No. 2 - Module 1

Module 1
Accounting 1204
ECONOMIC DEVELOPMENT
A Lecture by
Kirsten Glace P. Juanitas, CPA
Module 1: Introduction to
Development Economics
Learning Objectives:
1. Review basic economic principles

2. Relate basic economic principles on a
broader perspective
3. Learn about the market failures
A Lecture by
Human beings are
Insatiable Creatures
We have
unlimited wants
A Lecture by
Factors of Production
Can the world LAND

Satisfy us? LABOR
CAPITAL
Resources are
ENTREPRENEUR
Limited
A Lecture by
Economic Goods vs Free Good
The Basic
Economic
How do we Problem:
deal with
SCARCITY ?
Limitations that exists in obtaining all the
goods and services that people want
A Lecture by 5
THE TEAM
What shall be
produced? How shall
these be
produced?
CHOICE
To whom
August Bergquist
shall these be
Allan Matson
Distributed?
Manager
Victoria Lindqvist How?
Key employee
Owner
A Lecture by 6
ECONOMICS
• Study of how people allocate scarce resources for production, distribution, and
consumption, both individually and collectively.
• MICROECONOMICS focuses on the behavior of individual consumers and

producers
• MACROECONOMICS examines overall economies on a regional, national, or

international scale.
A Lecture by
INDUSTRY
ProductionOUTLOOK
Possibilities Curve (PPC)
 Shows the maximum amounts to two different goods that can possibly be
produced during any particular time period using society’s scarce
resources
Illustration: The Concept of Time
 There are only 24 hours in a day

 Assume that we all need 8 hours of sleep
 That leaves 16 hours to study or play
 How do we allocate 16 hours for these two productive
activities
A Lecture by 8
Production Possibilities Curve
INDUSTRY OUTLOOK
POINT STUDY PLAY
Chart Title
18 A 16 0
16
A B 0 16
S
14
12
T 10
U 8
D
6
Y 2
0
B
0 4 8 12 16
A Lecture by 9
PLAY
Production Possibilities Curve
INDUSTRY OUTLOOK
POINT STUDY PLAY
Chart Title
18 A 16 0
16
A B 0 16
C 12 4
S
14
12
C D 4 12
E 8 8
T 10
E
U 8
D
6
4
D
Y 2
0
B
0 4 8 12 16
A Lecture by
PLAY
10
What does this
graph tells us?
1. There is a limit as to what we can
produce, thus we must make a choice
among alternatives
2. In order to choose one alternative you

must forego other
A Lecture by 11
Opportunity Cost
The best alternative foregone
to produce/ consume
something else
A Lecture by
In a world where
we are all riddled
with a lot of choices,
we must be prepared
To face the trade-offs
A Lecture by
Production Possibilities Curve (Unemployment)
INDUSTRY OUTLOOK
18
Chart Title
A Z
Y
16
S
14
12
C
T 10
E
U 8
D
6
U D
4
Y 2
0
B
0 4 8 12 16
PLAY
14
 Points along the line, resources are
used to their fullest potential
 Any points below the line are possible
alternatives but resources are not fully
used
 Points beyond the line are not possible
alternatives assuming ceteris paribus
 Points beyond the line is possible only
if additional resources are introduced
in the situation
A Lecture by
Economic Growth
 Increase in the production of
economic goods and services from
one period to another
 Usually resulting from increase in

resources or development/
introduction of technology
A Lecture by
Production Possibilities Curve (Growth)
INDUSTRY OUTLOOK
18
Chart Title
16
G
F
14
12
O 10
E
O 8
D
6
0
0 4 8 12 16
A Lecture by
VACATION
17
The important real-world relevance
of these concepts?
 Varying wants and needs of each person in a
society must be considered to allocate the
resources of a country
 Government must ensure that resources are

fully utilized to ensure optimum production
potential
 Choices must be made to determine which

A Lecture by sector
must be prioritized 18
Philippine GDP 2019
• 376.8 Billion US Dollars
• 61% Services Sector

• 39.17 % Industry Sector
• 8.82% Agriculture Sector
A Lecture by
General Appropriations Act FY 2021
• CY 2021 National Budget: ₱4.506 Trillion
Education Sector ₱754.4 Billion

2.5 Billion
DPWH 667.3 Billion for the procurement
of COVID Vaccines
DILG 246.1 Billion
DND 209.1 Billion
DOH 203.1 Billion
A Lecture by
BIR Collections
• CY 2020: 1.899 Trillion pesos
• 1ST Quarter CY 2021: 470,487,450 pesos The Philippines
• Projected: 2.717 trillion by year end
is operating on a
Philippine Debt budget deficit,
how do we
• CY 2020: 10.13 Trillion pesos manage?
• 1ST Quarter CY 2021: 10.77 Trillion pesos
• Projected: 11 Trillion by end of 2021
A Lecture by
A Lecture by Can we repay this? How?
The Market
 Production and Distribution is
determined by price
 Price is determined by
demand and supply
A Lecture by
Demand  Consumer’s Desire for a Commodity
Law of Demand
as price increases quantity demanded decreases
as price decreases, quantity demanded increases
Price QD
De
5 1 P ma
R nd
3 3 Cu
I rve
1 7
C
E
A Lecture by Quantity
Shifts in the Demand Curve
Population
Income
Tastes and preferences P
R
Expectations/speculations
I
Prices of complementary C
Goods E
Prices of substitute goods
Quantity
A Lecture by
Supply  amount of available commodity
Law of Supply
as price increases quantity supplied increases
as price decreases, quantity supplied decreases
Price QS
P
5 5
R r ve
3 3 Cu
I pl y
1 1 p
C Su
E
A Lecture by Quantity
Shifts in the Supply Curve
Number of Suppliers
Prices of resources
Technology P
R
Prices of other products
I
using the same resources
C
Government interventions E
(taxes, subsidies)
Expectations
Quantity
A Lecture by
Market Equilibrium
Demand = Supply
A Lecture by
Is Market
Equilibrium
Achievable?
A Lecture by
Surplus
Supply > Demand
A Lecture by
Shortage
Demand > Supply
A Lecture by
Demand = 100 Supply = 500
Surplus= 400
Surplus
A Lecture by
Shortage
Supply = 100 Demand = 500

Shortage= 400
A Lecture by
Surplus
Shortage
A Lecture by
 Price Determines Supply and
Demand
 Demand and Supply Together

Determines Price
A Lecture by
 The Market can
EFFICIENTLY distribute
goods
 But Distribution may not be
EQUITABLE
A Lecture by
The Market Failures
Public Goods and Services
Spillovers
Inequity
Market Power
Instability
A Lecture by
This Ends Module 1
Thank you!
See you next class! 
A Lecture by
THANK YOU!
Kirsten Glace Juanitas
Kjuanitas@cpu.edu.ph
09778056677
A Lecture by

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Module 1

1. Review basic economic principles

Can the world LAND

• MICROECONOMICS focuses on the behavior of individual consumers and

• MACROECONOMICS examines overall economies on a regional, national, or

Illustration: The Concept of Time

 There are only 24 hours in a day

2. In order to choose one alternative you

 Usually resulting from increase in

 Government must ensure that resources are

 Choices must be made to determine which

• 61% Services Sector

Education Sector ₱754.4 Billion

Supply = 100 Demand = 500

 Demand and Supply Together

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