BM1704
Name: Date:
Section: Score:
TASK PERFORMANCE
I. PROBLEM SOLVING (60 points)
Solve for the following items. Write your answers on the back of this sheet.
1. The following is a demand schedule for RJ Guitars. Construct the demand curve. (10 points)
Price Quantity Demanded
P4,000 2
P3,500 6
P3,000 10
P2,500 14
P2,000 18
2. Because of a typhoon in the city, the price of cabbages rose from P60.00 to P80.00, and the quantity
demanded falls from 150 kilos to 100 kilos.
a. Compute for the price elasticity for this price range. (10 points)
Answer:
%Change in quantity demanded
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Q 2−Q 1
¿ ×100
(Q 2+Q1)/2
−50
¿¿ 100−150
×100 ×100
150
(100+150)/2
¿−40
%Change in price
P 2−P 1
¿ ×100
( P 2+ P1)/ 2
80−60
¿ × 100
(80+60)/2
20
¿ ×100
70
¿ 28.571
Price Elasticity
Percentage change∈quantity demanded
Ep ¿ Percentage chaneg∈ price
−40
¿
28.571
Ep ¿−1. 400
b. What is the interpretation of this price elasticity of demand? (5 points)
Answer:
Demand is elastic when PED is bigger than 1. This indicates that consumers are extremely
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sensitive to price changes, as a 1% rise in price will result in a more than 1% decrease in quantity
demanded. Demand is inelastic when PED is less than one. Demand is perfectly elastic in the first
case.
c. What happens to the total revenue of sellers when the price of cabbages increases? (5 points)
Answer:
Because the price increased and the demand for the product declined, the sellers' profits will
decline.
3. The following table shows the daily quantity sold for two (2) products in Brigg’s Warehouse
according to the average income of customers.
Quantity demanded if income is P15,000 Quantity demanded if income is P25,000
Product A 20 15
Product B 12 18
a. Calculate and interpret the income elasticity for Product B, if a customer’s income changes from
P15,000 to P25,000. (10 points for the solution, 5 points for interpretation)
Answer:
Income Elasticity
% change in quantity demanded
Q 2−Q 1
¿ ×100
(Q 2+Q1)/2
18−12
¿ ×100
(18+12)/2
6
¿ ×100
15
¿ 40
% Change in Income
I 2−I 1
¿ ×100
(I 2+ I 1)/2
25,000−15,000
¿ ×100
(25,000+15,000)/2
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10,000
¿ ×100
20,000
¿ 50
Percentage change∈quantity demanded
Ep ¿ Percentage ch ange ∈income
40
¿
50
Ep ¿ 0.8
Interpretation: Consequently, when income rises, so does demand, which is why the income
elasticity is positive.
b. Calculate and interpret the income elasticity for Product A, if another customer’s income
changes from P15,000 to P25,000. (10 points for the solution, 5 points for interpretation)
Answer:
% change in quantity demanded
Q 2−Q 1
¿ ×100
(Q 2+Q1)/2
15−20
¿ ×100
(15+20)/2
−5
¿ ×100
17.5
¿ 28.571
% Change in Income
I 2−I 1
¿ ×100
( I 2+ I 1)/2
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25,000−15,000
¿ ×100
(25,000+15,000)/2
10,000
¿ ×100
20,000
¿ 50
Percentage change∈quantity demanded
Ep ¿ Percentage ch ange ∈income
28.571
¿
50
Ep ¿ 0.571
Interpretation: The overall revenue will drop as the price of the goods rises and the quantity
demanded declines.
Rubric: Demand Curve Illustration
CRITERIA PERFORMANCE INDICATORS POINTS
Design The illustration is correctly presented and 6
organized.
Labels All components are labeled accordingly. 4
Total 10
Rubric: Problem-solving
CRITERIA POINTS
Complete solution and correct answer 10
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Incomplete solution and correct answer 6
No solution and correct answer 3
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Rubric: Interpretations
CRITERIA PERFORMANCE INDICATORS POINTS
Provided pieces of evidence and
Content 3
supporting details
Organization Expressed the points in clear and logical
2
of ideas arrangement of ideas
TOTAL 5
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