APPLIED

ECONOMICS
LIZA BALDO-ALVARADO
ASSOCIATE PROFESSOR III
BICOL UNIVERSITY-CBEM
DEPARTMENT OF ECONOMICS

ECONOMICS
IS THE SOCIAL SCIENCE THAT STUDIES
THE CHOICES THAT INDIVIDUALS,
BUSINESSES,
GOVERNMENT,
AND
ENTIRE SOCIETIES MAKE AS THEY COPE
WITH SCARCITY AND THE INCENTIVES
THAT INFLUENCE AND RECONCILE
THOSE CHOICES.
(BADE AND PARKIN. PRINCIPLES OF ECONOMICS)

APPLIED ECONOMICS
Is the study of observing how theories work in
practice.
The application of economic theories and
principles to real world situations with the
desired aim of predicting potential outcomes.
(SOURCE: INVESTOPEDIA)
Alvarado, Liza B.

TEN PRINCIPLES OF ECONOMICS

How people make decisions
1.People face trade-offs
2.The cost of something is what you give up
to get it
3.Rational people think at a margin
4.People respond to incentives
Alvarado, Liza B.

 HOW PEOPLE REACT

5. Trade can make everyone better off
6. Markets are usually a good way to
organize economic activity
7. Governments can sometimes improve
market outcomes
Alvarado, Liza B.

 HOW

THE ECONOMY AS A WHOLE

WORKS

8. A countrys standard of living depends on

its ability to produce goods & services

9.Prices rise when the government prints too
much money
10. Society faces a short-run trade-off
between inflation and unemployment
(Gregory Mankiw. Principles of Economics)
Alvarado, Liza B.

SOME BASIC ECONOMIC PROBLEMS IN

THE COUNTRY

Macroeconomic level
Poverty
Unemployment
Microeconomic level
Traffic congestion in Metro Manila
Garlic shortage
Alvarado, Liza B.

POVERTY
As of first semester of 2015, 26.3 percent or roughly 26
million of the 100 million Filipinos were living below the
povery line
(source: Philippine Statistics Authority,

formerly NSO)

during this period, a family of five

Needed on the
average
PhP 6,365/ month
PhP 9,149 / month
Alvarado, Liza B.

to meet familys

Basic food
Basic food & non-food
needs

 POVERTY IS A STATE IN WHICH A

HOUSEHOLD`S INCOME IS TOO LOW TO
BE ABLE TO BUY THE QUANTITIES OF
FOOD, SHELTER, AND CLOTHING THAT
ARE DEEMED NECESSARY.

Threshold is the point at which a

physiological or psychological effect
begins to be produced.
Alvarado, Liza B.

AS OF 2015, 1ST QUARTER

PhP 6,365/month
Monthly Food
threshold
Alvarado, Liza B.

PhP 9,140/month
Poverty threshold

The PSA releases statistics on poverty

among families a crucial social
indicator that guides policy makers in
their efforts to alleviate poverty.
Alvarado, Liza B.

SOME POLICIES TO REDUCE POVERTY

1. Welfare
2. Minimum wage laws
3. Negative income tax
(G. Mankiw. Principles of Economics)
Alvarado, Liza B.

1. WELFARE

government programs that

supplement the incomes of the needy

Alvarado, Liza B.

1. Conditional Cash transfers (4Ps)

Pantawid Pamilya Pilipino Program
direct subsidy

Center-piece poverty alleviation

program under Aquino
Administration
2014 budget was P62.61 Billion
Nutrition, education & healthrelated goals

Formerly Ahon Pamilyang Pilipino

in 2008 w/ a budget of P1.2
Billion
Alvarado, Liza B.

2. Kalahi (Kapit-bisig Laban sa

Kahirapan) program
started with Pres. Gloria M.
Arroyo
direct service delivery
DSWD in partnership with
LGUs
Improvement of some
infrastructure projects in the
barangay like water supply,
sanitation, barangay
schools, etc.

DUTERTE ADMINISTRATION
TARGET: Reduce poverty rate between 1.25 to
1.5 percentage points a year (in 6 years = 9
percentage points.
- 12 agencies to deal with poverty in his first EO
CDA, Housing &Urban Devt Coord. Council, Natl
Anti-Poverty Commission, NFA, PCA, TESDA,
NYC, among others.
Alvarado, Liza B.

 Full implementation of the Reproductive Health

Law

Increase of contraceptive prevalence rate

to 70%
- NEDA chief Ernesto Pernia
Prioritize projects outside Metro Manila,
In 1st year farm-to-market roads and
schools that are easier to complete quickly
Alvarado, Liza B.

OTHER PROGRAMS:

Basic education provision (K to 12

program)
Universal Philippine Health Insurance
program (Philhealth) coverage for all
Filipinos (among others, upgrading
government hospitals)
Alvarado, Liza B.

2. MINIMUM WAGE LAW

Is a government regulation that makes hiring labor for less
than a specified wage illegal. (Robin & Bade, Principles of
Economics)

Wage rate

UNEMPLOYMENT

(PhP per day)

MINIMUM WAGE
ILLEGAL
REGION

D
Quantity (thousands of workers)

Alvarado, Liza B.

1990, THE GOVERNMENT ADOPTED A REGIONAL

MINIMUM WAGE RATE SETTING.
(GERARDO P. SICAT. VOL. III-102)
AIM OF THE MINIMUM WAGE IS TO BOOST THE
INCOMES OF LOW-WAGE EARNERS
FIRMS AND WORKERS ARE NO LONGER PERMITTED
TO OPERATE AT THE EQUILIBRIUM POINT IN THIS
MARKET BEC. IT IS IN THE ILLEGAL REGION.

BUT IT CANT TELL EMPLOYERS HOW MANY

WORKERS TO HIRE.
Alvarado, Liza B.

2. NEGATIVE INCOME TAX

A TAX SYSTEM THAT COLLECTS REVENUE FROM
HIGH-INCOME HOUSEHOLDS AND GIVES SUBSIDIES
TO LOW-INCOME HOUSEHOLDS.
HIGH-INCOME FAMILIES WOULD PAY A TAX
BASED ON THEIR INCOMES. LOW-INCOME
FAMILIES WOULD RECEIVE A SUBSIDY. IN OTHER
WORDS THEY WOULD PAY A NEGATIVE TAX.

(G. MANKIW)
Alvarado, Liza B.

NORMAL (SCHEDULAR) TAX RATE ON INDIVIDUAL TAXPAYER

(SEC. 24 (A) OF NIRC- NEW INTERNAL REVENUE CODE)
Over

But not over

Rate

P 10,000

5%

P 10,000

P 30,000

P 500 + 10% of the excess over P10,000

P 30,000

P 70,000

P 2,500 + 15% of the excess over P 30,000

P 70,000

P 140,000

P 8,500 + 20% of the excess over P 70,000

P 140,000

P 250,000

P 22,000 + 25% of the excess over P 140,000

P 250,000

P 500,000

P 50,000 + 30% of the excess over P250,000

P 500,000
Alvarado, Liza B.

P 125,000 + 32% of the excess over P 500,000

3 INHERENT POWERS OF THE STATE

1. Police power
2. Eminent domain power
3. Taxation power
Question: Which is the strongest among
these 3 inherent powers of the state?
Alvarado, Liza B.

 PHIL. IS ONE OF THE COUNTRIES IN

SOUTHEAST ASIA WITH THE HIGHEST TAX
RATES.
DUTERTE ADMINISTRATION PLANS TO REDUCE
INDIVIDUAL AND CORPORATE TAX RATES.
DOF (DEPT. OF FINANCE) PROPOSED TO JACK
UP THE VAT FROM 12 TO 14 PERCENT
(PDI, JUNE 21, 2016, B-8)
Alvarado, Liza B.

VALUE ADDED TAX IS AN INDIRECT

TAX.

 VAT EXEMPTIONS THAT WILL BE KEPT ARE

THOSE COVERING SENIOR CITIZENS AS
WELL AS PWDS.
THE PHIL. PRACTICES PROGRESSIVE
TAXATION, THESE TAXES THAT PLACE A
GREATER BURDEN ON THOSE BEST ABLE TO
PAY AND LITTLE OR NO BURDEN ON THE
POOR. EXAMPLE IS THE INCOME TAX ON
INDIVIDUALS.
Alvarado, Liza B.

METRO MANILA TRAFFIC CONGESTION

(MICROECONOMIC PROBLEM)

MM, worst traffic on earth (Global evaluation

conducted by WAZE, a GPS-based navigation app.
(Lara Tan, CNN Phil. Oct. 2, 2015)
Longest minutes spent commuting from home to
office with an average time of 45.5 minutes
Cost of traffic in MM is P2.4 Billion a day

(JICA 2013)
In 2030, it will rise to P6.0 Billion a day if no
intervention is done today
Alvarado, Liza B.

METRO MANILA 2010 POPULATION IS 11.8 MILLION

12% of the population in the Philippines
Total Land area is 638 sq. kilometers (0.21% of the
total land area of 300,000 sq. km.
Population density of 42,857 people per square
kilometer.
85% of the air pollution in MM comes from vehicles
Manila port is a major contributing factor to traffic in
Metro Manila
Alvarado, Liza B.

ONE OF THE TOP 5 PROPOSED HOUSE BILLS

To grant emergency powers to the president to
address the traffic problem in Metro Manila.
Other solutions to solve the congestion:
Revival of rail cargo project (Railway solution)
-To facilitate efficient cargo transport as well as
commuter relief
Allow government to secure property & right of way
within private villages (Eminent Power)
Terminals of PUVs and ambulant vendors will be
removed along the national highway
Alvarado, Liza B.

 Odd-Even scheme
Tow illegally-parked vehicles

Regulating car sales and requiring proof of parking space

Public-private partnership (PPP) program

- plan to build an international airport on reclaimed

land along Manila Bay in cooperation with two business
tycoons, Ramon S. Ang and Manuel V. Pangilinan.
- estimated 1,600 hectares of reclaimed land
- similar to the international airports of Hong Kong,
Seoul, Osaka, Nagoya, Macau and Doha
Alvarado, Liza B.

POSSIBLE SOLUTIONS TO SOLVE PROBLEMS ON

POVERTY, UNEMPLOYMENT AND TRAFFIC
CONGESTION IN METRO MANILA
to execute projects in the countryside and

thereby create jobs there

lowering the birth rate to three children for
the poorest quintile of couples
Alvarado, Liza B.

GARLIC SHORTAGE
Garlic Cartel Scam
Cartel is a combination of firms that acts as if it
were a single firm; it is a shared monopoly.
In January to July 2014, garlic prices spiked
alarmingly prompting the Department of Justice to
direct the National Bureau of Investigation (NBI) to
conduct an investigation into possible profiteering,
hoarding and cartel-like activities.
Alvarado, Liza B.

VEGETABLE IMPORTERS, EXPORTERS AND

VENDORS ASSOCIATION OF THE PHILIPPINES,
INC. (VIEVA), A GROUP OF GARLIC TRADERS
AND IMPORTERS, HEADED BY CRUZ
MONOPOLIZED THE SUPPLY OF GARLIC AND
DICTATED MARKET PRICES.
THE OFFICE OF THE OMBUDSMAN IS
CURRENTLY INVESTIGATING DEPARTMENT OF
AGRICULTURE SECRETARY AND SEVERAL
BUREAU OF PLANT INDUSTRY (BPI) OFFICIALS
Alvarado, Liza B.

S2

P2

S1

P1
D
Q

DECREASE IN SUPPLY BROUGHT ABOUT BY LESS SELLERS OF GARLIC

One of the Parameters of Supply decrease in the number of sellers

Alvarado, Liza B.

SOURCES: BOOKS
BADE, ROBIN & PARKIN, MITCHAEL. FOUNDATIONS OF ECONOMICS.
3RD ED. PEARSON, 2007
MANKIW, N. GREGORY. PRINCIPLES OF ECONOMICS. 6TH ED.
CENGAGE LEARNING, 2012
MARCELINO, RAMON BENEDICTO, ET. AL. PRINCIPLES OF
ECONOMICS ( W/ TAXATION & AGRARIAN REFORM) SIMPLIFIED.
NATIONAL BOOK STORE, 2011
SICAT, GERARDO P. PHIL. ECONOMIC & DEVELOPMENT ISSUES VOL.
3 ANVIL PUBLISHING, PASAY CITY, 2003
Alvarado, Liza B.

PERIODICALS

PHILIPPINE STATISTICS AUTHORITY (PSA) MARCH 18, 2016, POVERTY INCIDENCE AMONG
FILIPINOS REGISTERED AT 26.3%, AS OF FIRST SEMESTER OF 2015; PSA-2016-PHDSD-018

PDI, PAGE B-4, JULY 7,2016 (SOLUTIONS TO TRAFFIC WOES PROPOSED)

PDI, PAGE A5, JULY 7, 2016 (CHARTER CHANGE, 5 OTHER BILLS TOP HOUSE AGENDA)

PDI, PAGE A-1, JUNE 21, 2016 (EDSA TRAFFIC JAMES: RODY EXEC EYES EXTRA POWERS)

PDI, PAGE B-8, JUNE 21, 2016 (DUTERTE GOVT COMMITS TO CUT INCOME TAX RATE)

PDI, PAGE A-14, JUNE 20, 2016 (WHEN RIVALS COOPERATE)

MB, PAGE 1, JULY 7, 2016 (2 YEAR EMERGENCY POWERS FOR TRANSPORT REFORM URGED)

PHILSTAR.COM. JUNE 15, 2016 BY ROSETTE ADEL (OMBUDSMAN PROBES DA CHIEF OVER GARLIC
CARTEL SCAM)

Alvarado, Liza B.

WEB
http://marketbusinessnew.com/financial-glossary/applied-economics/

http://psa.gov.ph/tags/povertyhttps://psa.gov.ph/content/poverty-incidence-among-filipinosregistered-263-first-semester-2015-psa
http://bigstory.ap.org/article/01c15e8b65f64c9dbb9ff44c7daab356/duterte-team-aims-30percent-cut-philippine-poverty
File:///C:/Users/user?Downloads/Peoples%20Budget%202016%20(web%20version).pdf
http://www.philstar.com/headlines/2016/06/21/1595083/duterte-aims-pluck-9-m-pinoyspoverty

Alvarado, Liza B.

THANK YOU