Managerial Economics ~ Government & Business

8/7/2019 Managerial Economics ~ Government & Business

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Things to Ponder

If you are a business

man, do you think that

there are somegovernment policies that

seem to kill your

business?



Things to Ponder

If you are in the

government, how will you

effectively implement apolicy that seemed to get

more objections than

acceptance?



Managerial Economics:Managerial Economics:Government and BusinessGovernment and BusinessLynette B. Ysalina



Topics for discussion:

1. What is the role of the

Government in the two systems

of economy?




2. How does the Philippine

Government carry out the three

categories of planning?




3. How public control techniques

help attain the government¶s

goals of exercising somemeans of control on industries?



THE ROLE OF THE

GOVERNMENT IN THE

TWO SYSTEMS OFECONOM Y



Systems of Economy

Free-Market

Centrally

Planned



The Centr ally Planned Economy

is a system in which thecentral governmentcontrols industry such thatit makes major decisionsregarding the production

and distribution of goodsand services



Centr ally Planned Economy

Advantages

it is stable and safe for

investors all individual efforts are

focused towards acertain goal

long term financial

projects andinfrastructure can bemade without the fear of market downturn

Disadvantages

cannot manage

production accordingly. slow decision making,

less progressing, andprone to corruption

there is surplus labor

and materials there is not much room

for innovation



The Free Market Economy

is a system in whichthere is no economicintervention andregulation by the state,except to enforce privatecontracts and theownership of property




The fall of Communismclearly signals the rise of anera where market economy

dominates the manner of allocating resources.

Note




Through free competitionbetween vendors for theprovision of products and

services, prices tend todecrease, and quality tendsto increase.

Theory



Things to Ponder

Did the Free Market

Economy System helped?

Or did it harass thePhilippine businessmen?



Some Government Efforts

Improve transportation

network & facilities in

order to facilitate the flowof goods and services.



Some Government Efforts

Implemented monetary,

fiscal and foreign policies

that remove wild swingsin income and

employment and

moderate the pace of

inflation.



THE PHILIPPINE

GOVERNMENT & THE

THREE CATEGORIESOF PLANNING



3 Planning Categories



Rationalistic Management

Is the future-oriented calculation

and decision-making in which every

prudent individual or organizationengages;

the nature of planning used by

NEDA together with the variousgovernment agencies



Rationalistic Management

Through rationalistic

planning, businesses todayassume the continuation of certain economic policies for

longer periods of time,whether or not they supportsuch policies (e.g. taxation)

Note



Market Improvement & Replacement

Planning Used to help the government control

the tendencies of monopolies thru:

Policies that will improve theperformance of the market; and

Replacement of the market byoutright government take-over

or price deregulations.





Public Control Techniques

Taxation;

Franchises &

Licenses; Codes;

Inspections; and

Investigation &Publicity



Technical or Natur al Monopoly

arises where the largest supplier in an

industry, often the first supplier in a

market, has an overwhelming cost

advantage over other actual and

potential competitors.



Things to Ponder

What should be done with

technical monopolies?



Two Alternatives

Outright

governmentownership of industries

Public

regulation of privateindustries



Things to Ponder

Why is it wrong to always

apply the profitability

criterion (usually appliedto private firms) on

government-run

companies?



Things to Ponder

Cite instances wherein

the government prices its

service below the averagecost. How does it recover

the losses incurred?



The Anti-Trust Laws

A legislation enacted by the

government to regulate tr ade and

commerce by preventingunlawful restr aints, price-fixing,

and monopolies

It seeks to make businessescompete f air ly



The Anti-Trust Laws

Promotes

Competition

Controls

Monopoly



Neighbourhood Effects

Arise when certain goods or

services are produced in such a

way that they benefit or prejudiceother individuals who cannot be

charged or recompensed for the

benefit or harm



Goods & Services w/

Neighbourhood Effects

Public Works

o

RoadsoBridges

oPorts & Harbours

oNational & Public Recreation Parks Education, etc.



Neighbourhood Effects in Education

An Educated Person

Better paying jobs

Provides more congenial company

Less prone to commit offenses

Helps promote socio-economic progress




Beneficial Effects to

the Individual

EDUCATION

Beneficial Effects tothe Society

Sub-standard

ProfitOriented




POLICYPOLICY

Non-stock

Non-Profit

GOV¶T. POLICY




Beneficial Effects to

the Individual

EDUCATION

Beneficial Effects tothe Society

GOV¶T. POLICY

Non-stock

Non-Profit



Summary

In the Philippines, an individual has

the right to own capital goods or

means of production; However, private ownership of

capital goods is not an unlimited

right; it can be subject to stateregulation;



Summary

Only when there is clear evidence

of the inability of private business

groups to promote the commongood is the State justified in

engaging in business operation;



Summary

Every business activity has social

implications, and therefore must be

subject to some form of control tomake sure that its effects on society

are not harmful;



Summary

There are some categories of

industries in which the government

has to take a very active, if notexclusive, role;



Summary

These industries cannot operate

under competitive conditions

because uncontrolled competitionwould result in misallocation of

resources; and





End of presentation . . .



Reference & Supplements

Bernardo Villegas, Managerial

Economics

http://www.globalnewshighlight.com http://wikipedia.com

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Managerial Economics ~ Government & Business