Classical Theory

of Economics

Mista, Huizo, Leal, Alim, De Angel

Classical theory
A theory of economics, especially directed
toward macroeconomics, based on the
unrestricted workings of markets and the
pursuit of individual self interests. Classical
economics relies on three key assumptions
Flexible Prices
Say’s Law
Saving investment equality
In the analysis of macroeconomics
macroeconomics
Is a branch of economics dealing with
the performance, structure, behavior, and
decision making of the whole economy.
This includes a national, regional, or global
economy. With microeconomics,
macroeconomics is one of the two most
general fields in economics.
history
In the Wealth of Nations Adam Smith
presented a comprehensive analysis of
economic phenomena based on the
notions of free markets and actions
guided by individual self interests in a
laissez faire enivironment.
laissez faire
is the belief that economies and
businesses function best when there is no
interference by the government. It comes
from the French, meaning to leave alone
or to allow to do. It is one of the guiding
principles of capitalism and a free market
economy.
history
The classical theory of economics exists because of
Adam Smith. This 18th-century Englishman developed the
basics of classic economics, asking and answering
questions such as "What are the basic principles of
capitalism?" Smith's core idea was that players in the
economy act out of self-interest and that this actually
produces the best outcome for everyone. Smith's theories
were the beginning of the modern discipline of economics.
Despite being followed and challenged by neoclassical
economics and then Keynesian theories, Smith's ideas are
still influential.
history

Smith’s classical theory of economics is that

self-interest benefits everyone. Businesses
profit from selling goods and services to
people who need them. Competition for
goods or customers naturally determines the
"right" price.
Say’S Law Key Assumption

• According to Say’s Law, When an economy

produces a certain level of real GDP, it also
generates the income needed to purchase that
level of real GDP. In other words, the economy
is always capable of demanding all of the output
that its workers and firms choose to produce.
Hence, the economy is always capable of
achieving the natural level of real GDP.
Flexible Prices Key Assumption
Flexible prices ensure that markets adjust to
equilibrium and eliminate shortages and surpluses.
The adjust to equilibrium is accomplished
automatically through the market forces of demand
and supply without the need
for government action.
With flexible prices, any surplus is temporary.
Wages fall to eliminate the surplus imbalance and
restore equilibrium--and achieve full employment.
Saving investment
equality Key Assumption
The saving-investment equality ensures that
any income leaked from consumption into
saving is replaced by an equal amount of
investment. Although of questionable realism,
these three assumptions imply that the
economy would operate at full employment.
A potential problem with Say's law is that not all
income generated by the production of goods is
necessarily spent by the household sector on
consumption demand--some income is saved.
In other words, while the production of $100
million of output generates $100 million of
income, the household sector might choose to
spend only $90 million, directing the remaining
$10 million to saving. If so, then supply does NOT
create its own demand. Supply falls $10 million
short of creating enough demand.
Expanded Senior
Citizens Act

Mista, Huizo, Leal, Alim, De Angel

Republic Act No. 9994
"Expanded Senior Citizens Act of 2010”

AN ACT GRANTING ADDITIONAL BENEFITS AND

PRIVILEGES TO SENIOR CITIZENS, FURTHER AMENDING
REPUBLIC ACT NO. 7432, AS AMENDED, OTHERWISE
KNOWN AS "AN ACT TO MAXIMIZE THE
CONTRIBUTION OF SENIOR CITIZENS TO NATION
BUILDING, GRANT BENEFITS AND SPECIAL PRIVILEGES
AND FOR OTHER PURPOSES"
Expanded senior
citizens act
It is further declared that the State shall promote social justice in all
phases of national development and values the dignity of every
human person and guarantees full respect for human rights.

This Act shows all matters relating to the care, health, and
benefits of the elderly, the State shall adopt an integrated and
comprehensive approach to health development which shall
endeavor to make essential goods, health and other social services
available to all people at affordable costs giving priority for the needs
of the elderly.
PRIVILEGES FOR THE
SENIOR CITIZENS
Article 6. OSCA-issued Senior Citizens'
Identification Card. - For the availment of
benefits and privileges under the Act and
these Rules, the senior citizen, or his/her
duly authorized representative, shall present
as proof of eligibility, a valid and original
Senior Citizens' Identification Card issued
by the Head of the Office of Senior Citizens
Affairs (OSCA) of the place where the
senior citizen resides, and which shall be
honored nationwide.
PRIVILEGES FOR THE
SENIOR CITIZENS
Article 7. Twenty Percent (20%) Discount and VAT
Exemption - The senior citizens shall be entitled to the
grant of twenty percent (20%) discount and to an
exemption from the value-added tax (VAT), IF
APPLICABLE, on the sale of the goods and services
covered by Section 1 to 6 of this Article, from all
establishments for the exclusive use and enjoyment or
availment of senior citizens.
Section 1. MEDICAL_RELATED PRIVILEGES
The 20% discount and VAT exemption shall apply to the
following:

a) Medicine And Drug Purchases

b) Essential Medical Supplies,Accessories And Equipment
c) Medical And Dental Services In The Private Facilities
d) Professional Fees Of Attending Physician/S
e) Professional Fees Of Licensed Health Workers Providing
Home Health Care Services
Section 2. DOMESTIC TRANSPORTATION PRIVILEGES

The Department of Transportation and

Communication (DOTC) together with different
offices shall give the transportation privileges of senior
citizens:

a) Air And Sea Transportation Privileges

b) Public Land Transportation Privileges
Section 3. HOTELS, RESTAURANTS, RECREATIONAL CENTERS,
AND PLACES OF LEISURES, AND FUNERAL SERVICES

The Department of Interior and Local

Government (DILG) and Department of Tourism
(DOT) shall issue the necessary circulars or directives
to establishments for its implementation to ensure
compliance herewith.

a) Hotels And Similar Lodging Establishments

b) Restaurants
Section 4. RECREATION CENTERS

The discount shall be for the utilization of

services in the form of fees, charges and rental
for sport facilities or equipment, including golf
cart rentals and green fees, or venues for
ballroom dancing, yoga, badminton courts,
bowling lanes, table or lawn tennis, workout gyms,
martial arts facilities.
Section 5. ADMISSION FEES PRIVILEGE

The discount shall be applied to

admission fees charged by theaters,
cinema houses and concert halls, circuses,
carnivals, and other similar places of
culture, leisure and amusement such as
museums and parks.
Section 6. FUNERAL AND BURIAL SERVICES
The beneficiary or any person who shall shoulder
the funeral and burial expenses of the deceased senior
citizen, shall claim the discount under this Rule for the
deceased senior citizen upon presentation of the
death certificate. Such expenses shall cover the
purchase of casket or urn, embalming, hospital morgue,
transport of the body to intended burial site in the
place of origin, but shall exclude obituary publication
and the cost of the memorial lot.