ECONOMICS - The study of the principles and policies which determine the volume

of 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 Unemployment Economic Group 2. MICROECONOMICS The study of activity in individual markets studies the actions of individual firms and households. ISSUES EXAMINED: Poverty Discrimination Monopoly Agricultural Problems Big Business Empires Labor Unions ECONOMICS AS A SCIENCE - Tries to understand, explain, and discover the nature of things. PHYSICAL SCIENCES - Physics, Chemistry, Biology, and Geology deals with physical and natural phenomena. - Enables the society to better manage its resources.

MATH - Encountering equations, tables and graphs. Knowledge of Algebra enables economist to understand and manipulate equations. - Use of statistics and geometry as they collect and tabulate data. SOCIAL SCIENCES HISTORY Economist rely 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 and
efforts 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. Research and evaluation are needed in order to achieve the truth when stating certain problems of society. MANS ACTIVITIES - Individuals strive hard to accomplish their responsibilities, duties, and functions in society and to satisfy their needs. LIMITED RESOURCES - Scarcity is the main cause of conditions in an economy. This is the reason why man continues his struggle for survival. Economics is the blood that gives Life to every action of man in his society.

ECONOMICS

SOCIAL SCIENCE

LIMITED RESOURCES

CLASSICAL AND NEOCLASSICAL ECONOMICS

David Ricardo Adam Smith

Francois Quesnay

Thomas Malthus John Maynard Keynes

Karl Mark

EMERGENCE OF IDEAS ABOUT ECONOMICS Greeks and Xenophon OECONOMICUS OECONOMICUS instructional treaties on efficient management and leadership. PLATO REPUBLIC presented a blueprint for an economy. - Division of labor that creates mutual interdependence and further leads to reciprocal exchange. ARISTOTLE TOPICS AND RHETORIC Exchange as a way to satisfy individual and collective wants and not to a means for the state to accumulate wealth. MERCANTILIST Accumulation of Wealth.Raw materials should be used for domestic production.

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, and services in the different sectors of the economy. CLASSICIST - Led by Adam 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 equilibrium in economy through public spending and keeping balance among supply and market prices. Book: General Theory of Employment, Interest, and Money. Karl Mark Father of Communism - Believed that poverty of the proletariat is caused by the abusive practices of the rich capitalists that safe guard their own selfish interests their accumulation of wealth. - Government should manage all the industries and wealth in a country to achieve equality among the people. Book: Das Kapital FUNDAMENTAL EMPHASIS OR CONCERNS OF ECONOMICS 1. Is concerned with Production creation or addition of utility. - usefulness - Ability of a good to satisfy a want. 2. Is concerned with Distribution is the allocation of the total product among the factors of production. Ex. Apportionment of rent for land, interest for capital, wage for labor, a profit for the entrepreneur.

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 for another good. D. Industrial Age-the age wherein trade was very much known. E. Information Age-uncovers the origins, development, aims, means, and moral and political hypocrisy of the new class of professionals. PRE-COLONIAL PERIOD BARTER - goods and services are directly exchanged for other goods or services AGRICULTURE - main source of living. KAINGIN-slash and burn SYSTEM-land cultivation FOLLOWING CROPS NOTED BY LIVELIHOOD Rice Coconut Root Crops Sugarcane Hemp (Gabi, Ube, and etc.) Bananas Fruits Vegetables Sweet Potatoes Nobles and Datus also allowed members of the barangay to sell the land for a fee or rent. Rice- staple food. Fish, Carabeef-Viand Tuba-fermented from coconut and nipa palm. Basi-Sugarcane Fishing-important industry Pearl Fishing-common in Sulu. Gold Deposits (percales)-mining

a. Lumbering shipbuilding were flourishing industries b. Carpentry was also developed. Boats: Praus -Built for transportation Balangay Lapis Caracoa Weaving-Home industry Ex. Ilocano blankets, Table cloths, Bath robes, Pia cloth woven in Visayas. Sinamay-Hemp -Central Luzon Medrinaque-Bananas Trade with other Asian countries China, 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 ships Tondo trade center in the Philippines 2.) Arabs through the merchants from Borneo Formosa and Malaysia PERIOD OF EXPLOITAIONS AND RESTRICTIONS Spain colonized the Philippines Encomienda System came from the word Encomiendar take charge of Encomiendero given full authority Responsibilities: Defense - Protect the Encomienda from enemy attack Religious - Helping in missionary works Security Maintaining peace and order treating the people kindly. Encomienda Administrative unit for tax collection purposes. 1721 it was abolished GALLEON TRADE trade relations between the Philippines and Mexico was popularly known as Galleon Trade.

Advantages: 1.) The obras pias used the profits obtained from the trade to run and maintain hospitals, 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 from the 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 the country. 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. Products: Indigo, spices and sugar. PHILIPPINE ECONOMY DURING THE AMERICAN PERIOD Payne Aldrich Tariff Act (1902) Under this act: All Philippine exports except rice were allowed to enter American markets free of duty under certain quota limits, while American exports to the Philippines were unlimited and free of duty. Simmons Underwood Tariff Act (1913) The quota limitations on Philippine export products like hemp, sugar and tobacco were abolished. Privilege between U.S. and Phil. seemed equalized. Increases of employment rate - factories were established. Mining Industry one of the important industries in our country.

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 Act Polarized 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

LAWS OF CONSUMPTION 1. Law of Variety use different products will give satisfaction 2. Law of Harmony product that compliment each other 3. Law of Imitation Filipinos are great imitators. We feel happy while we imitate famous person. 4. Law of Economic Order have natural tendency in satisfying their needs. Give priority to the basic needs. 5. Law of Diminishing Marginal Utility refers to the satisfaction achieved in consuming goods and services 5. MORAL HAZARD IN CONSUMPTION occurs when an arrangement provides incentives for one party to engage in behavior that unexpectedly raises the cost or lower the benefits of the party.

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. 2. 3. 4. 5.

Make a complete shopping list of all the things you need to buy. Selecting the kind best suit your needs. Examine each article carefully before buying. Do not be influenced in buying something just because your neighbors have it. Keep in mind the cost of upkeep and repairs in the purchase of certain expensive 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 and styles. 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 actresses. 3. Emotional appeal of advertisements: Feeling of love and sympathy is evoked by advertisements showing pictures of babies who are crying. 4. Guarantees: Free repair of the product during the first year and the second yr. 5. Contests and Premiums. GUARDING AGAINST FRAUDS FRAUD - is an act of deceiving, cheating or swindling in order to get something by taking advantage of another person. 1. Fortune telling 2. Employment rackets 3. Talent rackets 4. Investment frauds 5. Economic frauds

BUDGET - is a plan for the efficient use of money, time or materials. 1. Income 2. Savings 3. 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 transaction until 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 Capacity Capital 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. 2. It leads to extravagance. 3. Inability to make payments means forfeiture of the commodity and payments made. 4. The price of a commodity is higher than on a cash basis. 5. Making monthly payments is difficult especially during hard times. 6. Installments may last longer than the items bought. SAVINGS refers to the excess in income over current disposable expenditure or the amount of income that is not spend or consumed. Why do people save? 1. Future purposes 2. Financing a childs education 3. Retirement 4. Contingencies like sickness, floods, typhoons, earthquake and other calamities. What is saving Leakage? - Sum received by households to the business sector.

CONSUMER PROTECTION 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 extra charge 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. CONSUMER RIGHTS The right to safety. The right to be informed. The right to choose. The right to be heard. The right to compensation against damage. The right to clean environment. The right to consumer education.

1. 2. 3. 4. 5. 6. 7.

1. 2. 3. 4. 5. 6.

CONSUMER RESPONSIBILITIES Pay the product as agreed upon. Be a wise consumer; avoid wastage to avoid shortage. Patronize your locally produced goods to help protect the local producers. Always ask for the receipts for all the goods that you buy. Report to the proper authorities any violation of the rights of the consumers. Monitor and be vigilant on price adding.

GOVERNMENT AGENCIES THAT HELP THE CONSUMERS: 1. National Pollution Control Commission (NPCC) Accomplishments: 1. Enforcement of laws against factories that cause pollution. 2. Issuance of PD 1181/Decree banning the pollutants from vehicles. 3. Apprehension vehicles with anti-pollutants device. 4. Air pollution control. 5. Water pollution control. 6. Emission source testing. 7. Information campaign towards control of all kinds of pollution.

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 set a price ceiling on prime commodities especially those bought by lower income groups. - Issue order for the cancellation of the license to do business by any personal or group found violating the provisions of the decree. Presidential Decree No. 1572 / Accreditation Decree Purpose of this is to ensure the public of reliable and competent services from the repair enterprise and to safeguard their interests against unethical, unfair and incompetent practices. The following must be answered: 1. What and how much to be produced? 2. How will it be produced? 3. For whom will it be produced? -

Importance of decision making: ALLOCATION - decision as to what resources to produce and for whom to produce. Allocation of natural resources in a capitalistic economy is usually done through PRICE SYSTEM. Allocation is determined by who is willing to pay for the products and how much he is willing to pay. Therefore, in a capitalistic economy price system, acts as the allocator of both the inputs and outputs of products. Importance of allocating resources: To be sure that the needs of the society are met to the optimum level. Can be made possible through the efficient utilization of limited resources.

Allocating the natural resources is our problem that the Philippine Economic System is seriously concerned with it. Equitable allocation of resources: Reasons: 1. Men move different needs despite the facet that they belong to the same species. Some species eat more and others eat less. 2. Consumption habits vary from family to family, community to community, nation to nation, people to people. 3. Ability to produce differs because of training, education, and work habits. Some people are more productive, others less should they get equal allocation of resources. 4. Tradition relies heavily on inference allocation or distribution of social output. Some rich families follow their familys profession, while business traditions dissuade certain classes from pursuing some kind of employment. The sons of rich seldom seek manual work, while the poor can aspire for managerial positions through education. Relationship between scarcity and allocation Scarcity-is one such problem that our society has to live with each day. -economic resources are limited. Allocation-designation of resources to a specific use or whenever possible to some other alternative uses.

Efficient management of resources - Is necessary in order to ensure the optimum utilization of scar economic resources for the employment of the greater number of people. Relationship between population and allocation Social indicators as direct measure of allocation 1. Growth 2. Literacy 3. 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. Overpopulation A 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 - One of the barriers of equitable allocation. - Colonies are exploited by the colonizers today. a.) Neocolonialism b.) Multinational Corporations Ex. Land Ownership Peasants-Landless Development and Retraining of Labor Force Literacy-most basic labor competency. Value of Investment in Human Capital Lesson we can learn from the Japanese is better than investment in physical capital human capital. - Literate, Skilled, Trained, and economically motivated. - Training

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 and innovation. 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 other services 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. Alternative Economic Systems Workable Patterns of Production and Distribution Economic System-is defined as the sum total of institutions and models of customs which have become permanent and become a part of the economic activities of a country. 4 Basic Economic Systems 1. Traditional or subsistence economy - Earliest form of economic system. - All economies are accomplished outside the market. Hunting and Farming - Found in underdeveloped areas. - Customs and Traditions highly influenced. - Accordance with traditional law. - No formal economic organization. - Do not have formal system of exchange or banking activities. Ex. Ifugaos, Mangyans, and Aetas

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 private investments. 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 Do you believe that if a land is used for real estate purposes it is immobile? 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 durable good which is to be returned to the owner after its use or a specified period of time. - Is the price paid for the use of land. 2 types of rent 1. Economic rent-refers to the share of the factor used in the production of goods and services. -land rent 2. Commercial rent-the payment for the use of a factory or building plus the land on which is stands. Determination of rent How much rent should be paid? Land in popularized needs - higher demand than sparsely in habited sites. Fertility is a determinant -in case of agricultural lands. Location Accessibility to transportation Peace and order situation

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 Executives Lawyers 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. Semi-skilled-requires less educational background and training experience than the skilled type of labor. 3.) Unskilled-does not necessarily require skills or training to perform the job requires physical strength and a sense of comprehension and common sense. Ex. Street sweepers Pier Stevedores Truck Helpers House Helpers Laborers Motives of Labor 1.) Attractiveness or the inherent appeal of the work itself. 2.) Public Adulations. 3.) Sense of duty. 4.) Pressure from the society. 5.) Competition

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 other currencies. 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

Factors: National Resources Level of Technology Education Training Number of Workers in the Labor Force Theories of Wage 1.) Subsistence Theory-Iron Law of Wage -Based on the Malthusian theory of population. -Also advocated by David Ricardo; an English economist. -Maintained that wage of labor tended towards a rate that merely enabled worker and his family to attend their basic needs. 2.) Wage-Fund Theory -expounded by John Stuart Mile for the money out of the goods produced to pay the wage, the employer should advice payments.

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 the employer can pay and still make a profit. These are: 1.) 2.) 3.) 4.) Use of collective bargaining to settle labor disputes. Freedom to organize labor unions. Prompt settlement of labor disputes. Discrimination of information regarding workers rights and obligations; and 5.) 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.

COMPARISON OF DIFFERENT ECONOMIC SYTEM

COMPARISON

CAPITALISM

SOCIALISM

COMMUNISM

FASCISM

* Decision making of Production * Ownership of Resources * Source of Information * Motives

* Decentralized Private Individual * Private Individual

* State and Private Individual * Collective

* Centralized

* Dictator

* State

* Dictator

* Market

* Market / Plan

* Planned

* Planned

* Profit

* Material

* Social

* Social