PAMANTASAN NG LUNGSOD NG MARIKINA

COLLEGE OF MANAGEMENT AND TECHNOLOGY

BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

1CMT1I All Lessons in 1st Sem

Finals
Everything listed here is based on
Marketing Management Modules, Books, PPT, and Lessons in our Group Chat

Prepared by:

Mark Carlo Robeso Ationg

120723
Updates

Prepared by: Mark Carlo R. Ationg

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

Human Resource Management In partial fulfillment of the requirements for the

Bachelor of Science in Business Administration
Major in Marketing Management

Prepared by:

MARK CARLO R. ATIONG

1CMT1I Student

REBECCA B. CHAVEZ
Human Resource Management Professor

1st SEMESTER Finals SY 2023-2024

Prepared by: Mark Carlo R. Ationg

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

Human Resource Management

Prof. Rebecca B. Chavez

Lesson 1: Selection Process

1. Review: recruitment is a function of attracting the best possible candidates to fill up a vacant position. The
hardest part is to select and what criteria will be used as the basis in the selection.
“Who is the most appropriate?” is one critical consideration to begin with. It then best for a HRM
dept. have a pod of qualified talent to allow the best hiring decisions to be made, these people must
deliberate to determine who would make the best fit.!

2. The Selection process covers the following steps;

a. Screening applications and resume (in U.S.) and other western countries questions about Age,
marital slates, number of children and religion are prohibited they are considered not job related. At
our country are include these data. (Phil) Application form are most accurate as the applicant

Prepared by: Mark Carlo R. Ationg

120723 Updates 3
 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

Entrepreneurial Management In partial fulfillment of the requirements for the

Bachelor of Science in Business Administration
Major in Marketing Management

Prepared by:

MARK CARLO R. ATIONG

1CMT1I Student

EDGAR E. REYES
Entrepreneurial Management Professor

1st SEMESTER Finals SY 2023-2024

Prepared by: Mark Carlo R. Ationg

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

Entrepreneurial Management
Prof. Edgar E. Reyes

Lesson 4: Planning the Business to Establish

Planning
Planning in plain and simple language, is thinking ahead. In business, it is thinking ahead of objectives,
strategies, financing, production, marketing, profit prospects, and growth possibilities.

Principles of the Business Planning

1. Planning must be realistic – It must be based on available resources human, financial and physical
resources.
2. Planning must be based on felt needs – The objective of the entrepreneur should fit the needs of the people
in the community.
3. Planning must be flexible – Resources, needs and economic conditions change. Planning should be adjusted
to such changes to be effective and relevant.
4. Planning must start with simple projects – In the Philippines, many people are poor and have no business
experiences.
5. Plans Must Be Ongoing – Planning never ends. "Everyone's business changes every year, and often every
six months," says Dan Debelak in his book "Successful Business Models."
6. Plans Must Consider Your Competitive Advantage – Know and incorporate your competitive advantage
into your business planning. Businesses don't operate in a bubble.
7. Plans Must Incorporate Short- and Long-Term Goals – Short-term goals and long-term vision combined
result in a good plan.
8. Plans Must Relate to the Bottom Line – Good business planning has to add up to a better bottom line.
Figure out how your plans will improve sales, increase efficiency and/or reduce costs.
9. Plans Must Include Strategies – A plan tells you what you want to do; a strategy details how to do it.
10. Plans Must Affect the Customer – The customer does not care about your plan, so your plan had better care
about your customers if you want to keep them.

Components of Business Planning

1. SWOT – The chances of a product or service can be evaluated through the SWOT Analysis.
2. Objectives – These should be specific and realistic. These are the goals of what the company would like to
attain or accomplish.
3. Strategies – A plan tells you what you want to do; a strategy details how to do it.
4. Time Frame – In business, time is gold. For this reason, an entrepreneur must be efficient in time
management.

Sample Planning Applied in Manufacturing Business

Is defining of goals for future organizational performance and deciding on the tasks and resources needed to
attain them. Applied to manufacturing, it involves planning for (1) the product, (2) the process, (3) the facility location,
(4) the facility layout, and (5) the jobs. Facilities are the location and layout.

1. Product Planning – involves determining:

a. The product meets customer’s needs.
b. How long it takes for the product to make and to be marketed, and
c. The total cost to the product.
2. Process Planning – With determining the specific technologies and procedures required to produce a product
or service. (The broad definition of product includes service. However, in the book, product refers to the
physical object of business, whereas, service refers to the intangible or non-physical object of business.)
3. Facility Location Planning – with the identification of the place where the manufacturing process will be
situated. The criteria that should serve as a guide in facility location planning are:
a. Proximity or nearness to customers
b. Total costs
c. Transportation facilities (or infrastructure)
d. Quality of labor
e. Supplies
f. Peace and order condition
g. Government laws, rules and regulations

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

h. Competitive advantage
4. Facility Layout Planning – Involves the placement of departments, work stations, machines and inventory
storage within the factory. The factors to consider in facility layout planning are:
a. Objective or purpose of the system in terms of output and flexibility
b. Product and service demand
c. Number and volume of operations
d. Space availability
5. Job Planning or Job Design – Job design satisfies the employees’ personal and individual requirements.
The areas to consider in job planning or job design are:
a. Tasks to be done
b. Qualification of worker
c. Physical location
d. Working time
e. Reason for hiring
f. Performance measurement
g. Training

Importance of Business Planning

A business plan is a very important strategic tool for entrepreneurs. A good business plan not only helps
entrepreneurs to focus on the specific steps necessary for there to make business ideas succeed, but it also helps them
to achieve both their short-term and long-term objectives.

1. To Raise Money for Your Business – Potential investors or lenders want a written business plan before they
give you money. Instead, ensure you have a thorough business and financial plan that demonstrates the
likelihood of success and how much you will need for your business to take off.
2. To Make Sound Decision – As an entrepreneur, having a business plan helps you to define and focus on
your business ideas and business strategies. You not only concentrate on financial matters, but also on
management issues, human resource planning, technology and creating value fo r your customer.
3. To Help You Identify Potential Weakness – Having a business plan helps you to identify potential pitfalls
in your idea. You can also share the plan with others who can give you their opinions and advice. Identify
experts and professionals who are at a position to give you invaluable advice, and sh are your plan with them.
4. To Communicate Your Ideas with Stakeholders – A business plan is a communication tool that you can
use to secure investment capital from financial institutions or lenders. It can also be used to convince people
to work for your enterprise, to secure credit from suppliers, and to attract potential cust omers.

Prepared by: Mark Carlo R. Ationg

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

Entrepreneurial Management
Prof. Edgar E. Reyes

Lesson 5: Writing The Business Plan

The actualizing stage begins with the registration of the business with the government agencies that regulate
businesses. Non-registration of the business renders it illegal and subject to closure.

What is a Business Plan?

• A business plan is a written document describing all relevant internal and external elements and strategies
for starting a new venture, a new product, or a business expansion.
• It is a document that helps the small business owner determine what resources are needed to achieve the
objectives of the firm, and provides a standard against which to evaluate results.

Purposes of Business Plan

A business plan is written for two main purposes.
1. To serve as management’s guide during the lifetime of the business.
2. To fulfill the requirement for securing lenders and investors.

Details of the Business Plan

The Business Plan will detail the following:
1. Product - to be made or traded or service to be rendered
2. Marketing - when, where, to whom the product or service is to be sold
3. Management - organization, employees’ and officers’ positions, and job assignments
4. Finance - financial needs and where the money will come from and paid to
5. Operations - how the product will be produced, how the service will be rendered or how the merchandise is
to be acquired

Parts of the Business Plan

1. Executive Summary
• Highlights briefly and convincingly the different sections in the business plan.
• It supports the conclusion that the business is profitable and that it is worth pursuing.
• Is a portion of the business plan that summarizes the plan and states the objectives of the business.
If the SBO is intending to borrow money or is seeking capital from investors, the following must be
indicated:
o The capital needs of the business
o How the money will be used
o What benefits will be derived by the business from the loan or investment
o In case of loan, how it will be repaid with interest, and in the case of outside investment,
how profits will be generated.
o Take Note: The Executive Summary is prepared after the business plan is written.
2. Description of the Business
• Provides a complete picture or description of the products, and services and their unique features.
• This is divided into parts:
• A short explanation of the industry
• A description of the business
• In describing the industry, it is important to present the current situation and the outlook for the
future. Information must be provided regarding the various markets within the industry as well as
new products or developments that could affect the business.
• Statements about the following will be useful in describing the business:
o the industry sector where the business falls into (retail, manufacturing, education,
entertainment, and others)
o Whether the business is new or established
o The ownership status of the business (sole proprietorship, partnership, or corporation)
o Information on who the customer are
o Information on the size of the market
o Information on how the product or service is distributed

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

3. Operating Plan
• Gives the detail of how products are to be manufactured.
• The merchandising plan for a trading business shows in detail how the products are to be acquired.
• Operation and Management – How the firm will be operated on a continuing basis is an important
component of the business plan. As such, the plan must contain the ff:
o Organizational structure – How the firm is organized like: marketing, production, research
and development, management and human resources.
o Operating expenses – Projections of operating expenses are important aspects in the
preparation of a business plan. In determining operating expenses, labor and overhead must
be considered. Overhead, which may be fixed or variables, includes: rent, supplies, utilities
maintenance and repair, payroll, equipment leases, insurance, loan payments packaging
and shipping etc.
o Capital Requirements – Capital requirements are necessary items in operating businesses.
The business plan will not be complete unless a listing of capital equipment needs to be
purchased is drawn up.
o Cost of Goods Sold – The cost of goods of manufacturing firms refer to the total expenses
incurred in manufacturing the products that are intended to be sold.
4. Marketing Plan - Describes market conditions and strategy related to how products and services will be
priced, distributed, and promoted.
• Marketing strategy – Refer to what the SBO plans to do to achieve the market objective in the
firm. These strategies are formulated after undertaking market research. Market strategies consist of
the following:
o Definition of the market
o Determination of the market share
o Positioning strategy
o Pricing strategy
o Distribution strategy
o Promotion strategy
• Definition of the Different Market Strategies:
o Definition of the Market – determine which part of total potential market will be served by
the firm.
o Market Share - the percentage of the market for a product or service that a company
supplies.
o Positioning Strategies - refers how the firm differentiates its product or service from those
of the competitors and serving a niche.
o Pricing Strategy - how the firm prices its product or service.
o Distribution Strategy - refers to the process of moving goods and services from the firm to
the buyer
o Promotion Strategies - how the company’s products or services will be promoted.
Examples: Advertising aspects, packaging, public relations, sales promotions, and personal
sales.
• Description of the product or services
o The important features of the product or services, such us the maintenance free feature of
the product or the home delivery service for the products ordered through the phone.
o Detailed description of how the product is used
o What makes the product or service different from others available in the market.
5. Organizational Plan – Describes the form of ownership and lines of authority and responsibilities of the
people in the organization.
6. Financial Plan
• Projects financial data that show profitability, liquidity, and stability
• If you need funding, you can devote an entire section to talking about the amount of money you
need and how you plan to use the capital you’re trying to raise.
• Financial data – Important statement for business plan:
o Income statement
o Balance sheet
o Cash flow statement
• Income statement – Also known as statement of earnings. It shows the income, expenses, and
profits of a firm over a period of time. It may cover a certain year, quarter, or month. Provides basic
data to help the prospective financier analyze the reasons for the projected profits.
• Balance sheet – It shows the financial condition of the business as of a given date. Information
provided by this statement is useful not only to the entrepreneur but also to the prospective creditors.

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

As scrutiny of the balance sheet will give the owner some clues of modifications are needed in some
of the items listed.
• Cash flow statement – It projects what the business plan means in terms of pesos. It is used for
operational planning and estimates the amount of cash inflows and outflows of the business during
a specified period of time. A proper balance between the cash inflows and outflows will result to
profits.
7. Appendices or Annexes
• Back-up materials that support the text of the business plan.
• It is important to note that business goals should be SMART. (Specific, Measurable, Achievable,
Relevant, Time-bound)

Contents of Business Plan

1. Cover Page
a. Name and address of business
b. Name(s) and address(es) of the owners
c. Contact No. of persons
d. Date prepared
e. Statement of confidentiality of report
2. Executive Summary – One to four pages overview of the total business plan highlighting the significant
point arousing interest on the part of the reader.
3. Product – Description of products or services and their unique features.
4. Marketing Plan – Who the customers are, competition, marketing strategy, competitive edge, pricing.
5. Organizational Plan – States the form of business organization. It identifies management team, investors,
their background, their duties and responsibilities and states the plan for employees’ recruitment and training.
6. Operating Plan – Explains the process of acquiring and processing products.
7. Financial Plan – Specifies financial needs and sources of financing and shows a three to five -year period
pro forma income statement, cash flow projections, pro forma balance sheet, and break -even analysis.
8. Appendix – Shows supplementary materials.

Prepared by: Mark Carlo R. Ationg

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

Entrepreneurial Management
Prof. Edgar E. Reyes

Lesson 6: Choosing The Right Business Location

Welcome, aspiring entrepreneurs! Today, we embark on a journey to explore one of the most crucial factors
in business success: choosing the right location. Selecting the perfect spot for your business can significantly impact
its profitability, growth, and sustainability. In this update lecture, we will dive into the essential considerations and
strategies for determining the optimal location for your venture. So, let' s begin!

1. Understanding Your Target Market: Before choosing a location

It' s imperative to understand your target market thoroughly. Analyze their demographics, preferences, and behavior.
Ask yourself:
• Where are your potential customers located?
• What are their needs and preferences?
• How will the location affect their accessibility to your product or service?

2. Researching Demographics and Competition:

Conduct in-depth research on the demographics of the potential locations you are considering. Analyze factors such
as population density, income levels, age groups, and cultural preferences. Additionally, identify your competitors in
each area to assess the market saturation and potential demand for your offering

3. Evaluating Accessibility: Proximity and ease of access can make or break a business.
Consider the following aspects:
• Is the location easily accessible by foot, car, or public transport?
• Are there parking facilities available?
• Is the location visible from main roads or busy intersections?

4. Analyzing Local Regulations and Business Environment:

Be aware of local regulations, zoning laws, and taxes that may impact your business operations. Choose a location
that offers a favorable business environment and minimal bureaucratic hurdles.

5. Assessing Costs and Budget: Balancing costs is crucial in business

Compare the expenses of different locations, including rent, utilities, labor, and other operational costs. Align your
budget with the potential revenue from the chosen location.

6. Considering the Competition

Identify your competitors ' locations and assess their strengths and weaknesses. Choosing a location with limited
competition can offer a significant advantage.

7. Proximity to Suppliers and Resources:

Evaluate the proximity of your potential location to suppliers, manufacturers, and other resources critical to your
business. Reducing transportation costs and delays can positively impact your bottom line.

8. Factoring in Growth Potential

Anticipate the growth potential of your business and whether the location can support that growth. Avoid choosing a
location that restricts expansion possibilities.

9. Customer Feedback and Surveys:

Conduct surveys or gather feedback from potential customers about their preferences for the location of your business.
This information can provide valuable insights for decision -making.

Conclusion
In conclusion, determining the right location for your business is a strategic decision that can shape your company ' s
destiny. By carefully evaluating your target market, demographics, accessibility, regulations, costs, competition, and
growth potential, you can make an informed choice that aligns with your business objectives. Remember, location
isn't just about physical space; it' s about connecting with your customers and creating a thriving ecosystem for your
venture. Good luck on your entrepreneurial journey, and may your chosen location be the foundation of your success!

Prepared by: Mark Carlo R. Ationg

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

Microeconomics
In partial fulfillment of the requirements for the
Bachelor of Science in Business Administration
Major in Marketing Management

Prepared by:

MARK CARLO R. ATIONG

1CMT1I Student

King Ceasar Ian A. Kasilag, MBA

Microeconomics Professor

1st SEMESTER SY 2023-2024

Prepared by: Mark Carlo R. Ationg

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

Microeconomics
Prof. King Ceasar Ian A. Kasilag, MBA

Lesson 4: The Law of Demand and Supply

Introduction
The global pandemic has changed the direction of global supply chains. We can see the impact of the pandemic through
changes in the prices of different goods and services. It has also led businesses to shift their production to address the
current needs of the people. With what is happening around us we are led to ask questions such as: why are prices
changing? Why are businesses shifting their focus to producing or selling other things? How does a pandemic affect
people’s purchase behavior? All of these questions can be answered through understanding the economic concepts of
demand and supply.

This lesson will tackle the concepts of market system and the difference between the law of supply and the law of
demand. It will also briefly introduce the concept of market equilibrium. Additionally, quantity supplied and quantity
demanded, as well as its difference from supply and demand, will also be discussed. Alongside these are applications
of basic mathematical concepts that can help further understand supply and demand.

The law of demand

The law of demand states that as the price of goods increases, quantity demanded decreases. Conversely, when the
price of goods decreases, quantity demanded increases. Keeping all other factors constant (ceteris paribus), buyers
will purchase more with lower prices and less with higher prices. Hence, there is an inverse relationship between price
and quantity demanded.

The law of demand can be expressed as the demand function Qd = a - b(P), where Qd is quantity demanded, a
represents other factors affecting demand aside from price, b is the slope of the demand curve, and P is price.

Quantity Demanded and Demand

Quantity demanded is the number of units that a buyer is willing and able to purchase at a given price at a given time
period. Meanwhile, demand is the set of all quantities the buyer is willing to purchase at different price levels at a
given time period.

To illustrate the difference between quantity demanded and demand, we will use an example and apply mathematical
concepts to demonstrate.

Let us imagine a child who wants to buy ice cream. The child’s demand function for ice cream is represented by Qd
= 7 – P. Let us fill out the demand schedule for ice creaminTable1using the demand function for different price levels.
A demand schedule is a table that summarizes the quantity demanded for every price level. Using the different prices
found in Table 1, substitute each price level to the demand function to determine the corresponding quantity demanded.
To illustrate using P = ₱1, we substitute this in the demand function Qd = 7 – 1or Qd=6.When the price is equal to ₱1,
quantity demanded is equal to 6.

Table 1. Demand Schedule for ice cream

Price Quantity demand (Qd)
₱1 6
₱2
₱3
₱4
₱5

Substituting each price level to the demand function, we can complete the demand schedule for ice cream as shown
in Table 2.
Table 2. Demand Schedule for ice cream
Price Quantity demand (Qd)
₱1 6
₱2 5
₱3 4
₱4 3
₱5 2

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

Once the demand schedule is completed, we can now plot the demand curve with the price on the y-axis and quantity
on the x-axis. A demand curve is the graphical representation of the demand schedule. The graph should look like the
figure below:

Figure 1 shows the different data points which represent quantity demanded for ice cream at every price level. Demand
is the line that connects these data points. The demand curve is expected to have a downward slope since price and
quantity demanded are inversely related. As shown in the figure above, as we move from zero to a higher price in the
price axis (y-axis), the number of ice cream the child is willing to purchase goes down.

Quantity demanded changes based on price changes and moves along the demand curve, while changes in demand
shift the curve to the left or to the right.

Example 1
Juan is a school principal who plans to purchase notepads. His willingness and capacity to buy can be described by
the demand function Qd = 150 - 3P. Create a demand schedule and plot the demand curve showing the different prices
of a notepad which are ₱20, ₱30, and₱40.
Solution

Step 1: Applying the rule of substitution, solve for Qd using the demand function Qd=150 -3P, when the price is ₱20.
Substitute 20 to P.
Qd = 150 - 3P
Qd = 150 - [3(20)]
Qd = 150 - 60
Qd = 90

Step 2: Repeat Step 1 for price levels ₱30 and ₱40.

When the price is ₱30, substitute 30 to P.
Qd = 150 - 3P
Qd = 150 - [3(30)]
Qd = 150 - 90
Qd = 60

When the price is ₱40, substitute 40 to P.

Qd = 150 - 3P
Qd = 150 - [3(40)]
Qd = 150 - 120
Qd = 30
Step 3: Create the demand schedule.

Price (P) Quantity demand (Qd)

₱20 90
₱30 60
₱40 30

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COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

Step 4: Plot the points in a graph. Note that different price levels are points on they-axis while quantity demanded are
points on the x-axis.

Law of Supply
The law of supply states that as the price of goods increases, quantity supplied also increases. Meanwhile, when the
price of goods decreases, quantity supplied decreases. The law of supply can be expressed as the supply function Qs
= a + b(P), where Qs is quantity supplied, a represents other factors affecting the supply aside from price, b is the
slope of the supply curve, and P is the price. Variable a is also the value of quantity supplied when the price is equal
to zero.

Quantity Supplied and Supply

The quantity supplied is the number of units a seller is willing and able to sell at a given price at a given time period,
while supply is the set of all quantities supplied at different price levels at a given time period.

Consider an ice cream stand with supply function Qs = 15 + 2P. Create a supply schedule using the supply function
of the ice cream stand for different price levels.

Let us fill out the supply schedule of the ice cream stand in Table 3 using the supply function for different price levels.
A supply schedule is a table that summarizes the quantity supplied for every price level. Using the different prices
found in Table 3, substitute each price level to the supply function to determine the corresponding quantity supplied.

To illustrate using P = ₱1, we substitute this in the supply function Qs = 15 + 2(1) or Qs = 17. When the price is equal
to ₱1, quantity supplied is equal to 17.

Table 3. Supply schedule of ice cream

Price (P) Quantity demand (Qd)
₱1 17
₱2
₱3
₱4

Substituting each price level to the supply function, we can complete the supply schedule for ice cream as shown in
Table 4.

Table 4. Supply schedule of ice cream

Price (P) Quantity demand (Qd)
₱1 12
₱2 14
₱3 16
₱4 18
₱5 20

Once the supply schedule is completed, we can now plot the supply curve with the price on the y -axis and quantity on
the x-axis. A supply curve is the graphical representation of the supply schedule. The graph should look like the figure
below:

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

Figure 3 shows the different data points which represent the quantity supplied for ice-cream at every price level.
Supply is the line that connects these data points. The supply curve is expected to have an upward slope since price
and quantity supplied are positively related.

As shown in the figure above, as we move from zero to a higher price in the price axis (y -axis), the number of ice
cream the stand is willing to sell goes up. In this example, the owner would like to sell more units of ice cream at a
higher price to increase profit.

Quantity supplied changes based on price changes and moves upward or downward the supply curve, while changes
in supply shift the curve to the left or to the right.

Example 2
Rey sells notepads. His willingness and capacity to sell notepads can be described by the supply function Qs = 150 +
2P. Create a supply schedule and plot the supply curve showing the different price levels of notepads at ₱20, ₱30, and
₱40.

Solution
Step 1: Applying the rule of substitution, solve for Qs using the supply function Qs=150+ 2P,

when the price is ₱20. Substitute 20 to P. Qs = 150 + 2P

Qs = 150 + [2(20)]
Qs = 150 + 40
Qs = 190

Step 2: Repeat Step 1 for price levels ₱30 and ₱40. When the price is ₱30, substitute 30 to P. Qs = 150 + 2P
Qs = 150 + [2(30)]
Qs = 150 + 60
Qs = 210

When the price is ₱40, substitute 40 to P. Qs = 150 + 2P

Qs = 150 + [2(40)]
Qs = 150 + 80
Qs = 230

Step 3: Create a supply schedule.

Price (P) Quantity demand (Qd)
₱20 190
₱30 210
₱40 230

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COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

Step 4: Plot the points in a graph. Note that different price levels are points on the y -axis while the quantity supplied
are points on the x-axis.

Market Equilibrium
A market, as defined earlier, is where buyers and sellers meet to exchange goods and services. In the market, buyers
determine the demand, while sellers determine the supply. The interaction of buyers and sellers in the market
determines the market price, quantity demanded, and quantity supplied.

Imagine going out and buying pandesal. Buying pandesal can cost around ₱10 for ten pieces. At this price, you are
able and willing to buy ten pieces of pandesal. The bakery is also able and willing to sell all the pandesal without
compromising profits. At this price level, sellers are able and willing to sell the quantity demanded by the buyer.

Market equilibrium is the point where quantity demanded is equal to quantity supplied.

The price where quantity demanded is equal to quantity supplied is called the equilibrium price or the market clearing
price. At ₱10, the number of pieces of pandesal that the buyer is able and willing to purchase is equal to the number
of pieces of pandesal that the seller is able and willing to sell.

Wrap-Up
• Learning the basic principles of economics helps people understand and learn more about advanced topics
later on. One of the fundamental topics in economics is supply and demand.
• There are two market systems, free market or capitalism, and command economy or communism or
socialism. Many countries adopt a mixed market system where it adopts both capitalist and socialist ideas.
• The law of supply states that as price increases, quantity supplied increases; as price decreases, quantity
supplied also decreases. The law of demand states that as price increases, quantity demanded decreases; as
price decreases, quantity demanded increases.
• Quantity demanded and quantity supplied reflect buyers' willingness and ability to purchase, and sellers'
willingness and ability to produce goods and services. Demand and supply is the set of all units of goods and
services that are used and produced.
• Market equilibrium is the point where quantity supplied is equal to quantity demanded. The price at which
they are equal is called equilibrium price or market clearing price.

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Microeconomics
Prof. King Ceasar Ian A. Kasilag, MBA

Lesson 5: Elasticity and its Application

Development Team of the Module
Leader: Cantor, Darren P.

Members: Sigua, Hannie Rylle R.

Ropan, Racky P.
Jala, Jhonlee D.
Torres, Bernard C.
Pugal, Renz Alvin N.
Romero, Karl Joshua G.
Tarzona, John Lorenz M.

Elasticity
• Is a measure of how much buyers and sellers respond to changes in market conditions.
• Allows us to analyze supply and demand with greater precision.
• Journal Question – Name 3 necessities and 3 luxuries that would buy.

Price Elasticity of Demand

• Price elasticity of demand is the percentage change in quantity demanded given a percent change in the price.
• It is a measure of how much the quantity demanded of a good respond to a change in the price of that good.

Computing the Price Elasticity of Demand

The price elasticity of demand is computed as the percentage change in the quantity demanded divided by the
percentage change in price.

Price Elasticity = Percentage Change in Od

of Demand Percentage Change in Price

Elasticity, Percentage Change and Slope

• Because the price elasticity of demand measures how much quantity demanded responds to the price, it is
closely related to the slope of the demand curve.
• But instead of looking at unit change, elasticity looks at percentage change. What do we mean by percentage
change?

Computing the Price Elasticity of Demand

Price Elasticity = Percentage Change in quantity demanded

of Demand Percentage Change in Price

Example: If the price of an ice cream cone increases from $2.00 to $2.20 and the amount you buy falls fro m 10 to 8
cones then your elasticity of demand would be calculated as:

Computing the Price Elasticity of Demand Using the Midpoint Formula

The midpoint formula is preferable when calculating the price elasticity of demand because it gives the same answer
regardless of the direction of the change.

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Computing the Price Elasticity of Demand

Example: If the price or an ice cream cone increases from $2.00 to $2.20 and the amount you buy falls from 10 to 8
cones your elasticity of demand, using the midpoint formula, would be calculated as:

Ranges of Elasticity
• Inelastic Demand
– Percentage change in price is greater than percentage change in quantity demand.
– Price elasticity of demand is less than one.
• Elastic Demand
– Percentage change in quantity demand is greater than percentage change in price.
– Price elasticity of demand is greater than one.

Perfectly Inelastic Demand Elasticity equals O

Inelastic Demand – Elasticity is Less than 1

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Unit Elastic Demand – Elasticity Equals 1

Elastic Demand – Elasticity is greater than 1

Perfectly Elastic Demand – Elasticity equals infinity

Determinants of Price Elasticity of Demand

• Necessities versus Luxuries
• Availability of Close Substitutes
• Definition of the Market
• Time Horizon

Determinants of Price Elasticity of Demand

• Demand tends to be more inelastic
o If the good is a necessity.
o If the time period is shorter.
o The smaller the number of close substitutes.
o The more broadly defined the market.

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Elasticity and Total Revenue

• Total revenue is the amount paid by buyers and received by sellers of a good.
• Computed as the price of the good times the quantity sold.

The Total Revenue Test for Elasticity

Income Elasticity of Demand

• Income elasticity of demand measures how much the quantity demanded of a good respond to a change in
consumers' income.
• It is computed as the percentage change in the quantity demanded divided by the percentage change in
income.

Computing Income Elasticity

Income Elasticity – Types of Goods

• Normal Goods
o Income Elasticity is positive.
• Inferior Goods
o Income Elasticity is negative.
• Higher income raises the quantity demanded for normal goods but lowers the quantity demanded for inferior
goods.

Cross Price Elasticity of Demand

• Elasticity measure that looks at the impact a change in the price of one good has on the demand of another
good.
• % change in demand QI/O/o change in price Of Q2.
• Positive-Substitutes
• Negative-Complements.

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Microeconomics
Prof. King Ceasar Ian A. Kasilag, MBA

Lesson 6: Consumer Behavior Theory

Development Team of the Module
Leader: Pinuliar, Iyannel Khate

Members: Anduyon, Vianca Rhaine C.

Dequillo, Josephine H.
Doria, Levhye Adhriane L.
Halili, Isant Ed C.
Paralejas, Armin John B.
Ribaya, Ma. Lourdes
Roa, Rowella Abbyjah
Salonga, Cholo R.
Seva, Kevin B.

The Utility Approach

In economics, utility theory tries to explain the behavior of individual consumers in an economy. Utility
theory argues that each person, given a list of options, can rank those options in a precise order of preference. Each
person has different choices which are set, not changing over time. For example, imagine consumer A consistently
prefers hamburgers to hot dogs, while consumer B always wants a hot dog more than a burger.

Utility theory relies on a few assumptions about consumers and their behavior: One assumption is that people can rank
any number of options in exact order of preference. The options need not be related, and there is no limit to the number
of options that the consumer can rank. A second assumption is that more total utility is always better. If Bundle A
produces 10 units of utility, and Bundle B produces 11 units of utility, the individual will always be better off with
Bundle B. Utility theory also assumes that a mix of goods is better. If a consumer values two items roughly equally,
then a combination of the two offers more expected utility. For example, a consumer who considers hot dogs and
hamburgers roughly equal would choose to receive one of each over two hotdogs or two hamburgers.

Finally, utility theory relies on rational decision making. If a consumer prefers product X to product Y and product Y
to product Z, then there is no time that the decision -maker will prefer product Z to product X. In other words, the
individual’s preferences are fixed and don’t change. Utility theory can explain why consumers behave the way they
do and make the purchases they make.

Expected utility theory is a related theory. It states that consumers make decisions based on the satisfaction they can
expect to receive from an action, even when outcomes are uncertain.

The four characteristics of utility are form, time, place, and possession

Form utility
Is the value that an item has based on the form that it takes. Individual car parts have value, but when someone
assembles them into a functional vehicle, the utility the car offers is higher than the utility offered by each of its parts
alone.

Time utility
Is the satisfaction that a product offers to a consumer based on when they receive the product. A hungry consumer
receives more pleasure from food than someone who just ate. If a consumer never encounters a product, even if it’s
high quality, they never receive its utility.
Place utility
Is the value that a product offers based on where the product is. If you’re hiking, a hiking backpack provides significant
utility. If you’re trying to bring your books to school, a hiking backpack works, but isn’t quite as useful, offering less
value. If you’re staying at home for the next few weeks, the bag provides much less utility.
Possession utility
Describes the utility that something offers based on who has that item. A DVD in a store has value, but it doesn’t
provide as much value as it would if it were in a consumer’s DVD player, letting a group of people watch the movie.
The DVD offers additional utility because someone who will use it possesses it.

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What is ordinal utility?

When using ordinal utility, consumers assign preferences, but not values, to different products. For example, someone
might say they prefer action films to comedies and comedies to dramas, but they won’t say those action movies are
worth 5 points of utility, comedies worth 4, and dramas worth 1. Some economists argue that ordinal utility is a more
realistic way to look at utility theory. Most consumers don’t have a scoring system that they use to make decisions
about what to buy. They simply know their preferences and make decisions based on these feelings.

What is cardinal utility?

Cardinal utility assumes that people can assign specific values to products and use those values to make a
decision. For example, a consumer can determine that they receive precisely 20 points of utility from a ticket to a
baseball game and 30 points of satisfaction from seats at a hockey game. Thus, the consumer always prefers hockey
tickets to baseball tickets, assuming comparable prices. Cardinal utility is part of rational choice theory, which argues
that people work to achieve utility maximization.

One way that economists try to assign utility values to products is by looking at the maximum price a consumer will
pay for a product. If someone is willing to pay $50 for a hockey ticket, they may decide that they receive 50 units of
utility from it. If they would only pay $30 for a baseball ticket, they only get 30 units of satisfaction from seeing a
baseball game. Cardinal utility is also crucial for the efficient allocation of goods and welfare economics. An economy
reaches allocative efficiency when marginal cost (the cost of each additional good) and marginal utility (the value of
each additional good) are equal.

What is total utility?

Total utility is the complete level of satisfaction or value that a person receives from consuming a specific
product. This contrasts with marginal utility, which is the value that someone gets from using an additional unit of a
product. This is important because of the law of diminishing marginal utility. The law states that the more units of a
product consumed, the less value each offers. For example, eating one taco might offer 10 units of satisfaction, but
two tacos only provide 19 units of total utility. Three tacos provide 27 units of utility, four offer 34, and so on. Each
new taco consumed offers one less unit of utility than the previous one.

The marginal utility of an additional unit of a product can be negative. Someone who continues eating tacos will
eventually make themselves sick. The total satisfaction increases as consumption increases until more units offer
negative utility. When that happens, additional consumption reduces overall utility.

Consumer Behavior Through Utility Approach and Budget Line

The want-satisfying power of a good or service; the satisfaction or pleasure a consumer obtains from the
consumption of a good or service people tend to purchase things because they want or need those things. Utility
measures how much value those purchases provide. When a consumer spends the entire amount of their budget
designated for these specific goods, the combinations of goods they can buy are displayed on a budget constraint line.

The desire for a commodity by a person depends upon the utility he expects to obtain from it. The greater the utility
he expects from a commodity, the greater his desire for that commodity. It should be noted that no question of ethics
or morality is involved in the use of the word ‘utility’ in economics. The commodity may not be useful in the ordinary
sense of the term even then it may provide utility to some people. For instance, alcohol may actually harm a person
but it possesses utility for a person whose want it satisfies. Thus, the desire for alcohol may be considered immoral by
some people but no such meaning is conveyed in the economic sense of the term. Thus, in economics the concept of
utility is ethically neutral.

Total Utility
It is important to distinguish between total utility and marginal utility. Total utility of a commodity to a consumer is
the sum of utilities which he obtains from consuming a certain number of units of the commodity per period. Consider
Table 5.1 where a utility of a consumer from cups of tea per day is given. If the consumer consumes one cup of tea
per day, he gets utility equal to 12 utils.

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On consuming two units of the commodity per day his utility from the two units of the commodity rises to
22 utils and so on. When he takes 6 cups of tea per day, his total utility, that is, total utility of all the 6 units taken p er
day goes up to 41 utils. Generally, the greater the number of units of a commodity consumed by an individual, the
greater the total utility he gets from the commodity. Thus, total utility is the function of the quantity of the commodity
consumed.

It should however be noted that as the units of a commodity increases, total utility increases at a diminishing rate.
When the consumer for a particular commodity is fully satisfied by consuming a certain quantity of the commodity,
further increases in consumption of the commodity will cause a decline in total utility of the consumer. The number
of units of commodity consumed at which a consumer is fully satisfied is called satiation quantity.

Beyond the satiation point, total utility decreases if more is consumed. It will be seen from Table 5.1 that total utility
declines when the consumer consumes more than 6 units of the commodity. This happens because beyond satiety point
more consumption of a good actually harms the consumer which causes a decline in utility or satisfaction from the
commodity.

Marginal Utility
Marginal utility of a commodity to a consumer is the extra utility which he gets when he consumes one more
unit of the commodity. In other words, marginal utility is the addition made to the total utility when one more unit of
a commodity is consumed by an individual. The concept of marginal utility can be easily understood from Table 5.1.

When the consumer takes two cups of tea instead of one cup his total utility increases from 12 to 22 utils. This means
that the consumption of the second unit of the commodity has added to the total utility by 10 utils. Thus, marginal
utility is here equal to 10 utils.

Further, when the number of cups of tea consumed per day from 2 to 3, the total utility increases from 22 to 30 utils.
That is, the third unit of tea has made an addition of 8 utils to the total utility. Thus 8 is the marginal utility of the th ird
of consumption of tea. Beyond 6 cups of tea consumption per day, total utility declines and therefore marginal utility
becomes negative.

Marshall’s Cardinal Utility Analysis

Marginal utility analysis of demand is based upon certain important assumptions. Before explaining how utility
analysis explains consumer’s equilibrium in regard to the demand for goods, it is essential to describe those basic
assumptions on which the whole cardinal utility analysis rests.

The basic assumptions or premises of utility analysis are as follows:

1. The Cardinal Measurability of Utility:

The exponents of a cardinal utility theory or what is also called marginal utility analysis regards utility to be
a cardinal concept. In other words, they hold that utility is a measurable and quantifiable entity. According to them, a
person can express the utility or satisfaction he derives from the goods in the quantitative cardinal terms. Thus, a
person can say that he derives utility equal to 10 utils from the consumption of a unit of good A, and 20 utils from the
consumption of a unit of good B. Moreover, the cardinal measurement of utility involves that a person can compare
in respect of size, that is, how much one level of utility is greater than another.

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For example, a person can say whether the utility he gets from the consumption of one unit of good B is double the
utility he obtains from the consumption of one unit of good A. Marshall argues that the amount of money which a
person is prepared to pay for a unit of a good rather than go without it is a measure of the utility he derives from that
good.

Thus, according to him, money is the measuring rod of utility. Some economists belonging to the cardinalist school
measure utility in imaginary units called “utils”. They assume that a consumer is capable of saying that one apple
provides him utility equal to 4 utils and one orange gives him utility equal to 2 utils. Further, on this ground, he can
say that he gets twice as much utility from an apple as from an orange.

2. The Hypothesis of Independent Utilities

The second important tenet of the cardinal utility analysis is the hypothesis of independent utilities. On this
hypothesis, the utility which a consumer derives from a good is the function of the quantity of that good and of that
good only. In other words, the utility which a consumer obtains from a good does not depend upon the quantity
consumed of other goods; it depends upon the quantity purchased of that good alone.

On this assumption, the total utility which a person gets from a collection of goods purchased by him is simply the
total sum of the separate utilities of the goods. Thus, the cardinalist school regards utility as ‘additive’, that is, separa te
utilities of different goods can be added to obtain the total sum of the utilities of all goods purchased.

3. Constancy of the Marginal Utility of Money

Another important assumption of Marshall’s marginal utility analysis is the constancy of the marginal utility
of money. Thus, while the cardinal utility analysis assumes that marginal utilities of commodities diminish as more of
them are purchased or consumed, but the marginal utility of money remains constant throughout when the individual
is spending money on a good and due to which the amount of money with him varies.

Marshall measured marginal utilities in terms of money. But measurement of marginal utility of goods in terms of
money is only possible if the marginal utility of money itself remains constant. It should be noted that the assumption
of constant marginal utility of money is very crucial to the Marshallian utility analysis, because otherwise Marshall
could not measure the marginal utilities of goods in terms of money.

If the money which is the unit of measurement itself varies as one is measuring with it, it cannot then yield correct
measurement of the marginal utility of the good.

4. Introspective Method

Another important hypothesis of the cardinal utility analysis is the use of introspective methods for judging
the behavior of marginal utility. In the intro spective method the economists reconstruct or build up with the help of
their own psycho logical experience the trend of feeling which goes on in other men’s mind.

From his own response to certain forces and by psychological experience and observation one gains understanding of
the way other people’s minds would work in similar situations. To sum up, in an introspective method we attribute to
another person what we know of our own mind. That is, by looking into ourselves we see inside the heads of other
individuals.

So, the law of diminishing marginal utility is based upon introspection. We know from our own mind that as we have
more of a thing, the less utility we derive from an additional unit of it. We conclude from it that other individuals’
minds will work in a similar fashion, that is, marginal utility to them of a good will diminish as they have more units
of it.

The Law of Diminishing Marginal Utility

Diminishing marginal utility is an economic concept that describes the decrease in the additional satisfaction
or happiness (utility) that a person derives from consuming one more unit of a good or service as they consume more
of it. In simpler terms, it means that as you consume more of something, the extra pleasure or benefit you get from
each additional unit tends to diminish. For example, imagine you're eating slices of pizza. The first slice might be
incredibly satisfying because you were hungry and craving pizza.

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The second slice is still enjoyable but not as much as the first. As you continue eating, your appetite might wane, and
the satisfaction from each subsequent slice decreases. This illustrates the diminishing marginal utility of pizza slices.
This concept is fundamental in economics because it helps explain why people make consumption choices. Rational
individuals aim to allocate their resources (money, time, etc.) to maximize their overall well -being. They do this by
considering the diminishing marginal utility and seeking a balance in their consumption of different goods and
services. In summary, diminishing marginal utility is the idea that as you consume more of something, the additional
satisfaction or utility gained from each extra unit decreases. It pl ays a significant role in consumer behavior and
economic decision-making.

Illustration of the Law of Diminishing Marginal Utility

Consider Table 5.1, in which we have presented the total and marginal utilities derived by a person from cups
of tea consumed per day. When one cup of tea is taken per day, the total utility derived by the person is 12 utils. And
because this is the first cup its marginal utility is also

12. With the consumption of 2nd cup per day, the total utility rises to 22 but marginal utility falls to 10. It will be seen
from the table that as the consumption of tea increases to six cups per day, marginal utility from the additional cups
goes on diminishing (i.e., the total utility goes on increasing at a diminishing rate).

However, when the cups of tea consumed per day increase to seven, then instead of giving positive marginal utility,
the seventh cup gives negative marginal utility equal to 2. This is because too many cups of tea consumed per day (say
more than six for a particular individual) may cause him acidity and gas trouble. Thus, the extra cups of tea beyond
six to the individual in question gives him disutility rather than positive satisfaction.

The Budget Line

The budget line, also known as the budget constraint, is about two goods that you can purchase using your own salary;
each good should be equal to the customer's monetary earnings, and it is important that the slope is straight.

The budget line is a graphical delineation of all possible combinations of the two commodities that can be bought with
provided income and cost so that the price of each of these combinations is equivalent to the monetary earnings of the
customer.

It is important to keep in mind that the slope of the budget line is equivalent to the ratio of the cost of two commodities.
The slope of the budget constraint possesses distinctive importance. In other words, the slope of the budget line can
be described as a straight line that bends downwards and includes all the potential combinations of the two
commodities which a customer can purchase at market value by assigning his/her entire salary. The concept of the
budget line is different from the Indifference curve, though both are necessary for consumer equilibrium.

The two basic elements of a budget line are as follows:

The consumer’s purchasing power (his/her income)
The market value of both the products

Equation of a Budget Line

To understand the concept of a budget line in a detailed manner, it is important to understand the mentioned equation.
The equation of the budget line equation can be represented as follows:

M = Px × Qx + Py × Qy

Px is the cost of product X.

Qx is the quantity of product X.
Py is the cost of product Y.
Qy is the quantity of product Y.
M is the consumer’s income.

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Features of a Budget Line

Some of the properties of the budget line are as follows:
• Negative slope: If the line is downward, it shows a reverse correlation between the two products.
• Straight line: It indicates a continuous market rate of exchange in individual combinations.
• Real income line: It denotes the income and the spending size of a customer.
• Tangent to indifference curve: It is the point when the indifference curve meets the budget line. This point is
known as the consumer’s equilibrium.

Assumptions of a Budget Line

The budget line is mostly based on the assumption and not reality. However, to get clear and precise results and
summary, the economist considers the following points in terms of a budget line:
• Two commodities: The economist assumes that the customers spend their income to purchase only two
products.
• Income of the customers: The income of the customer is limited, and it is designated to buy only two products.
• Market price: The cost of each commodity is known to the customer.
• Expense is similar to income: It is assumed that the customer spends and consumes the whole income.

A Shift in Budget Line

A budget line includes a consumer’s earnings and the rate of a commodity. These are the two important factors that
shift the budget line.

Shift due to change in price: The amount of the product either increases or decreases from time to time. For instance,
if the price and income of product A remains constant and the price of product B decreases, then the buying potential
of product B automatically increases. Similarly, if the price of B increases and the other factors remain steady, the
demand for product B automatically decreases.

Shift due to change in income: Change in income makes a huge difference that leads to a change in the budget line.
High income means high purchasing possibility and low income means low purchasing potential, making the budget
line to shift.

The Indifference Curve Analysis

Indifference curve analysis is a graphic representation of two products combined that provide similar levels of
satisfaction to consumers. They can be indifferent if a consumer takes more of one good while consuming less of the
other

Features of Indifference Curve Analysis

1. Indifference curve always slopes downward from left to right:
– An indifference curve has a negative slope, i.e. it slopes downward from left to right.
– If a consumer decides to have one more unit of a commodity, the quantity of another good must fall
to maintain the total satisfaction level.
2. Indifference curve is always convex to the origin:
– IC is strictly Convex to origin i.e. MRSxy is always diminishing.
– Due to the law of diminishing marginal utility, a consumer is always willing to sacrifice lesser units
of a commodity for every additional unit of another good.
3. Higher indifference curve represents higher level of satisfaction:
– Higher indifference curve represents larger bundles of goods i.e. bundles which contain more of
both or more of at least one.
– It is assumed that the consumer’s preferences are monotonic. i.e. he always prefers larger bundles
as it gives him higher satisfaction.

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Microeconomics
Prof. King Ceasar Ian A. Kasilag, MBA

Lesson 7: Production Theory

Development Team of the Module
Leader: Dela Cruz, Marina E.

Members: Agbas, Angela

Ationg, Mark Carlo R.
Barandon, Cher Deanne G.
Ilagan, Ma. Luisa Karylle M.
Malinao, Joana A.
Martin, Hanna Miel A.
Millares, Mary Grace R.
Pesa, Paulene Antonette Mae D.
Quintana, Clarissa Mae S.

Production Theory in Economics

Production theory in economics refers to how businesses decide the quantities of outputs to produce in
response to demand. The firm produces goods or commodities with limited resources, and this means that even if it
somehow knows people are willing to buy whatever quantity of goods it produces, it just can't instantly make an
unlimited quantity of goods.

• Production theory in economics refers to how businesses decide the quantities of outputs to produce in response
to demand.
• The resources firms use in production are called the factors of production, and they are also known as inputs.

Theory of Production
Theory of production, in economics, an effort to explain the principles by which a business firm decides how
much of each commodity that it sells (its “outputs” or “products”) it will produce, and how much of each kind of labor,
raw material, fixed capital good, etc., that it employs (its “inputs” or “factors of production”) it will use. The theory
involves some of the most fundamental principles of economics. These include the relationship between the prices of
commodities and the prices (or wages or rents) of the productive factors used to produce them and also the
relationships between the prices of commodities and productive factors, on the one h and, and the quantities of these
commodities and productive factors that are produced or used, on the other.

The various decisions a business enterprise makes about its productive activities can be classified into three layers of
increasing complexity. The first layer includes decisions about methods of producing a given quantity of the output in
a plant of given size and equipment. It involves the problem of what is called short -run cost minimization. The second
layer, including the determination of the most profitable quantities of products to produce in any given plant, deals
with what is called short-run profit maximization. The third layer, concerning the determination of the most profitable
size and equipment of plant, relates to what is called long-run profit maximization.

Theory of Production Function

Since the production theory is about deciding how much output to make, the production function helps by
showing how the output will change when a variable input changes. For example, how many products will the
company make if it employs two more employees? The production function answers this question!

The production function is illustrated with a graph that shows the effects of changes in input.

• The production function is a figure illustrating the changes in output when a single variable input changes.
• The resources firms use in production are called the factors of production, and they are also known as inputs.

Substitution of factors
The isoquants also illustrate an important economic phenomenon: that of factor substitution. This means that
one variable factor can be substituted for others; as a general rule a more lavish use of one variable factor will permit
an unchanged amount of output to be produced with fewer units of some or all of the others. In the example above,

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COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

labor was literally as good as gold and could be substituted for it. If it were not for factor substitution there would be
no room for further decision after y, the number of chains to be produced, had been established.

The shape of the isoquants shown, for which there is a good deal of empirical support, is very important. In moving
along any one isoquant, the more of one factor that is employed, the less of the other will be needed to maintain the
stated output; this is the graphic representation of factor substitutability. But there is a corollary: the more of one factor
that is employed, the less it will be possible to reduce the use of the other by using more of the first. This is the propert y
known as “diminishing marginal rates of substitution.” The marginal rate of substitution of factor 1 for factor 2 is the
number of units by which x1 can be reduced per unit increase in x, output remaining unchanged. In the diagram, if
feet of gold wire are indicated by x1 and goldsmith-hours by x2, then the marginal rate of substitution is shown by the
steepness (the negative of the slope) of the isoquant; and it will be seen that it diminishes steadily as x2 increases
because it becomes harder and harder to economize on the use o f gold simply by taking more care. The remainder of
the analysis rests heavily on the assumption that diminishing marginal rates of substitution are characteristic of the
production process generally.

The cost data and the technological data can now be brought together. The variable cost of using x1, x2 units of the
factors of production is written p1x1 + p2x2, and this information can be added to the isoquant diagram (Figure 2).
The straight line labelled v2, called the v2-isocost line, shows all the combinations of input that can be purchased for
a specified variable cost, v2. The other two isocost lines shown are interpreted similarly. The general formula for an
isocost line is p1x1 + p2x2 = v, in which v is some particular variable cost. The slope of an isocost line is found by
dividing p2 by p1 and depends only on the ratio of the prices of the two factors.

Three isocost lines are shown, corresponding to variable costs amounting to v1, v2, and v3. If 200 units are to be
produced, expenditure of v1 on variable factors will not suffice since the v1 -isocost line never reaches the isoquant
for 200 units. An expenditure of v3 is more than sufficient; and v2 is the lowest variable cost for which 200 units can
be produced. Thus v2 is found to be the minimum variable cost of producing 200 units (as v3 is of 300 units) and the
coordinates of the point where the v2 isocost line touches the 200-unit isoquant are the quantities of the two factors
that will be used when 200 units are to be produced and the prices of the two factors are in the ratio p2/p1. It may be
noted that the cheapest combination for the production of any quantity will be found at the point at which the relevant
isoquant is tangent to an isocost line. Thus, since the slope of an isoquant is given by the marginal rate of substitution,
any firm trying to produce as cheaply as possible will always purchase or hire factors in quantities such that the
marginal rate of substitution will equal the ratio of their prices.

The isoquant–isocost diagram (or the corresponding solution by the alternative means of the calculus) solves the
shortrun cost minimization problem by determining the least-cost combination of variable factors that can produce a
given output in a given plant. The variable cost incurred when the least-cost combination of inputs is used in
conjunction with a given outfit of fixed equipment is called the variable cost of that quantity of output and denoted
VC(y). The total cost incurred, variable plus fixed, is the short-run cost of that output, denoted SRC(y). Clearly SRC(y)
= VC(y) + R(K), in which the second term symbolizes the sum of the annual costs of the fixed factors available.

Marginal cost
Two other concepts now become important. The average variable cost, written AVC(y), is the variable cost
per unit of output. Algebraically, AVC(y) = VC(y)/y. The marginal variable cost, or simply marginal cost [MC(y)] is,
roughly, the increase in variable cost incurred when output is increased by one unit; i.e., MC(y) = VC(y + 1) - VC(y).
Though for theoretical purposes a more precise definition can be obtained by regarding VC(y) as a continuous function
of output, this is not necessary in the present case.

Marginal cost is the change in total production cost that comes from making or producing one more unit. It's calculated
by dividing the change in production costs by the change in quantity. You can use marginal cost to determine your
optimal production volume and pricing.

The usual behavior of average and marginal variable costs in response to changes in the level of output from a given
fixed plant is shown in Figure 3. In this figure costs (in dollars per unit) are measured vertically and output (in units
per year) is shown horizontally. The figure is drawn for some particular fixed plant, and it can be seen that average
costs are fairly high for very low levels of output relative to the size of the plant, largely because there is not enough
work to keep a well-balanced work force fully occupied. People are either idle much of the time or shifting,

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COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

expensively, from job to job. As output increases from a low level, average costs decline to a low plateau. But as the
capacity of the plant is approached, the inefficiencies incident on plant congestion force average costs up quite rapidly.
Overtime may be incurred, outmoded equipment and inexperienced hands may be called into use, there may not be
time to take machinery off the line for routine maintenance; or minor breakdowns and delays may disrupt schedules
seriously because of inadequate slack and reserves. Thus, the AVC curve has the flat-bottomed U-shape shown. The
MC curve, as might be expected, falls faster and rises more rapidly than the AVC curve.

Marginal cost and price

The conclusion that marginal cost tends to equal price is important in that it shows how the quantity of output produced
by a firm is influenced by the market price. If the market price is lower than the lowest point on the average variable
cost curve, the firm will “cut its losses” by not producing anything. At any higher market price, the firm will produce
the quantity for which marginal cost equals that price. Thus the quantity that the firm will produce in response to any
price can be found in Figure 3 by reading the marginal cost curve, and for this reason the marginal cost curve is said
to be the short-run supply curve for the firm.

The short-run supply curve for a product—that is, the total amount that all the firms producing it will produce in
response to any market price—follows immediately, and is seen to be the sum of the short-run supply curves (or
marginal cost curves, except when the price is below the bottoms of the average variable cost curves for some firms)
of all the firms in the industry. This curve is of fundamental importance for economic analysis, for together with the
demand curve for the product it determines the market price of the commodity and the amount that will be produced
and purchased.

Criticisms of the theory

The theory of production has been subject to much criticism. One objection is that the concept of the
production function is not derived from observation or practice. Even the most sophisticated firms do not know the
direct functional relationship between their basic raw inputs and their ultimate outputs. This objection can be got
around by applying the recently developed techniques of linear programming, which employ observable data without
recourse to the production function and lead to practically the same conclusions.

On another level the theory has been charged with excessive simplification. It assumes that there are no changes in
the rest of the economy while individual firms and industries are making the adjustments described in the theory; it
neglects changes in the technique of production; and it pays no attention to the risks and uncertainties that becloud all
business decisions. These criticisms are especially damaging to the theory of long -run profit maximization. On still
another level, critics of the theory maintain that businessmen are not always concerned with maximizing profits or
minimizing costs.

Though all of the criticisms have merit, the simplified theory of production does nevertheless indicate some basic
forces and tendencies operating in the economy. The theorems should be understood as conditions that the economy
tends toward, rather than conditions that are always and instantaneously achieved. It is rare for them to be attained
exactly, but it is just as rare for substantial violations of the theorems to endure.

Only the simplest aspects of the theory were described above. Without much difficulty it could be extended to cover
firms that produce more than one product, as almost all firms do. With more difficulty it could be applied to firms
whose decisions affect the prices at which they sell and buy (monopoly, monopolistic competition, monopsony). The
behavior of other firms that recognize the possibility that their competitors may retaliate (oligopoly) is still a theory
of production subject to controversy and research.

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

Microeconomics
Prof. King Ceasar Ian A. Kasilag, MBA

Lesson 8: Market Structure

Development Team of the Module
Leader: Rodriguez, Jamie G.

Members: Ablero, Khylle Jairo N.

Baguipo, Izzy Shane P.
Enriquez, Trisha Mae Y.
Guillano, Rebecca H.
Juano, Angel S.
Loriaga, Mylene M.
Luma, May-Ann A.
Pelon, Devie Z.
Troyo, Dhaniel Anne V.

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

Microeconomics
Prof. King Ceasar Ian A. Kasilag, MBA

Lesson 9: Government Issues in Microeconomics

Development Team of the Module
Leader: Apale, Mikaela C.

Members: Alano, Justine T.

Balilla, Edriann Ralf
Balomino, Andrei S.
Boncalo, Bon Carlo Treb O.
Dacles, Samantha Raeven T.
Hilario, Kyle Justin D.
Pascual, Jeremy S.
Rodriguez, Beyance Nicole
Sarmiento, Joshua F.

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

The Contemporary World

In partial fulfillment of the requirements for the
Bachelor of Science in Business Administration
Major in Marketing Management

Prepared by:

MARK CARLO R. ATIONG

1CMT1I Student

Arman Lopez Jacinto, DPA

The Contemporary World Professor

1st SEMESTER SY 2023-2024

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

The Contemporary World

Prof. Arman Lopez Jacinto, DPA

Lesson 1: Development Issues in 21 st Century

A. Global Populations
defined as the increase in the number of people in a given area. Population growth can be measured in a neighborhood,
country, or even global level.
- United Nations Population Division

8 billion people World population has reached 8 billion people on November 15, 2022 according to the United Nations.
The U.S. Census Bureau International Database (IDB) estimates the world population will reach 8 billion in October
2023.

United Nations and U.S. Census Bureau International Database (IDB)

Global Population Growth

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COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

Fertility Rate
• Shows the average number of children a woman of childbearing years would have in her lifetime
• A fertility rate of 2.1 is necessary just to replace current population
• Today, the worldwide average fertility rate is about 2.59

Mortality Rate
• Also called the death rate
• Number of deaths per 11000 people
• Generally, a society is considered healthy if it has a low mortality rate
• However, some healthy nations have higher mortality rates because they have large numbers of elderly people

Causes of Global Populations

1. Fertility is higher than mortality
2. Ignorance of Family Planning
3. Child Marriage
4. International migration and emigration

Effects of Global Populations

1. Industrialization
2. Increase in Pollution and Waste
3. Climate Change
4. Shortage of Food and other resources
5. Increase Crime Rate
6. Unemployment
7. Affected to environmental health problems
8. Deforestation
9. Natural Disasters
10. Higher risk of large-scale disasters like pandemics

Conclusion
EDUCATION is a vital tool to spread awareness among the people to addressed the global growth of populations.

1. Education on Family Planning

2. Education thru Media Campaign
3. Sustainable Life Style
4. Sustainable Policies and Programs
5. Immigration Policies
6. Education and Empowerment

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

The Contemporary World

Prof. Arman Lopez Jacinto, DPA

Lesson 2: Development Issues in 21 st Century

B. Poverty and Inequality

Poverty
It entails more than the lack of income and productive resources to ensure sustainable livelihoods. Its manifestations
include hunger and malnutrition, limited access to education and other basic services, social discrimination and
exclusion, as well as the lack of participation in decision -making.
- United Nations

Inequality
It can include economic inequalities such as inequalities in income, wealth, wages and social protection, as well as
social and legal inequalities where different groups are discriminated, excluded or otherwise denied full equality.
- United Nations

Number of people living on less than $1.90 a day, 2015 –2018, 2019–2022 projection before and after COVID-19
(millions) Poverty Rate

- United Nations Department of Economics and Social Affairs

Causes of Global Inequality

• Religion
• Gender Inequality (Gender inequality around the world)
• Inequality in the workplace
• Inequality in wealth and income
• Unemployment
• Social inequalities
• Education
• Poverty

Religion
“A strong belief on super power or power that control human density.” Discrimination in Religion:

It is discrimination to treat you worse that someone else, just because of your religion or belief.
• Refusing to work alongside with you just because you are Jewish.
• Refusing to join you when you eat at school just because you are Muslim
• Dismissing from group activity
• Refusing to allow you into an activity if you are wearing a hijab

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COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

Gender Inequality around the world

“Refers to unequal treatment or perceptions of individuals based on their gender”

Gender equality is still a huge issue today, where male are considered superior to female.
• Unequal pay, and to have male dominant job, but still have lower income, fewer prestigious jobs, and are
more likely to live in poverty than men.
• Education and poverty reduction go hand in hand, progress is being made, but there are still less girls in
school or finishing schools. This also has to do with living in rural areas.

Inequality in the workplace

• Women are facing discrimination in their income, unemployment and occupational
• Refusing to join you when you eat at school just because you are Muslim
• Dismissing from group activity
• Refusing tom allow you into an activity if you are wearing a hijab

Inequality in the schools

• Gender discrimination is very common in some countries People are very conservative and they did not want
their girls to go to school and get education
• Poverty is another factor that prohibits the parents to send their children to schools
• Many girls get married or live in rural community where they are unable to get to schools

Access to Healthcare
Many women die in childbirth in the developing world and is usually completely avoidable if proper healthcare care
available. HIV/AIDS can also be diminished with education and reduction of child marriages and women slaves.

Gender Based Violence

Gender based violence is one of the most socially tolerated abuse of human rights nationwide. It is contributor to
poverty and ill-health and prevent many women from reaching their potential.

Types of Poverty
a. Absolute Poverty – Lack of basic human needs, like clean water, nutrition, health care, education, clothing
and shelter.
b. Relative Poverty – The condition of having fewer resources or lesser income as compared to others, within a
society or country, or as compared to worldwide averages.

Causes of Inequality and Poverty

• Unemployment or having a poor quality (i.e. low paid or precarious)
• Low levels of education and skills
• The size and type of family
• Gender
• Disability or ill-health
• Being a member of minority ethnic groups
• Living in a remote or very disadvantaged community

Effects of Inequality and Poverty

• Lower long-term GDP growth rates
• Higher crime rates
• Poorer public health
• Increased political inequality
• Lower average education levels

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

The United Nations Sustainable Development Goals

The United Nations Sustainable Development Goals Millenium Development Goals (MDG’s)
The countries created eight categories of goals. They hoped to reach these targets by 2015 to 2030:
1. Eradicate extreme poverty and hunger
2. Achieve universal primary education
3. Promote gender equality and empower women
4. Reduce child mortality
5. Improve maternal health
6. Combat HIV/AIDS, malaria, and other diseases
7. Ensure environmental sustainability
8. Develop a global partnership for development (United Nations, 2010)

The United Nations Sustainable Development Goals

By 2016, progress was made toward some MDGs, but little progress was made toward others. Goals with progress:
• Poverty
• Education
• Child mortality
• Access to clean water (health)

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 PAMANTASAN NG LUNGSOD NG MARIKINA
COLLEGE OF MANAGEMENT AND TECHNOLOGY
BACHELOR OF SCIENCE IN BUSINESS ADMINISTRATION
MAJOR IN MARKETING MANAGEMENT

The United Nations Sustainable Development Goals

Goals with less progress:
• Hunger and malnutrition increased from 2007 through 2009, undoing earlier achievements.
• Employment was also slow to increase
• HIV infection rates were not reduced. Infection rates continue to outpace the number of people getting
treatment.
• Mortality and health care rates for mothers and infants also showed little advancement. (United Nations,
2010)

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