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C H A P T E R 1
C H A P T E R 1 BY GROUP ONE C H A P T E R 1

01. Economic Growth

ECO
006
Looking Back
02. Productivity

Chapter 03. O - Ring Theory of

Development
• Economics
- as a social science
CHAPTER
ONE 1 04. Solow Model
- comes from a Greek word "Oikonomos"
Economic 05. Economic Development
in the Philippines - "Oikos" which means household and
Growth and 06. Economic Growth and
"nomos" which means management.

Development
the World

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Looking Back Basic Macroeconomics Introduction

• Branches on Economics Questions :
- Microeconomics
- also known as the economics of individual activities
and entities.
What determines the standard of living?
Economic Growth
- law of supply, demand,equilibrium and diminishing
marginal utility
What determines the cost of living?
vs
- Macroeconomics
Why does our economy fluctuates?
Economic
- economics of the entire nation
- Gross domestic product (GDP) as the basic
Development
measurement to determine the nation's income

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Introduction Economic Growth vs. Economic Development Standard cost of living

Is the levelof consumption that peole
enjoy, on the average, and is measured
Economic Growth Economic Development by the average income per person Economic
• percentage change • welfare, a measure Development
in GDP of the well - being
of a country Cost of living In 2013, the World Bank Group adopted two
• boosts Is the amount of money it takes to buy new goals to guide its work: ending extreme
development • advancement poverty and boosting shared prosperity.
goods and services that a typical family
consumes. A rising of living is inflation
and deflation as otherwise.

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example: - More quality educated people produced in a country would

The factors considered in building
an economy:
01.
Saving and Investment - In order to produce more, we have to
invest in capital assets to enable us to have the capacity to yield
more goods and services.
02 Diminishing Returns and Catch-up Effect - As the stock of
capital increases, the extra output produced from an additional
unit of capital decreases. In the long run, a higher saving rate
leads to a greater level of productivity and income but not
greater growth in these variables.
05
03 Investment from Abroad - An investment that is sponsored with
06 Property Rights and Political Stability - Property rights ensure
foreign money and operated domestically is called foreign portfolio
investment.
04 Education - Human capital theory attributes differential
investments in human capital to inequalities in income, such as
those found to exist between women and men or minorities and
whites. Human capital as a set of economic asset.
mean an oppo rtunity to generate more and better ideas to
produce goods and services.
Health and Nutrition - A healthy population would also mean
human capital, just like education, hence, are capable to produce
m or e goo ds an d se rv ice s. H ealt h ier i n div idu als a re mo re
productive.
the exercise of rights over one's property and these guarantee
more production of goods and services. A stable political
environment is considered to have efficient executive, legislative,
and judiciary system.

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07 Free Trade - A competitive economy that reduces or eliminates

trade restrictions experiences economic growth after benefiting
Factors of Production PRODUCTIVITY

from more products to be used as input to production.

LAND LABOR

Productivity
08 Research and Development - The products of research and - refers to all natural - refers to t he effort and
resources such as minerals, skills of people who work to
development (R&D) are new ideas, goods, and services that produce goods and services.
people consume. forests and water.
• Refers to the amount of goods and
- A patent is awarded to an innovator services produced from each unit
of labor.
09 Population Growth - Large population means more human CAPITAL ENTREPRENEURSHIP
esources working and contributing to the production of the • The key factor in defining the - refers to the tools,machinery,
- combine the factors of production,
standard of living is the advances land, labor and capital to make a
country. and other physical assets used profit. They identify opportunities,
in productivity. to produce goods and services. organize resources and bring new
products or services to the market.

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Factors to consider in productivity • The name "O - Ring" was derived from the devastating destruction
of the Challenger space shuttle in 1986, resulting from a faulty little

O- RING
Physical Human Capital Natural Technology gasket or O - Ring.
Capital Resources
• Assets that • Refers to the • Describes all • Refers to society's THEORY OF • The theory tells us that weak link in the production process may

DEVELOPEMENT
are utilized knowledge and inputs into the understanding of cause a surmountable quality failure of the final output.
to produce skills that production of the best ways to
goods and workers acquire goods and produce goods and
services. through services that services.Technologi • The quality of input is given more value than its quantity.
education, are provided by cal Knowledge and
training and nature. human capital are • Proposed by economist, Michael
experiences closely related, Kremer in 1993.
whereas human
capital describes
the transfer of this
knowledge to the
labor force.

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ASSUMPTIONS:
• Savings are equal to investment
• Is the model to used to understand long-term growth economics
• Labor and Capital are substitutable for each other
• Capital depreciates at a constant state
• Out of the factors of production, the Solow Model focuses on • Population growth as a constant rate

Solow Model
capital and labor, where technology is exogenously included.
• There are diminishing returns to an individual output
• Full employment of labor
• The standard Solow Model is used to estimate that in the long run,
• Developed by Robert Solow, an American economies converge to the steady-state equilibrium. • Constant return to scale
economist and Nobel Prize winner of Economic No technological progress
Sciences •

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Economic • -Inflation of the country is at 5.7% p.a. (1995-2004). As per writing

of the book, the inflation of the country increased from 4% in July

Development In Economic
2021 to 4.9% in August 2021."
• -A shortfall in budget
the Philippines • -According to a report by the Philippine Coop another factor that
Growth and
is considered in the country economic development is how the
According to the W orld Fact B ook
2020 of the Central Intelligence
Agency (CIA) of the USA, the
government deals with the leftists and separatists, like the New
People's Army (NPA), the Moro National Liberation Front (MNLF),
Moro Islamic Liberation Front (MILF), and of course, the Abu
Sayyaf In 1996,
the World
The United Nations Department of
Ph i li pp in e s r a n ks 1 32 n d o u t of a n • -One of the most n oteworthy programs of the current Economic and Social Affairs (UN-DESA)
estimated 211 countries or states with a administration of President Rodrigo Duterte is the "Build, Build, released the 17 Sustainable Development
Build" program G oals (SD G) a dop te d b y all mem be r
per capita GDP of $8,400 annually in countries of the UN.
2017. • -The COVID-19 pandemic greatly affected the tourism industry.

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decent job creation, entrepreneurship, creativity and innovation, and encoura

Target 8 of 17 Sustainable Development Growth - "promote sustained,
inclusive, and sustainable economic growth, full and productive
employment and decent work for all".
Here are the targets and indicators of SDG 8 to tackle economic
growth:
• Sustain per capita economic growth in accordance with national circumstances
and, in particular, at least 7 per cent gross domestic product growth per
annum in the least developed countries
• Take immediate and effective measures to eradicate forced labour, end modern
the formalization and growth of micro-, small- and medium-sized enterprises,\
slavery and human trafficking and secure the prohibition and elimination of the
including through access to financial services
worst forms of child labour, including recruitment and use of child soldiers, and
by 2025 end child labour in all its forms
• Improve progressively, through 2030, global resource efficiency in consumption
a n d p r o d u c t i o n a n d e n d ea v o u r t o de co u pl e e c on o m i c g r o w t h f r om
• Protect labour rights and promote safe and secure working environments for all
environmental degradation, in accordance with the 10 ‑ Year Framework of
workers, including migrant workers, in particular women migrants, and those
Programmes on Sustainable Consumption and Production, with developed
in precarious employment
countries taking the lead

• By 2030, devise and implement policies to promote sustainable tourism that

• Achieve hig her levels of economic product ivity through di ver sification,
technological upgrading and innovation, including through a focus on high-value
added and labour-intensive sectors
• Promote development-oriented policies that support productive activities,
• By 2030, achieve full and productive employment and decent work for all
creates jobs and promotes local culture and products
women and men, including for young people and persons with disabilities, and
equal pay for work of equal value
• Strengthen the capacity of domestic financial institutions to encourage and
expand access to banking, insurance and financial services for all
• By 2020, substantially reduce the proportion of youth not in employment,
education or training

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THANK YOU !
RULE OF 70
The power of approximation to determine
how fast a variable can double compounded
without really compounding.
T hi s tech ni que may be used in t he fast
computation of savings, investment, GDP per
capita, population and so on.