1st Gradin Notes in ECONOMICS

8/3/2019 1st Gradin Notes in ECONOMICS

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ECONOMICS - The study of the principles and policies which determine the volumeof output of goods and services, level of employment and income, and the manner in

which the price system functions and income distributed.- Deals with the activities of people in making a living or in

satisfying human wants.

-

Greek Word OIKONOMIA Household Management

2 Basic Facts

1. The limited resources available.

2. The unlimited needs of members of the household.

BASIC ECONOMIC QUESTIONS:

1. What shall be produced? (OBJECTS)2. How much shall I produce? (QUANTITY)

3. How shall goods and services be produced? (MANNER)4. For whom shall the goods and services be produced? (RECEPIENT)

DIVISIONS OF ECONOMICS:

1. MACROECONOMICS The study of the economy as a whole answers these

questions.

a.) What factors determine the total level of production?

b.) Should the government increase taxes?c.) How will an increase in money supply affect the economy of the nation?

ANALYZE THE FOLLOWING:

Inflation International Finance


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Inflation International Finance

MATH

- Encountering equations, tables andgraphs. Knowledge of Algebra enableseconomist to understand and manipulate equations.

- Use of statistics and geometry as they collect and tabulate data.

SOCIAL SCIENCES

HISTORY Economistrely on historical data particularly economic data.

SOCIOLOGY Information on human social relations or group life helps

economist understand the interaction among various economic units.- Evaluate how the types of social organization affect economic

growth.

PSYCHOLOGY Known of why humans act the way they do, and how they

learn and change is important to the economist.

- Individuals economic decisions.

ETHICS Understanding human conduct, character, and values.

- Guides economist to make a policy recommendations.

- Values judgement to come up with economic goals.

ECONOMICS is a social science that deals with the study of mans activities andefforts to use the limited resources for the satisfaction of the unlimited needs of man.SOCIAL SCIENCE The study about SOCIETY.

SOCIETY is a group of people who have common objective, race, goals, and interest.


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SOCIAL SCIENCE LIMITED RESOURCES

CLASSICAL AND

NEOCLASSICAL

ECONOMICS

Adam Smith

David

RicardoFrancois

QuesnayJohn Maynard

Keynes

Thomas

MalthusKarl Mark

ECONOMICS


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PHYSIOCRATS

Francois Quesnay believed in the importance of nature in the economic

development of a country.- Man should use natural resources wisely and properly to attain the

maximum advance from it.

TABLEAU ECONOMIQUE Illustrated the flow factors of production, goods, andservices in the different sectors of the economy.

CLASSICIST

- Led byAdam Smith Father of Modern Economics

Book: An Inquiry into the Nature and Causes of the Wealth of

Nations.- pointed out the importance of specialization

in achieving industrial nation in the economy.Laisser Faire or Let Alone Policy

- The government should not interfere with the activities of man

towards the free market.David Ricardo Law of Diminishing Marginal Returns

- Increasing number of people will drive man to cultivate even

the idle necessities in life.- This will happen due to the depletion of fertile lands.

Thomas Robert Malthus Malthusian Theory

- Effects of the rapid increase of population.

Book: An Essay on the Principles of Population

- Stated that population increases rapidly than the supply of food

which can cause famine.

John Maynard Reynes Government plays a significant role in maintaining equilibriumin economy through public spending and keeping balance among supply and market

prices.

Book: General Theory of Employment, Interest, and Money.


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3. Is concerned with Consumption is the use of a good or service.

-considered as the most important function in

economics because it is the ultimate end of economic utility.4. Is concerned with Goods and Services economic goods come in a form of wealth

or income.

-economic services are part of income.5. Is concerned with Public Finance study of expenditures and revenues of the

government raises money through taxation investments and borrowing.

ECONOMIC DEVELOPMENT / PHILIPPINE THROUGH THE YEARS

STAGES OF ECONOMIC DEVELOPMENT

A. Primitive Stage - people live through hunting and fishing.

B. Feudal System - cannot afford a solution for a crisis.

C. Trade and Towns trading goods to other countries or people. In exchange foranother good.

D. Industrial Age-the age wherein trade was very much known.

E. Information Age-uncovers the origins, development, aims, means, and moral andpolitical hypocrisy of the new class of professionals.

PRE-COLONIAL PERIOD

BARTER - goods and services are directly exchanged for other goods or servicesAGRICULTURE - main source of living.

KAINGIN-slash and burnSYSTEM-land cultivation

FOLLOWING CROPS NOTED BYLIVELIHOOD


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a. Lumbering shipbuilding were flourishing industries

b. Carpentry was also developed.

Boats: Praus -Built for transportationBalangay

Lapis

CaracoaWeaving-Home industry

Ex. Ilocano blankets, Table cloths, Bath robes, Pia cloth woven in Visayas.Sinamay-Hemp

-Central Luzon

Medrinaque-Bananas

Trade with other Asian countriesChina, India, Siam (Thailand), Cambodia, Java, Sumatra, Borneo, and

parts of Malaysia and West Asia

They brought:Porcelain wares, tin, iron, gongs and exchange these with Philippine gold,

betel nuts, pearls and seashells.

1.) Chinese earliest traders

SUNG DYNASTY

Trade: Wholesale

Junks Chinese shipsTondo trade center in the Philippines

2.)Arabs through the merchants from Borneo

Formosa and Malaysia

PERIOD OF EXPLOITAIONS AND RESTRICTIONS


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Advantages:

1.) The obras pias used the profits obtained from the trade to run and maintainhospitals, orphanages, and other charitable projects.

2.) The Galleon Trade brought instruments used to help the Philippines in the

development of science.

Disadvantages:

1.) The official neglected the countrys agricultural and industrial sectors

2.) Most Filipinos suffered as a result of the trade, several deaths were reported fromthe place where the Polistas cut down timber to build Galleon.

1815 It was abolished.

TOBACCO MONOPOLY (1782 1885)

- Purpose: increase countries income- Negative : compulsory labor

- Filipinos were cheated

ROYAL COMPANY OF THE PHILIPPINES

- Trading Company

- To develop and promote direct trade between the colony and

Spain and at the same time tap the natural resources of thecountry.

Special Privileges:

- Exclusive control of the trade between the Phil and Spain.- Tax free admission of goods from the Philippines to Spain.

- Allowing the companys ships to trade directly with Asian

countries.


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Negative effects:

- Most of the Philippine exports went to American markets.

- Foreign markets were neglected.

IMPACT OF AMERICAN OCCUPATION

1.) Filipino First of Garcia

Granting party rights to the Americans

Retail Trade Nationalization ActPolarized the Filipinos and awakened them to the reality that foreigners had been

exploiting our natural resources.2.) The economic rulings on party rights, retail trade nationalization and other

opinions led to the end of the party rights agreement.3.) Growth of labor unions able to work for labor laws that benefited the workers.

4.) The termination of the Laurel-Langley Agreement ended Philippine dependence

on American market and investments.

POST - WAR ECONOMY

We suffered economic setbacks during the war. The war devastated Manila,

Corregidor and other strategic sites.

War devastated Manila. Estimated damages : P 582,500,000.00

WANT

The consumer is always right


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HOW TO MAKE AGOOD BUY

- Shopping is an art and there are fundamental principles which a consumer

should master to obtain the best quality of a merchandise at the lowest price.- To become a good buyer you must analyze your own particular requirements.

- You must choose a goal and know what you want most for your money.

- Plan ahead.- Save money.

CHOOSING THE RIGHT KINDS OF GOODS

1. Make a complete shopping list of all the things you need to buy.

2. Selecting the kind best suit your needs.3. Examine each article carefully before buying.

4. Do not be influenced in buying something just because your neighbors have it.

5. Keep in mind the cost of upkeep and repairs in the purchase of certainexpensive items.

6. Set a price range or limit to your purchases.

7. Compare items in several stores before you pay to get an idea about prices andstyles.

8. Consider the utility of the good.

BEWARE OF FALSE ADVERTISEMENT

Example:

1. Attractive advertisements: Bright light, multiple colors, big bold letters and

pictures.

2. Testimonials: Quoted statements of well-known people such as actors and


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BUDGET - is a plan for the efficient use of money, time or materials.

1. Income

2. Savings3. Food

4. Clothing

5. Shelter 6. Welfare and Development reading materials, education, medical and dental

bills, medicines, toilet articles, trips, movies, church obligations and gifts.

PROJECT: Saving Account in the Bank

CREDIT - comes from the Latin word cadere which means to believe.

- Represents promise of payment for goods bought in a business transactionuntil it has been settled through the issuance of money by the borrower: - promissory

notes, bank loans, charge accounts, installment plan.

TO OBTAIN GOOD CREDIT RATING:

Character

CapacityCapital

ADVATAGES OF USING CREDIT:

1. It enables one to buy something that will last for years.2. One can buy an item which is indispensable and not a luxury.

3. One can buy goods without interest.

4. It forces one to save money.

DISADVANTAGES IN USING CREDIT:

1. It encourages indebtedness.


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C O N S U M E R P R O T E C T I O N

AREAS OF ABUSE AGAINST WHICH CONSUMERS NEED PROTECTION:

1. Monopolies which determine the price, the quantity, and the quality of products.

2. Misleading or false advertising.3. Misleading or false personal selling practices such as termite inspection leading to

home treatment.

4. Excessive interest rates and carrying charges as when retail stores collect extracharge for delivering goods.

5. Marketing harmful products.6. Deceptive labeling/packaging as in the case of a mixture of good and bad fruits.

7. Environmental pollution caused by toxic wastes from factories.

C O N S U M E R R I G H T S

1. The right to safety.

2. The right to be informed.

3. The right to choose.4. The right to be heard.

5. The right to compensation against damage.

6. The right to clean environment.

7. The right to consumer education.

C O N S U M E R R E S P O N S I B I L I T I E S

1. Pay the product as agreed upon.

2. Be a wise consumer; avoid wastage to avoid shortage.

3. Patronize your locally produced goods to help protect the local producers.


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2. Food and Drug Administration (FDA)

3. Bureau of Domestic Trade (BDT)

4. Product Standard Agency (PSA) - Jan. 1, 1983;- introduce the metric system;

- implementing standard requirement of each product.

CONSUMER RELATED LAWS:

Act No. 3940

An act to penalize fraudulent advertising, mislabeling, or misbranding of any products,

stocks, bonds, etc.

Department. Administrative Order No. 4 Series of 1971

- August 16, 1972

- All sales promotion campaign shall have definite duration to be

announced in all kinds of media together with the termination and

deadline of the submissions of entries.

Republic Act No. 71 / Price Tag Law

Practice of affixing price tags on all articles on sale at retails is required.

Presidential Decree No. 1674 / Price Stabilization Law


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Efficient management of resources

- Is necessary in order to ensure the optimum utilization of scar

economic resources for the employment of the greater number ofpeople.

Relationship between population and allocation

Social indicators as direct measure of allocation

1. Growth

2. Literacy3. Life Expectancy-average age expected

4. Infant Morality-infant deaths per 1000 live births

Causes of inequitable allocation of resources

1. Lack of money, technology, and Human Capital.

a.) Breaking the cycle of poverty is one of the most serious economic

problems facing developing countries.b.) Less progressive countries is close to subsistence level.

c.) No economic surplus.

d.) Productivity is low.2. Lack of literature and skilled labor

This is the common cause of inequitable allocation of wealth deprived of

educational opportunities.

3. OverpopulationA big percentage of manpower. Asset

Increased number of months to feed is a liability.

Equitable allocation of resources through family planning

Exploration of the Labor Force


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The governments role in the allocation of resources

1. Regulations on monopolies.

2. Public utility regulations.- The public service condition is tasked to regulate transportation and

communication.

3. Deregulation- is the process of eliminating government regulations and reducing the scope

and power of regulatory bodies.

a.) Regulations sometimes discourage improvement in efficiency andinnovation.

b.) Any increase in profit is eliminated by offsetting rate reaction.Ex. Oil deregulation law

4. Production of goods and services-consumer sovereignty in a market consumer decides how resources will be

allocated.

Government provides: Mail service, Infrastructure, Defense, Schools, and otherservices

Government-uses tax money

- goods and services:a.) libraries, museums

- Enrich our culture.

- Social values

Consumers cannot afford them.5. Consumer work, and environment protection

Government Agencies-protecting citizens.

- Protection of migrant workers food and drug administrations,social security act and medicine.

- Command and control regulations.


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2. The welfare state has democratic political institutions.

3. The government usually owns public institutions as transportation and communication,

basic industries as steel, oil, and other requires indicative planning guides privateinvestments.

4. The system cares for the basic needs of the citizens from the cradle frame.

Page 102 - alternative economic system.

PRODUCTION

- Is the creation of goods and services that will satisfy human needs

and wants.Students will give an example.

4 indispensable factors

-Land, Labor, Capital, Entrepreneurial skill

1. Land

Essential Characteristics

1. Land is limited-it does not increase in time.

2. Land is fixed-can never be transferred.

3. The value of land appreciates and depreciates-Increase value - growth of population and improvement of infrastructure.

-Decrease value soil erosion

- Infertility- Deteriorating peace and order.

Rent

- Refers to the payment made by a person to another for the use of a

Do you believe that if a land is used

for real estate purposes it is

immobile?


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Rent prices perform 3 functions:

1. Promote the efficient maintenance of existing building and stimulate the

construction of new ones.2. Allocate existing scarce resources among competing claimants and

3. Determine the ratio of the use of existing resources by current demands.

Rent control and its effects

Rent controls have discouraged the construction of new rental units because rent controls

have artificially depressed the most important long term determinant of profitability

which is rent.

Rental rates below equilibrium levels, building, and home owners

Cost of maintenance, taxes, repairs and other improvements which exceed rental receipts.= abandon their property.

LABOR

-human factor

Human efforts, either mental or physical used in the production of goods and services.

Note: Those directed at acquiring income can be considered as labor.

Classification

1.) Mental-use of mental prowess in the production.

Ex. Business ExecutivesLawyers

Teachers

Accountants

Architects-demands a longer preparation at a higher level of education.

2.) Physical Labor-physical aspect of human faculty.

Classification:Skilled-electricians, machinists, plumbers, mechanics

-it requires a definite amount of training and skills acquired from

vocational studies and actual exposure.


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Wage

-price paid for personal service of production.

-share of labor in production.-interchangeable with salary.

Computed by:

-piece or unit of work on an hourly, daily, or weekly basis.

Different Kinds of Wage

Time Wage-wage paid based on the length of time.Piece Wage-Paid according to the number of items paid.Fees-Professional fees lawyers or doctors.

Commission - Salesmen.Bonuses

Money Wage-refers to the actual amount received in terms of pesos and or othercurrencies.

Real Wage-refers to the amount of goods and services that can actually be purchased with

the money wage received.

Free Income of Labor

Ex. Educational Services (Public Schools)Libraries

Livelihood Training Centers

Free Health and Medical Services

Recreational Facilities-parks

-Security system (SSS) (GSIS)

What Determines Wage

-determined by supply and demand.

Labor Wage


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3.) Marginal Productivity Theory-This theory advocated that an employer is willing to

raise wage based on the contribution to the entire production process of the last worker.

4.) Bargaining Theory of Wage-Forerunner of labor unionism.-Proposed by John Davidson; an American Economist.

- The theory maintained that wage is determined on the

market between sellers (workers) and buyers (employers) of labor.

If the workers will organize, they maybe able to force wage up to the maximum which theemployer can pay and still make a profit.

These are:1.) Use of collective bargaining to settle labor disputes.

2.) Freedom to organize labor unions.3.) Prompt settlement of labor disputes.

4.) Discrimination of information regarding workers rights and

obligations; and5.) Efforts towards maintenance of peace in the industry.

Labor Union-Labor code guarantees the rights of laborers to organize a labor union.-is an organization which aims to secure from management better working

conditions and more benefits, and to look after the social and moral welfare of its

members.


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COMPARISON OF DIFFERENT ECONOMIC SYTEM

COMPARISON CAPITALISM SOCIALISM COMMUNISM FASCISM

* Decision making * Decentralized * State and * Centralized * Dictatorof Production Private Individual Private Individual

* Ownership of * Private Individual * Collective * State * DictatorResources

* Source of * Market * Market / Plan * Planned * PlannedInformation

* Motives * Profit * Material * Social * Social


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1st Gradin Notes in ECONOMICS