Professional Documents
Culture Documents
Problem Sets
SS12/A3
Submitted by:
Carreon, Juan Miguel M.
Submitted to:
Prof. Gil Astrophel B. Orcena
PS1
DISCUSSION OUTLINE: DS PROBLEMS
1. What are the determinants of demand/supply?
Supply is the amount of goods or services that a supplier is willing to provide to the
market. Its determinants include the cost of production, technology, the number of sellers and
expectation for future prices. Furthermore, any factor that increases the cost of production
decreases supply and any factor that decreases the cost of production increases supply.
On the other hand, demand is an economic principle that describes a consumers desire
and willingness to pay a price for a specific good or service. The determinants of demand
consist of income, consumer preferences, number of buyers, price of related goods, and
expectation of future.
2. What does a change in demand/supply suggest?
An increase in demand suggests an increase in the price of the goods (shift up) and an
increase in the number of goods that must be produced. Consequently, a decrease in demand
decreases both the price of the goods (shift down) and the number of goods to be produced.
Then again, an increase in the supply suggests a lower the price and an increase in the
number of goods to be produced. While a decrease in supply increases the price and
decreases the quantity of goods to be produced.
3.
If price is originally at P1 in the picture below, only Q1 will be sold because this is all
that buyers will purchase, even though sellers are willing to sell more, Q2. The difference Q2
- Q1 is called a surplus. In this situation the buyers are in equilibrium because they can buy
all they want to buy at the going price. However, the sellers are not in equilibrium and will
compete among themselves to get rid of the surplus. Some sellers will be willing to offer
their product at a lower price. Buyers are always willing to move down the demand curve, so
there is a tendency to move downward toward market equilibrium in the picture below.
Supply
500 packs per week
487 packs per week
382 packs per week
240 packs per week
As the price of the bread goes up, the amount of bread demanded goes down.
7. What about a supply schedule? Cite examples.
A supply schedule is a table that illustrates how much of a good or service suppliers are
willing and able to supply at many different prices. The supply schedule shows you how the
supply changes when you increase or decrease the price.
increase in income could result in an inward shift of demand (to the left) if the good or
service assessed is an inferior good or a good that is not desirable but is acceptable when the
consumer
is
constrained
by
income.
10. Illustrate in matrix and graphically varying market demand levels for prepaid
communication services (Globe, Smart & Suncel): types of demand curves
800
723
700
600
584
500
367
400
300
200
100
0
Sun Cellular
Smart
Globe
Number of Users
11. a. Illustrate in matrix and graphically an equilibrium situation for LRT/MRT prepaid
services. Show in the graph specific values of the prepaid tickets.
1400
1300
1267
1200
1100
1000
956
900
800
700
600
500
500
400
300
200
100
0
12
15
20
Ticket Prices
Quantity of tickets demanded
b. What about a graph showing a market equilibrium per station? (Consider Santolan-Recto
Line)
600
509
500
400
375
360
325
300 300
250
207
200
135
50
to
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ar
da
Le
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Pu
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V.
M
ap
J.
Ru
iz
G
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ao
Cu
b
s
na
An
o
n
na
ip
u
Ka
t
ol
an
nt
G
o
15
Be
t
100
Sa
197
700
609
600
500
460
400
400
360
375
325
297
250
235
200
450
425
307
300
300
509
475
207
150
135
100
197
115
50
15
Non-peak hours
Re
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Pu
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V.
M
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b
Be
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Ka
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ao
s
na
ip
u
nt
Sa
An
o
na
ol
an
Peak hours
12. Show graphically varying demand levels for TV network services on a primetime viewing
(Kapamilya, Kapuso, & Others). Be sure to specify the programs.
23.4
12.9
TV
)
s)
m
rd
ro
o
Bo
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Th
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N
ew
s
M
ar
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TV
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21.6
Graphically show the relationship between the demand curve and the supply curve in the
following economic scenarios
1. A hoarding of goods due to a rising market demand resulting to higher prices of the
hoarded goods in the succeeding months.
7
6
5
4
Price 3
2
1
0
0.5
1.5
2.5
3.5
4.5
5.5
Market Quantities
Price
3
2
1
0
0.5
1.5
2.5
3.5
Market Quantities
4.5
5.5
Price 3
2
1
0
0.5
1.5
2.5
3.5
4.5
5.5
Market Quantities
0
0.5
1.5
2.5
3.5
4.5
5.5
5. A sustained importation of meat from China (at lower prices) despite a stable market
situation.
Y-Values
3.5
3
2.5
2
1.5
1
0.5
0
0.5
1.5
2.5
6. Impacts of the freeze in Bohol on the market equilibrium for basic commodities
7
6
5
4
Price 3
2
1
0
0.5
1.5
2.5
3.5
4.5
5.5
Market Quantities
The freeze in Bohol caused a decrease in supply and an increase in demand, causing inflation.
Price 4
3
2
1
0
0.5
1.5
2.5
3.5
4.5
5.5
Market Quantities
2. A 1-unit increase per month in the EP of Good X for 5 consecutive months resulting to no
change in the QD for Good X
6
5
4
Price 3
2
1
0
Market Quantities
PART II. Below is a hypothetical schedule of price, demand, and supply for the flesh trade
industry planet Mars:
Price/transaction
(in dollars)
$ 75
$ 50
$ 35
$ 25
$ 15
$ 10
Quantity Demanded
Per Year
3 million
6 million
9 million
12 million
15 million
18 million
Quantity Supplied
Per Year
18 million
15 million
12 million
9 million
6 million
3 million
Problem: Is there a possible equilibrium for the flesh trade industry in Mars?
Prove your answer mathematically or graphically.
80
75
75
70
60
50
50
Axis Title
50
40
35
35
30
25
25
20
15
10
0
15
10
10
5000000
10000000
15000000
Axis Title
Yes, there is a possible equilibrium for the flesh trade industry in Mars
20000000
E=
R0=42=8
R1=23=6
Proo =RPC
Pro1=RPC
Price
83
1
0
=63
=3
Pro=Pro 1Pro0
1
Quantity Demanded
=35
= -2
Statement is false
2. A 50% cut in the price of a good with unitary demand pulls down its
revenue.
42
|24
|100 =100
E=
R0=42=8
R1=24=8
R=R 1R0
=8 8
=0
5
4
3
Price
2
1
0
Quantity Demanded
PC = R
Pro0 =R0PC 0
Pro1=R 1PC 1
Pro0 =0
Pro1=0
Pro=Pro 1Pro0
Pro=0
Statement is true
4. A 75% off in the price of a good with elastic demand necessarily pulls up its
revenues and profits.
41
|34
|100 =300
E=
R0=41
=3
R1=34
R=123
=9
= 12
5
4
Pro0 =32
Pro1=122
=1
= 10
Pro=101
=9
Statement is true
Price
2
1
0
Quantity Demanded
5
4
3
Price
2
1
0
Quantity Demanded
6. Goods on sale with elastic demand create a positive impact on revenues but
do not necessarily mean a profit gain.
This implies that changes in the
price have no effects on the quantity
of a good.
5
4
3
Price
2
1
0
Quantity Demanded
7. The demand elasticity for any good whose price and quantities demanded do
not change is perfectly inelastic.
Statement is false. If a change in
price produces no change in the
quantity demanded of a commodity,
then the price elasticity of Good X
is perfectly inelastic.
5
4
3
Price
2
1
0
Quantity Demanded
E=
Price
2
1
0
Quantity Demanded
5
4
3
R=R 1Ro
Price
2
1
0
Quantity Demanded
QUANTITIES/OUTPUTS (QTY)
1
2
3
4
5
VC
10
15
20
30
50
FC
10
10
10
10
10
PC
20
25
30
40
60
AC
20
12.5
10
10
12
MC
0
5
5
10
20
R
15
30
45
60
75
MR
0
15
15
15
15
Pro
-5
5
15
20
15
1. Given the following factors/economies of scale for Business X in its 1st year of
operation:
Project Cost = 100k payable to BPI w/ 10% interest rate in one year on a monthly
installment basis;
1-month advance of 15k, a 2-month deposit of 30k & a Meralco deposit of 2k;
BIR tax: 15% of the total annual profit, payable on January in the succeeding year;
Price of Good X = Php 14.00
Production Cost = 2k/day (inclusive of Meralco consumption cost)
Quantities produced & sold/ day = 300; and
Business contract is to be renewed after a year
Problems:
1. At the earliest, in what month will the business gain pure profit? Show answers in
a summary matrix and solutions below the matrix with labels.
(5 points)
2. What is the total net profit for Business X in its first year of operation? Show
solutions (2 points).
3. What is the opportunity cost of borrowing from BPI? (1 point)
4. What is the average cost for good X? (1 point)
5. What is the productions pricing strategy? Show mathematically.
(1 point)
M
1
2
3
4
5
6
7
8
9
10
11
12
R
P 126,000
P 126,000
P 126,000
P 126,000
P 126,000
P 126,000
P 126,000
P 126,000
P 126,000
P 126,000
P 126,000
P 126,000
PCo
P 60,000
P 60,000
P 60,000
P 60,000
P 60,000
P 60,000
P 60,000
P 60,000
P 60,000
P 60,000
P 60,000
P 60,000
PC1
P 69,166.67
P 69,166.67
P 69,166.67
P 69,166.67
P 69,166.67
P 69,166.67
P 69,166.67
P 69,166.67
P 69,166.67
P 69,166.67
P 69,166.67
P 69,166.67
PC2
P 54166.67
P 69166.67
P 69,166.67
P 69,166.67
P 69,166.67
P 69,166.67
P 69,166.67
P 69,166.67
P 69,166.67
P 69,166.67
P 69,166.67
P 69,166.67
Proo
P 71833.33
P 56833.33
P 56833.33
P 56833.33
P 56833.33
P 56833.33
P 56833.33
P 56833.33
P 56833.33
P 56833.33
P 56833.33
P 56833.33
Pro=P 696999.96
PC=P 60000
Tax=696999.96 ( 0.15 )
Tax=P 104549.97
( P 110000
)
12
PC 1=( P 60000 ) +
PC 2=PC 1 P 15000=P54166.67
(Month 1)
P 110000
PC 2=( P 60000 ) +
12
(Month 2 onwards)
Proo =RPC 2=P71833.33
(Month 1)
Proo =( RPC 2 )P 15000=P 56833.33
(Month 2 onwards)
At the earliest, in what month will the business gain pure profit?
o The 13th month
What is the total net profit for Business X in its first year of operation?
o P 592,449.99
What is the opportunity cost of borrowing from BPI?
o P 10,000
What is the average cost for good X?
o Cannot be determined (>P 6.67)
What is the productions pricing strategy?
o Cost Absorption Approach
Problem Set 7:
BASIC PROBLEMS ON THE COMPUTATION OF ANNUAL INCOME TAX
1.
Engr Gilbert Gonzales, single in status, earns a monthly income of Php 80,000 as a
professor of MIT. His monthly payments include SSS Php 1800, Philhealth Php 1200
& Pag-ibig Php 1000. What is his income tax due?
Income:
P 80,00012=P 960,000
Deduction:
( P50,000 )+ [( 1,800+1,200+1,000 )12 ] =P 98,000
Taxable Income:
P 960,000P 98,000=P 862,000
P125,000+ P 115,840
Income tax due:
P 240,840
2. Nestor, a Muslim with two wives with 5 children each - all below 18 years of age, earns a
monthly income of Php 60,000 for his professional services at Company X. However,
due to a severe political conflict in Mindanao, he filed a leave of absence for the last two
months of year 2014. How much did he pay at BIR for his tax due for 2014?
Income:
P 60,00010=P600,000
Deductions:
P50,000+P 100,000=P 150,000
Taxable Income:
P 600,000P 150,000=P 450,000
3. Prof. Bartolome, married without any child, earns Php 60,000 per pay day at Mapua
Institute of Technology. His withholding tax per month is Php 6500. He also earns Php
6000 per month as the extension coordinator the School of Languages, Humanities and
Social Sciences (SLHS), and Php 10,000 per month for his consultancy services at the
UST-Center of Innovation and International Development (UST-CIID). What is his tax
due, and net tax due, if any?
Income:
MIT = P120,000
SLHS = P6,000
UST = P10,000
Deductions:
P50,000
Taxable Income:
P1,632,000 - P50,000 = P1,582,000
Tax withheld:
P 6,500 * 12
P 78,000
Net tax due:
P471,240 P78,000
P392,240
4. Ms. Michelle Perez, legally separated with one legally adopted child whose age is 15, has
a monthly income of Php 50,000. Other than her regular compensation, she receives a
13th month pay of Php 85,000 and a summer bonus of 50,000. Compute for the tax due.
Income:
P50,000 * 12 = P600,000
13th month pay = P85,000
P85,000 P82,000 = P3,000
Total income = P603,000
Deductions:
P50,000 + P25,000
P75,000
Taxable income:
P603,000 P75,000
P528,000
5. Mrs. Ramos earns Php 30,000 per month as a public elementary school teacher. Her
husband works in Dubai as a mechanical engineer sending a regular monthly remittance
of PHp 30,000. She has a child with exceptionality whose age is already 25 years old, and
three (3) other children as qualified dependents. What is her gross compensation
income? What about her total exemptions? What is her tax due?
Income:
P30,000 * 12 = P360,000
Deductions:
P50,000 + (4 * P25,000) = P150,000
Taxable income:
P360,000 P150,000 = P210,000