DE LA SALLE UNIVERSITY-DASMARINAS

College of Education
EDUC425

Economics
SEPT 2, 2023

Competencies

 Comprehend the basic principles of economics as well as the nature and

functions of the economic system

 Interpret economic concepts such as supply and demand, diminishing

marginal utility, income effect vs. substitution effect

 Apply concepts on the nature and behavior of cost and the theory of
production to current economic situations in the Philippines.

 Be familiar with Philippine economic conditions with respect to taxation,

land reform and cooperatives as well as the growth of the gross national
product.

Principles of Economics

 The word Economics was derived from the Greek word “Oikos” which
mean household; “Oikonomos” one who manages a household;
“Oikonomia” which means management of the household/family.

 Adam Smith is considered as the father of Economics when he published

his opus “The Wealth of Nations” in 1776.

 Economics is a study of how to allocate scarce resources to satisfy human

needs and wants.

 It’s a science that determines the different factors that affect the
nation/society’s economy.

 It studies the production, distribution and consumption of goods and

services.
  Its main concern is the management of the economy at the micro and
macro level.

Branches

 As a Social science, Economics is highly related with other specialized

fields specifically in History, Sociology, Anthropology, Psychology and
Political Science.

 Its has two main branches:

 Macroeconomics-deals with the economy of the nation or world economy

 Micro economics-deals with the economy of firms and household

Subfields:

 Political Economy- focuses on the effects of economics to politics and vice

versa.

 Development Economics-focuses on economic theories/principles that

determine economic development

Introduction: Concepts

 Resources- source of raw materials where goods and services are

derived.

 Goods- tangible things that directly satisfy human needs.

 Services-non-tangible things that directly satisfy human needs.

 Human needs and wants- biological/physical and psychological needs of

humans in society.

 Allocation of resources- proper use and distribution of resources.

 Production- creation of goods and services from raw materials.

 Consumption-the utilization of goods and services for human satisfaction.

Fundamental Questions in Economics

 What and for whom to produce?

 -Intended market and type of product
 How to produce?
-mode of production/production system
 How much to produce?
-quantity of product

Economic Systems

 Capitalism or market- Free market economy emphasis on private

enterprise.

 Socialism -state-run economy with limited private enterprise.

 Communism - state controlled economy.

 Mixed System - a free market economy with limited government control.

Circular Flow of Economic Activities

 Household- the smallest economic unit.

 Firms-firms process raw materials sourced from household.
 Income- amount earned in the circular flow (i.e. wages, rent, profit)
 Resources- raw materials provided for production (i.e. land, labor capital)

Law of Supply and Demand.

- The Law of Demand- provided all things remaining constant, as price

increases demand decreases; as price decreases , demand increases

- The Law of Supply-provided all things remaining constant, as price

increases, supply increases; as price decreases, supply decreases.

Factors of Production

Land- natural resources

Labor – manpower
Capital- machineries, financial capital, infrastructure
Entrepreneur- catalyst of business/owner

Theories of Production

- short run- type of production in which not all factors of production vary (fixed
and variable costs)
- long run-type of production where all factors of production vary

Law of Diminishing Returns

- In production, with fixed and variable inputs, beyond some point, each
additional unit of the variable input (without changing the fixed inputs)
yields smaller and smaller increases in outputs.

Market Equilibrium

- The market seeks the maximum benefits of both producers and

consumers

Market Structure

- Pure competition-numerous players

- Pure Monopoly-single player

- Monopolistic Competition-limited number of players

- Oligopoly- few players

- Duopoly- two players

Business Organizations

 Single Proprietorship-business owned by a single person.

 Partnership-business owned by more than one person/partner.

 Corporation-business owned and operated by a group of investors called

stockholders.

 Cooperatives- are registered associations of at least 15 persons who

voluntarily pool their resources consisting of money, labor, or talent or all of these
together to build capital and work together to raise incomes. (Sicat. 2003)

Measuring Economic Growth

 Economic growth –measured in aggregate terms (i.e. GDP etc)

 Economic development-successive and continuous economic growth

  Gross Domestic Product (GDP)-all goods and services produced by a
country domestically in a particular year .

 Balance of Payments (BOP)- total transaction of the country with the rest
of the world.

 Balance of Trade-the difference between exports and imports.

 Gross International Reserve (GIR)-total foreign exchange reserves of the

country.

 Poverty-is defined as the lack of material possessions like wealth and

basic needs like food, clothing and shelter.

Economic Planning, Monetary and Fiscal Policy

 Government’s way of intervening in the national economy.

 Monetary Policy- manages and regulates the financial sector.

 Fiscal policy-through government spending and taxes, this is a tool used

by the government in regulating the economy

Taxation, Land Reform and Cooperatives

 Taxation
- The process or means by which the sovereign through its law-making
body raises income to defray the necessary expenses of government. (De
Leon. 1993)
-
Purpose of Taxation

- To raise funds for the operations of the government

- To control swings in the business cycle (inflationary periods and
recession)
- To bring about efficiency (taxes on pollution and the “bads”) (Introductory
Economics. 1999)

Types of Tax System

- Progressive-based on the person/firms ability to pay

- Regressive-not based on the person/firms ability to pay
- Proportional- uniform tax rates on all level

Types of Taxes
 - Direct taxes-taxes imposed based on income (i.e income tax)
- Indirect taxes-taxes not based on income (i.e. value added tax)

Agrarian Reform

- is concerned with the total development of the farmers -- economic, social

and political transformation. (Fajardo. 1990)

Socio-economic implications

- Reduces social tensions

- Improve economic life in the rural areas
- Facilitates the growth of the economy (Sicat. 2003)

Comprehensive Agrarian Reform Program

 CARP is a social justice and poverty alleviation program which seeks to

empower the lives of agrarian reform beneficiaries (ARBs) through
equitable distribution and ownership of the land based on the principle of
land to the tiller. (www.dar.gov.ph)

CARP’s Objectives

- To promote social justice

- To move the nation toward sound rural development and industrialization
- To establish owner-cultivatorship of economic-sized farms as basis of the
Philippine agriculture (Pagoso. 2004)