Module 4 Application of Supply and Demand

UNIT 1 – ECONOMICS & REAL-WORLD CHALLENGES
APPLIED
ECONOMICS
MODULE 4: Application of Supply and Demand
The Philippine
Product Market
The Different
Market Structures
Market structures are
classified based on the
following aspects:
Degree of Competition
Driven by the number of
competing firms in the
industry.
Number of Firms
Pertains to the actual
number of competitors in
the market.
Bargaining Power of
Consumers
Ability of consumers to
influence market prices.
Barrier to Entry
Refers to the ease with
which new firms can
penetrate the industry.
Perfect Competition
Identical goods and many
buyers who have access to
the good.
Monopolistic Competition
Sellers typically have

less capability and are
smaller in size
Oligopoly
Means that consumers
have no bargaining power.
Monopoly
Market structure that has a
single player that controls the
market.
The Philippine
Labor Market
Households provide the labor
required to manufacture goods
or provide services.
Labor Supply and
Population
Growth
Labor Force
Total member of people
identified as employed and
unemployed.
Employed – individuals who have
a job either full-time or part time
capacity.
Unemployed – searching for a
job.
Underemployed – better skilled
than what their current jobs
require.
Population Growth
Increase in total number of
human beings in the country.
Census
Official collection of
population information, five
years by the Philippines
Statistic Authority (PSA).
Labor force
participation rate
Approximate percentage of
the population that is actually
part of the labor pool.
Unemployment and
Wages
Unemployment rate
Measures the percentage of
labor force who do not have a
job.
Frictional Unemployment
Temporary unemployment
that is a result of people
being in between jobs or
being in transition.
Structural Unemployment
Technology changes and
upgrades that require
specialized skills.
Cyclical Unemployment
Upturn and downturn in the

business cycle.
Seasonal Unemployment
Peak and lean seasons.
Tourism and farming.
Factor Income
Factors of production earn
what is called as factor
income.
Wage
Is what a worker gets as
compensation for hours of labor.
Salary
Aggregate amount
received.
Minimum Wage
Possible amount firms must pay
their employees as mandated
by the country’s labor laws.
Labor Migration and
Overseas Filipino
Workers (OFWs)
Work in a foreign country is
the concept of labor
migration.
Financial Market
Marketplace for the exchange of
financial securities such as
stocks and bonds.
Stocks
Ownership in company.
Stockholder
Referred to as a shareholder.
Bonds
Debts and these debts are
largely traded over-the-
counter or privately through
investment brokers.
Medium of Exchange
Legal tender or a recognized
form of payment for purchases
and transactions.
Unit of Account
Money is used as a standard
to measure the value of
goods and services.
Store of Value
Can choose to keep your
money now and save it for
the future.
Liquidity
Asset to pay for
transactions.
M10 or BM
This is known as base money
that includes currency in
circulation, bank reserves, and
government reserves.
M1
This is known as narrow
money. This includes M0 or
BM plus peso demand
deposit.
M2
This is known as broad money.
This includes M1 plus savings
and time deposits denominated
in peso.
M3
This is known as broad money
liabilities. This measures
includes M2 plus money
market securities such as
promissory notes and
commercial papers.
M4
This measures includes M3 plus
deposits denominated in foreign
currency and transferable
assets.
Bank Rate
This is the central bank’s
lending rate to commercial
banks.
Open Market
Operations
This refers to the buying and
selling bonds by the central
bank in order to manage the
supply of money in the country.
Reserve Requirement
Ratio
Philippine commercial banks are
required to maintain a minimum
cash reserve with central bank,
which may not be used for lending
and regular bank operations.
The Philippine Peso
and Foreign Exchange
Is the market for the
exchange of foreign
currencies.
Direct Quote
provides the domestic
currency as the base
currency, while an
Indirect quote provides
the domestic currency as
the counter or quote
currency.
Letting market forces
determine the
exchange rate is
called a FLOATING
FOREX REGIME.
Fixed Forex Regime
Value of the local currency
is pegged to another,
usually more stable,
currency such as the US
dollar.
Currency Depreciation
Currency loses value relative
to another currency.
Currency Appreciation
Occurs when the currency

becomes more valuable to
relative to another currency.
Inflation
Is the increase in prices over
time.
END

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UNIT 1 – ECONOMICS & REAL-WORLD CHALLENGES

Sellers typically have

Upturn and downturn in the

Occurs when the currency

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