultural Sector
2. Industrial Sector
3. Services Sector
CATEGORIES of Workers
1. Wage and Salary
2. Self-Employed workers without any paid employee
3. Employers in own family-farm or business
4. Unpaid family workers
CLASSIFICATION of Workers
1. Full-time workers – work for 40 hours or more in a week.
2. Part-time workers work for less than 40 hours in a week.
 Quantity of Labor
Monthly Salary (Php)
Supplied
10,000.00 100
15,000.00 200

20,000.00 300

25,000.00 400

30,000.00 500

Supply of Labor in Metro Manila

 Salary

30,000
25,000

20,000
15,000
10,000
Quantity of
0 Labor
100 200 300 400 500

Figure 1 – Supply of labor in Metro Manila

 Factors that may change the Labor Supply

1. Substitution Effect – when the wage rate increases, leisure

becomes more expensive that other goods that workers might
purchase. Higher wage rate would lead workers to work
more hours because high price of leisure makes less
attractive.
2. Income Effect – the income effect of higher wages would
lead more workers to work less, while those receiving lower
wages would lead more workers to work more. But with
lower wages, it reduce the income of workers that would lead
them to look for additional income to maintain the family’s
standard of living.
 Quantity of Labor
Monthly Salary (Php)
Supplied
10,000.00 500
15,000.00 400

20,000.00 300

25,000.00 200

30,000.00 100

Labor Demand in Metro Manila

 Salary Labor Demand – refers to the
number of hours that an employer
is willing to pay based on current
30,000
market price of labor.
25,000

20,000
15,000
10,000
Quantity of
0 Labor
100 200 300 400 500

Figure 1 – Labor Demand in Metro Manila

 Factors that may change the Labor Demand

1.Increase in demand for goods and services. The demand

for labor increase when there is an increase in the
demand for goods and services.
2.During recession, the demand for labor decreases when
the company needs to decrease their production costs.
3.Changes in technology will change the demand for labor
for workers with technical know-how.
 Demand and Supply of
Workers in
Metro Manila

Quantity of Quantity
Monthly QS-QD
Labor of Labor
Salary +surplus;--shortage
Supplied Demanded

10,000.00 100 500 -400

15,000.00 200 400 -200
20,000.00 300 300 0
25,000.00 400 200 +200
30,000.00 500 100 +400
 Price
D S

30000
25000

20000 EQUILIBRIUM
15000

10000

0
Quantity of
100 200 300 400 500
Labor

Figure 1 –Demand and Supply of Labor in Metro Manila

 Wages – Is a monetary remuneration computed on
hourly, daily, weekly or piece work basis paid by an
employer to an employee in exchange for work done.

Wage and wage-related benefits given to workers

1. Minimum wage – is the lowest remuneration that
employers may legally pay to workers.
2. Holiday Pay – the payment of an employee’s daily basic
wage for all non working regular holidays.
3. Overtime Pay – more than 40 hours in a workweek.
4. Vacation Leave – 13 vacation days, with additional 1
vacation day every year starting on 2nd year of service
and convertible to cash at the end of each year. Max.
vacation leave is 18 days.
5. Parental Leaves
> Maternity Leave – 60 days for normal delivery, 78 days for a
caesarean delivery, for up to four pregnancies.
> Paternity Leave – all married male employees are entitled to 7
days paternity leave for the delivery or miscarriage of his legitimate
spouse for up to four pregnancies.
> Solo-Parents Leave – Republic Act no. 8972. Parental leave of not
more than 7 working day every year shall be granted to any solo
parent employee who has rendered service at least 1 year.
6. 13th Month Pay – its mandatory, equivalent to 1 month’s basic pay
salary to employees with at least 1 year of service and must be paid
before December 24.
7. Separation Pay – it is the amount due to the personnel where the
termination of employment is due to causes authorized by law.
8. Retirement Pay – it is the amount to be paid to employee who has
reached the compulsory retirement age or who availed of
voluntary retirement.
 Labor migration and the
Overseas Filipino Worker Phenomenon
Migration – refers to the movement of people from one place to
another.
Types of Migration
1. Internal Migration – rural to urban migration
2. International Migration – one country to another.
Causes of Migration
3. Poverty
4. Unemployment
5. Victims of Natural Calamities
6. Civil Wars
7. Improve Standard of living
8. Better education
9. Better environment
10. Economic security
 1. Overcrowded
2. Lack of housing facilities
3. Increasing inequality in the
distribution of income and
1.Increase Labor wealth
Supply 4. Heavy pollution like noise,
2.Cheap Labor air, water, sounds etc.
5. Traffic congestion
6. The occurrence of squatter
areas and slums
7. Unemployment

Positive Negative
Effects of Effects of
Migration Migration
Labor migration – is the process of shifting a labor
force from one physical location to another

Causes of Labor Migration

1. The desire of the job seekers to increase
income and to improve the standard of living
2. The emergence of new industries
3. The relocation of the production facilities of
a given business to a new area.
 Overseas Filipino Worker (OFWs) – are Filipinos who
are presently and temporarily working outside the
country. #land-based or #sea-based workers

Based on the data gathered from POEA 2014, a total

1,832,668 OFWs.
> land-based workers – 1,430,842
> Sea-based workers - 401,826
Three government agencies to Overseas Contract Workers
(OCWs)
1. National Seamen Board (NSB)
2. Overseas Employment Development Board (OEDB)
3. Bureau of Employment Services (BES)
Reasons behind OFW Phenomenon

1. High employment rate

2. Low salary offered by employers in the
Philippines
3. Discrimination in job hiring in the
Philippines
4. High Withholding Tax
CHAPTER
3
INDUSTRY AND
IT’S
 BUSINESS ENVIRONMENT
 Includes all the internal and external factors that
affect how the company functions including
employees, customers, management, supply and
demand and business regulations.
 Outside forces affecting the business operation
that are beyond the control of the business.
 BUSINESS
ANALYSIS
It is a process to identify all the external and
internal elements, which can affect the
organization’s performance.
 Entails assessing the level of threat or
opportunity the factors might present.
 Micro environment of the organization consists of
those factors which are controllable by the
management.
 Macro environment is also known as external
environment that greatly influences the performance,
decision making and strategy of all business
enterprises.
 COMPETITORS - are the rivals against another, the presence of
competitors can decrease the prices of goods and services as the firms
attempts to gain a larger market share.
 ORGANIZATION - the firm itself includes the business owner, board of
directors, stockholders, investors, and employees.
 SUPPLIERS – are the ones who provide inputs to the business like raw
materials, tools, equipment and other inputs needed in producing goods.
 MARKET – it is a place where buyers and sellers interact to facilitate
exchange of good and services.
 INTERMEDIARIES – these are the people who help the company
promote, sell and distribute its products to final consumers like resellers,
physical distribution firms, marketing services.
 CUSTOMERS – are the ones who buys the goods or services produced by
another person’s or companies for their own consumption.

Factors of MICRO Environment

 Population and Demographic – top management use population and
demographic factors to identify potential markets for specific goods
and services. (age, gender, education, income and employment)
 Economic – it can directly and indirectly affect the business of the
company.
 Socio-cultural – should be given great consideration of the op
management because this influences the decisions of consumers.
 Technological – development of new technology can change business
into a success or failure.
 Legal and Political – government laws, policies, rules and
regulations have significant influence in the business operations.
 Environmental Factors –it includes weather condition and climate
change that greatly affects the company’s operations.

Factors of MACRO Environment

 FIR
M
 Is a business organization, such as a corporation,
limited liability company or partnership that sells
goods or services to make profit.
FORMS of BUSINESS ORGANIZATION
 Sole Proprietorship is a type of business organization that is owned by
one natural person and in which there is no legal distinction between the
owner and the business.
 Partnership is a business organization owned by two or more persons.
 Corporation is a business organization created under government
charter. A corporation is a legal person. It can sue or be sued, can enter
into contracts, and must pay taxes.
 Cooperative is a business organization owned by and operated for the
benefit of those using its service.
 INDUSTRY
 Is an economic activity concerned with the
processing of raw materials and manufacture of
goods in factories.
 It is the process of making products by using
machinery and factories.
 Industry Analysis is the study of a specific market
for which a company currently sells its products, or
plans to enter in the near future.
 SWOT Analysis is a tool which helps the company
in identifying the internal and external factors
affecting their business. And it is one of the most
effective way used in decision-making process.
1. Competitive Rivalry –force examines how intense the competition
currently is in the marketplace, which is determined by the number
of existing competitors and what is capable of doing.
2. Bargaining Power of Suppliers –force analyzes how much power a
business’s supplier has and how much control it has over the
potential to raise its prices, which, in turn, would lower a business.
3. Bargaining power of customers –force looks at the power of the
consumer to affect pricing and quality.
4. Threats of new entrants –force examines how easy or difficult it is
for competitors to join the marketplace in the industry being
examined.
5. Threat of substitute products or services –force studies how easy it
is for consumers to switch from a business’s product or service to
that of a competitor.

PORTER’s Five Force Model-

Michael E. Porter
1.Agribusiness
2.Manufacturing
3.Retail and
Service Industry
4.International Trade

Types of Business Industries

 1. AGRIBUSINESS
Is an industry engaged in the producing
of a farm, the manufacture and
distribution of farm equipment and
supplies, and the processing, storage,
and distribution of farm commodities.
 Types of AGRIBUSINEsS
1.Seafood Operation – considered to be businesses
that have more suitable position in the market.
2.Farm Equipment – agriculture process like tractors
or equipment used in slaughterhouse.
3.Packaging and Processing – firms with plant
packaging facilities lease out their plant facilities to
firm with similar business to increase profits.
4. Personnel Specialist – firms hire farm managers to
manage the operations of a farm business.
5.Agrichemicals – chemical companies that produce
fertilizers and pesticides can also be classified within
the agriculture sector.
1 3

5
4
2. MANUFACTURING INDUSTRY
Refers to any business that uses
machines, tools, and labor to convert
raw materials into finished goods for
sale to customers of intermediate goods
in the production process.
 Types of Manufacturing industry

Chemical Industry–
comprises the
companies that
produce industrial
chemicals
Construction
Industry – is the
branch manufacture
and trade based on
building, maintaining
and repairing
structures.
 Types of Manufacturing industry
Electronic Industry–
creating, designing,
producing and selling
devices.
Energy Industry – is the
totality of the industries
involved in the production
and sale of energy.
Engineering Industry –
deals with the design,
manufacture and operation
of structures, machines or
devices.
 Types of Manufacturing industry

Food Industry– a
complex, global
competitive of
diverse business that
supply most of the
food consumes by
the world population
Metal Industry –
primarily concerned
in metallurgy and
metalworking.
 Types of Manufacturing industry

Plastic Industry–
manufacturers polymer
materials and offers
services in plastics
important to a range of
industries.
Pulp and Paper
Industry – comprises
companies that use wood
as raw material and
produce pulp, paper and
board.
 Types of Manufacturing industry
Telecommunication
Industry–covers a
number of areas
including cabling,
wireless, switching and
transmission and
communications, media
and IP Networks
Textile Industry –
apparel industry,
production of cloth,
yarn, clothing and their
distribution.
 Types of Manufacturing industry
Transportation
Industry–all those
businesses that move
people, or good by land,
sea or air from one point
or another.
Wood Industry – includes
people, places and jobs
that focus on growing trees
for wood, cutting those
trees and transporting
them, turning trees into
lumber and fashioning the
3.RETAIL AND SERVICE INDUSTRY
Retail industry has contributed to the
economic growth of the country.
Retailing is the process of buying and
selling consumer goods and services
through multiple channels of distribution
to earn profit.
 Retail and services industry

Grocery Stores – sells a variety of food and non-food

products such as meat, cereal, dairy products, health and
beauty aids and cleaning products.
General Merchandise Stores – include department
stores and mass merchandisers, retail outlets that sell
merchandise at a discount such as clothing, sporting
goods, auto parts and toys.
Specialty Stores – concentrate on particular type of
product, include retail businesses that sell books,
women’s lingerie, and motorcycle parts, coffee pet
supplies.
 Retail and services industry

Non-Store Retailers – like mail orders or internet

companies are often run by entrepreneurs, and usually
employ fewer people than retailer with store locations.
Restaurants– is a business which prepares and serves
food and drinks to customer in exchange for money,
either paid before or after the meal, or with an open
account.
SERVICE INDUSTRY – that creates service rather than
tangible objects, such as banking, communications,
wholesale and retail, all professionals services.
In the world economy, goods and
services are exchanged across national
boundaries.
 Imports – goods and services
purchased from other countries
 Exports – goods and services sell
from other countries.

4.INTERNATIONAL
INDUSTRY
 Advantages of International industry

Helps each country to sell goods and

services that they don’t need and buy the
goods and services that they need.
Creates more jobs for producing country.
Attracts investment
Leads to specialization and encourages
production of different goods in different
countries.
 DIsAdvantages of International industry

Excessive exports may exhaust the natural resources

of the country that will result to destruction in the
environment.
To much import may poses a threat to the survival of
domestic products and would result to downfall in the
industry
The welfare of the people in countries that produce
goods and services for the sake of earning higher
profits.
Sometimes the essential products required in a country
are also imported to earn foreign exchange.
 Top 10 Philippines export
Top 10 imports in the philippines
products

Electronic equipment
Coconut oil
Oil
Gold
Machines, engines,
Dried fish and Shellfish
Metal components pumps
Vehicles
Household items,
Aircrafts, spacecraft
woodcrafts and furniture
Plastics
Fashion accessories
Iron and steel
Petroleum products
Cereals
Electric apparatus
Food waste, animal
Semiconductor
Computer accessories fodder
 Top 10 business opportunity in the philippines

ONLINE BUSINESS
PRINTING
OR E-BUSINESS
FOODCART BUSINESS
LAUDRY SHOP
BUSINESS
PURIFIED
UKAY UKAY
DRINKING WATER
BUSINESS
AFFILIATE SUPPLIER
POULTRY FARMING
MARKETING
HANDICRAFT
CELLPHONE
BUSINESS
LOADING BUSINESS
 EXERCIS
E Starting a business
Have you ever thought about what you would
need to start your own business? Given the list
of possible ideas below, answer the questions
that follow, to know how far is your
understanding in organizing a business.

Computer shop Beauty salon

T-shirt printing shop Food cart
E-loading business Photography
 questions

1. What type of business would you like to start?

2. How could you determine if there is a demand for the goods
or services you would like to sell?
3. What kind of office or building would you need?
4. Is the location important? Why or why not?
5. What kind of equipment, tools, furniture and other supplies
will you need?
6. What kinds of skills will your employees need?
7. How will you let your people know about your business?
8. Where will you get the money you need to pay for building,
tools and equipment, raw materials or merchandise, workers
and advertising?
9. What would you say to convince a banker, a friend or a
family to lend you money to start a business?
REFERENCE:

Applied Economics for Senior High

School, Eloisa M. Macalinao, 2016
Note: Photo not mine