BSTM-3

ABM 5 SEMIFINAL EXAM.

PLEASE ANSWER THE QUESTIONS AS COMPREHENSIVELY AS YOU CAN. 5 POINTS EACH.

1. What is the demand function? Explain its equation.

A demand function is a mathematical relationship between the price of a good or service and the quantity of that
good or service that consumers are willing to purchase at that price. It is typically represented by an equation of
the form:

Q = f(p)

where:

 Q is the quantity demanded

 p is the price

 f(p) is an unspecified function that describes the relationship between the two variables

The law of demand states that, all other things being equal, the quantity demanded of a good or service is
inversely related to its price. This means that as the price of a good or service increases, the quantity demanded
will decrease, and vice versa.

2. Why is it important to study customer expectations? Explain.

Studying customer expectations is super important for businesses because it helps them understand what their
customers want and need. When businesses know what their customers expect, they can tailor their products,
services, and overall customer experience to meet those expectations.

By studying customer expectations, businesses can:

 o Improve customer satisfaction: When businesses deliver on customer expectations, it leads to
happier customers. Satisfied customers are more likely to become repeat customers and
recommend the business to others.
o Build customer loyalty: When businesses consistently meet or exceed customer expectations, it
builds trust and loyalty. Customers are more likely to stay loyal to a business that consistently
meets their expectations.
o Stay competitive: Understanding what customers expect allows businesses to stay ahead of the
competition. By continuously improving and adapting to meet customer expectations, businesses
can differentiate themselves in the market.
o Drive innovation: Studying customer expectations can also inspire businesses to innovate and come
up with new products or services that meet emerging needs. It helps businesses stay relevant and
responsive to changing customer demands.

3. What is consumer surplus? Explain and illustrate.

Consumer surplus is a concept in economics that represents the difference between what a consumer is willing to
pay for a product or service and what they actually have to pay.

Let's say you're really excited about buying a new pair of shoes. You're willing to pay up to 1,500 pesos for them
because you really love them and they're exactly what you've been looking for. However, when you go to the
store, you find out that they're on sale for only 1,000 pesos. In this case, the consumer surplus is the difference
between what you were willing to pay (1,500 pesos) and what you actually paid (1,000 pesos). So, your consumer
surplus would be 500 pesos. It's like a little extra benefit or savings that you get as a consumer.

4. What are supply shifters? Explain and illustrate.

Supply shifters factors that can cause a change in the supply of a product or service. These factors can shift the
entire supply curve, either increasing or decreasing the quantity supplied at each price level.

To illustrate, let's consider the market for smartphones. If there is a technological breakthrough that allows for
more efficient production, it can lead to an increase in supply. As a result, more smartphones will be available at
each price level, shifting the supply curve to the right.

5. What is producer surplus? Explain and illustrate.

Producer surplus is a concept in economics that measures the benefit or profit that producers receive from selling
their goods or services at a certain price. It represents the difference between the price producers are willing to
sell at and the actual price they receive.

To illustrate, let's say you're a farmer selling watermelons. You're willing to sell each watermelon for P50, but the
market price is P80. The producer surplus would be the difference between your willingness to sell at 50 and the
actual selling price of 80. So, in this case, the producer surplus would be 30 per watermelon. The producer surplus
is important because it reflects the profitability and incentive for producers to supply goods or services in the
market. When the producer surplus is higher, it indicates that producers are benefiting more from their sales and
are more likely to continue producing and supplying the product.

6. Explain the theory on Individual Behavior and how it can be used by a business.

The theory of individual behavior in economics explores how individuals make decisions and choices based on
their preferences, constraints, and incentives. It helps us understand why people behave the way they do when it
comes to buying goods or services.

For businesses, understanding individual behavior is crucial because it allows them to tailor their products,
marketing strategies, and pricing to meet the needs and preferences of their target customers.

7. What is Game Theory? Explain.

Game Theory, is a branch of mathematics and economics that studies strategic decision-making in situations
where the outcome of one person's choice depends on the choices of others. It's like trying to predict what moves
your friends will make in a game.

In Game Theory, we analyze different players, their possible strategies, and the potential outcomes of their
interactions. It helps us understand how people make decisions in competitive situations and how those decisions
can affect the overall outcome.

By using mathematical models and strategic thinking, Game Theory helps us predict and understand the choices
people make in different situations. It allows us to make more informed decisions and strategies by considering
the potential actions and reactions of others.

8. How are laws and economics related? Explain.

Laws and economics are closely related because they both influence and shape each other. laws and economics
are interconnected. Economics provides tools to analyze the impact of laws on economic behavior, while laws
establish the legal framework for economic activities and promote market efficiency. Together, they contribute to
shaping and influencing the economic landscape.

9. What do you think is the most relevant criticism of Economics? Why do you say so?

Economics uses models and theories to understand human behavior and predict outcomes, but these models are
based on simplifications and assumptions. Critics argue that these assumptions can oversimplify the complexities
of real-world situations, leading to inaccurate predictions and policies.

Economics has its criticisms, However, it’s still a valuable tool for understanding and analyzing the economy. It
provides insights into how individuals, businesses, and governments make decisions and interact in the world of
scarce resources.

10. What is the purpose of the Comprehensive Agrarian Reform Program? Explain.

The Comprehensive Agrarian Reform Program (CARP) in the Philippines was implemented to address issues of
land inequality and promote social justice in rural areas. Its purpose is to redistribute agricultural lands to landless
farmers and farmworkers, empowering them with land ownership and supporting their economic well-being. The
purpose of the Comprehensive Agrarian Reform Program is to address land inequality, empower landless farmers,
and promote social justice and sustainable rural development in the Philippines.

11. Who are the beneficiaries of the Comprehensive Agrarian Reform Program?

Under the Comprehensive Agrarian Reform Program (CARP), the beneficiaries are primarily landless farmers and
farmworkers in the Philippines. The program aims to provide them with land ownership and support their
economic well-being. By redistributing agricultural lands, CARP seeks to address historical injustices and promote
equitable access to land resources. It's a significant initiative to empower and uplift the lives of those who rely on
agriculture for their livelihoods.
 12. Can a demand curve be completely vertical? When will this happen? Explain and illustrate.

Yes, a demand curve can be completely vertical under certain circumstances. This occurs when the quantity
demanded remains the same regardless of changes in price. It typically happens when the goods or services in
question have no substitutes or alternatives available.

For example, let's consider a life-saving medication that has no close substitutes. If the price of this medication
increases, people who need it will still be willing to pay the higher price because there are no other options
available to them. As a result, the quantity demanded remains constant, and the demand curve becomes vertical.

In this case, the vertical demand curve indicates that consumers are willing to pay any price to obtain the essential
medication. However, it's important to note that such cases are relatively rare, and most goods and services have
demand curves that slope downwards, indicating that higher prices lead to lower quantities demanded.

13. Can a demand curve be completely horizontal? When will this happen? Explain and illustrate.

Absolutely, a demand curve can be completely horizontal in certain situations. This occurs when the quantity
demanded changes significantly with even the slightest change in price. It typically happens when there are
perfect substitutes available for the product or when consumers have a high price sensitivity.

Let's take the example of a generic brand of cereal. If the price of the generic cereal is significantly lower than the
price of the branded cereal, consumers may be more likely to switch to the cheaper option. As a result, even a
small increase in price for the generic cereal could cause a significant decrease in the quantity demanded. In this
case, the demand curve for the generic cereal would be horizontal, indicating that consumers are highly
responsive to changes in price.
It's important to note that horizontal demand curves are relatively rare and most goods and services have
demand curves that slope downwards, indicating that higher prices lead to lower quantities demanded. However,
in situations where there are perfect substitutes or high price sensitivity, a horizontal demand curve can occur.

14. Do you agree with the Comprehensive Agrarian Reform Program? Explain your answer.

I agree, with the Comprehensive Agrarian Reform Program addressing land distribution and providing support to
landless farmers and farmworkers. It seeks to promote social justice, rural development, and economic
empowerment. It has helped redistribute land to farmers who previously had limited access to it. This has
provided them with opportunities for increased income and improved livelihoods.

However, CARP has also faced challenges and limitations. Some critics argue that the program has not been fully
implemented and that there are issues with land valuation, land conversion, and lack of support services for
beneficiaries.

15. When there is a shortage, will the demand curve shift to the right or to the left? Explain.

When there is a shortage, the demand curve does not shift. Instead, it is the quantity demanded at a given price
that changes. A shortage occurs when the quantity demanded exceeds the quantity supplied at the current price.
This means that consumers are willing to buy more of a product than is available in the market.

16. When there is a surplus, will the demand curve shift to the right or to the left? Explain.

When there is a surplus, the demand curve itself does not shift. Instead, it is the quantity supplied at a given price
that changes. A surplus occurs when the quantity supplied exceeds the quantity demanded at the current price.
This means that there is more of a product available in the market than consumers are willing to buy.