Economics and Taxation with

Agrarian Reform
Michael P. Vale
Instructor 1
1. ECONOMICS
2. TAXATION
3. AGRARIAN REFORM
 ECONOMICS

Walstad and Bingham

-A SOCIAL SCIENCE
concerned with using scarce
resources to obtain the
maximum satisfaction of the
unlimited material wants of
society
 ECONOMICS

•The study of the production,

distribution, selling and the use
of goods and services

•Key terms:
•Scarce Resources
•Use of Goods and Services
•Unlimited Wants
 SCARCITY

Condition wherein most things

that people want are available
only in limited supply

Ex. 5 books for 1000 students

OPPORTUNITY COST

The cost of choosing to use

resources for one purpose
measured by the sacrifice of
the next best alternatives for
using those resources.
Ex: A father needs to give up
his money for farm expansion
to finance his son’s education.
 BASIC ECONOMIC
PROBLEMS/QUESTIONS
1. What goods and services
must be produced?
2. How shall these goods and
services be produced?
3. For whom shall these goods
and services be produced?
THE ECONOMIC RESOURCES

1. LAND- One factor of

production which include
land used for agricultural or
industrial purposes as well
as natural resources found
above or below the soil.
Ex: Natural Resources
THE ECONOMIC RESOURCES

2. LABOR- Productive
services embodied in
human physical efforts, skill
and intellectual powers. It
consists of human time
consumed in production.
Ex: Teaching
THE ECONOMIC RESOURCES

3. CAPITAL- Durable goods

produced in order to
produce other goods. This
consists of machineries,
factories, offices.
Ex: Washing machine for
laundry shop
THE ECONOMIC RESOURCES
4. ENTREPRENEURIAL ABILITY-
Ability of an entrepreneur to
produce the required goods and
services and the deciding power of
businessmen to implement the
right combination of the three
other factors of production.
Ex: Businessman deciding whether to
hire or not additional employee’s.
ECONOMIC SYSTEMS
1. CAPITALISM- Economic
system characterized by
private individuals owning
and operating the majority of
the businesses that produce
goods and services.
TYPES OF ECONOMIC SYSTEMS
2. COMMUNISM- A society in which the
government owns all the nation’s
resources. This is the direct opposite
of Communism. The rights of
capitalism which are private
properties, profits are not allowed.
The central planning government decides:
• What goods and services to be
produced
• What job suites an individual
TYPES OF ECONOMIC SYSTEMS
3. SOCIALISM- The government owns and
operates the basic industries like
telecommunications, water services,
postal services, banking and selected
manufacturing. Private individuals are
allowed to own and operate small
enterprise.
The government decides:
• What goods and services to be produced
and how to distribute them.
• Those not govt. produced are distributed
by small enterprises.
TYPES OF ECONOMIC SYSTEMS
4. MIXED ECONOMY- Has an
element of more than one
economic systems. It contains
both private and state owned
enterprises.
 DIVISION OF ECONOMICS
1 1. MICROECONOMICS- Concerned with the
behavior and activities of specific
economic units- individual, household,
firms etc. The central concept is the
market.
2. MACROECONOMICS- Concerned with the
behavior of the economy as a whole with
respect to output, income, price level,
foreign trade, unemployment and other
aggregate economic variables.
 CIRCULAR FLOW OF ECONOMIC ACTIVITIES
2 BASIC ACTIVITIES IN ECONOMY
• Production
• Consumption
 CIRCULAR FLOW OF ECONOMIC ACTIVITIES
Figure 1: Activity Performers (firms and
households) in cycle of exchanges
LAND, LABOR, CAPITAL
(Economic resources)

FIRMS
HOUSEHOLDS
(Organizers and Users of
(Resource Owners)
Economic Resources)

GOODS AND SERVICES

(Output)
 CIRCULAR FLOW OF ECONOMIC ACTIVITIES
Figure 2: The flow of Output Between Firms
and Household

RAW MATERIAL INTERMEDIATE

FIRMS GOOD FIRMS

HOUSEHOLDS
FINAL GOODS
FIRMS
MARKET
A place where the producers (sellers)
and the consumers (buyers) meet.
This is where the producers and
consumers agree on the procurement
of goods and services.
It is where people (buyer) are left
alone with the businessmen (seller) to
make their transactions.
FORMS OF MARKET
ORGANIZED
 A form of market where the buyers and
sellers meet at a specific time and place
where an auctioneer helps set prices and
arrange sales.
Ex: Markets for Agricultural commodities
Done only on Wednesdays and Sundays
in Goa
FORMS OF MARKET
LESS ORGANIZED
- A form of market where the buyers and
sellers do not meet at a specific time and
there is no auctioneer involved.

Ex: Market for Ice Cream scattered anywhere

in Goa/ Ice cream vendor
Can be available anytime
MARKET
A market exist when “buyers wishing to
exchange money for goods or services are in
contact with the sellers wishing to exchange
goods or services for money.”

Given the fact that the producers are the

source of supply and the consumers are the
source of supply, it is where the forces of
demand and supply interacts.
COMPETITION
An instance when two or more “sellers” offering
same goods or services to “buyers” provide distinct
offers to make sales.

Ex: Prime Supermart and LCC competing with each

other by offering varied choices for grocery
shoppers.
• Prime Supermart’s Grocery items are
affordable
• LCC offers a pa raffle to buyers to compensate
Types Of Market Structure

1.Pure (perfect) Competition- Many products,

many buyers, many sellers
2.Monopoly- One Unique Product, One seller,
many buyers
3.Monopolistic Competition- One unique
product, Many sellers, many buyers
4.Oligopoly- One Unique product, few sellers,
many buyers
MARKET DEMAND
Buyers’ willingness and ability to pay a sum of
money for some amount for particular good or
services.

QUANTITY DEMANDED
 The amount of the good that buyers are
willing to buy
LAW OF DEMAND
LAW OF DEMAND:
 The quantity of any good which buyers are
ready to purchase varies inversely with the price
of the goods.
Claim that “Other things being equal, the
quantity demanded of a good falls when the
price of the good rises.
 DEMAND SCHEDULE
A table that shows the relationship between the price
of a good and the quantity demanded.
DEMAND SCHEDULE FOR GIGI’s HALO

Price per order /units(in pesos) Quantity Demanded (per

order/units)

5 25

10 20

15 15

20 10

25 5
 DEMAND CURVE
Graphical presentation of Demand Schedule
A graph between the price of a good and the quantity
demanded
Price of Halo
per order/unit DEMAND CURVE FOR GIGI’S HALO
(in pesos)
30

25

20

15

10

5 Quantity
demanded
0 (per
5 10 15 20 25 order/unit)
SHIFTS IN THE DEMAND CURVE
When the adjusted demand schedule is plotted in a graph,
the original demand curve (c1) will shift to the left (c2)
when there is a decrease in demand, and will shift to the
right (c3), when there is an increase in demand.
GOODS IN SHIFTING DEMAND CURVES:
Normal goods- A good for which other things being equal,
an increase in income leads to an increase in demand. Ex:
Gadgets
Inferior goods- A good for which other things being equal,
an increase in income will lead to a decrease in demand.
Ex: Bus rides
 SHIFTS IN THE DEMAND CURVE
Price
35

30

25

20 Series 1
Series 2
15 Series 3
10

5
Demand
0
5 10 15 20 25 30
MARKET SUPPLY
Supply- The quantity of a good or service which sellers
desire to sell at a given price.
Quantity Supplied- The amount of a good that sellers are
able and willing to sell.
LAW of SUPPLY- The claim that, other things are equal,
the quantity supplied of a good rises when the price of the
good rises.
2 Ways of presenting supply situation:
Supply schedule- A table that shows the relationship
between the price of a good and the quantity supplied
Supply curve- A graph on the relationship between the
price of good and the quantity supplied
SUPPLY SCHEDULE
Supply Schedule for Ice cream

PRICE of Ice cream (per QUANTITY of Ice cream

cone) (per cone)
0 0
.50 0
1 1
1.50 2
2.00 3
2.50 4
3 5
 SUPPLY CURVE
Supply Curve for Ice Cream

Price of Ice cream

3.5

2.5

1.5

0.5

0
1 2 3 4 5 Supply of Ice cream
 SHIFTS IN THE SUPPLY CURVE
Shift in the supply curve for ice
cream
Price 3.5

2.5

1.5

0.5
Supply
0
0 0 1 2 3 4
MARKET EQUILIBRIUM
A price where the quantity buyers want to buy exactly
equals the quantity which the sellers are offering to sale.
A price at which the supply and demand are equal.
A situation in which the market price has reached the level
at which quantity supplied equals quantity demanded.

Ex: Perfecta have 100 pesos to buy 10 pieces of pamaypay

at 10 pesos each- Equilibrium.
MARKET EQUILIBRIUM
EQUILIBRIUM PRICE- The price that balances
quantity supplied and quantity demanded.
EQUILIBRIUM QUANTITY- The quantity
supplied and the quantity demanded at the
equilibrium price
NOTE: A price below the equilibrium will
create a shortage while a price above the
equilibrium will create a surplus.
SURPLUS
A situation in which quantity supplied is greater than quantity
demanded.
Also known as excess supply
Essentially indicates that the quantity of a good or service
exceeds the demand for that particular good at the price in
which the producers would wish to sell
Excess supply is equivalent to the quantity available in the
market beyond the equilibrium point of intersection between
supply and demand. This will result in a shift in market
equilibrium towards lower price points.
A price floor ensures a minimum price is charged
for a specific good, often higher than that what the
previous market equilibrium determined. This can
result in a surplus.
SHORTAGE
A situation in which quantity demanded is greater than
quantity supplied.
The supply produced is below that of the quantity being
demanded by the consumers. This disparity implies that the
current market equilibrium at a given price is unfit for the
current supply and demand relationship.
In a perfectly competitive market, a shortage in supply will
ultimately result in a shift in the equilibrium point,
transitioning towards a higher price point due to the limited
supply availability.
TERMS
Disequilibrium
The loss of equilibrium or stability, especially due to
an imbalance of forces.
surplus
That which remains when use or need is satisfied, or
when a limit is reached.
shortage
Not enough or not sufficient for a given demand.
Government Policies That Alter the
Private Market Outcome
Price Controls measures :

Price Ceiling: a legal maximum on the price of a good or service.

Example: rent control.

Price Floor: a legal minimum on the price of a good or service.

Example: minimum wage.

SUPPLY, DEMAND, AND GOVERNMENT POLICIES

 Definition of GDP

The total value of output

of goods and services
produced within an
economy in a given
period of time
 Definition of GNP

The total value of final goods

and services produced during
a given period by the citizens
of a country.
MONEY
Anything that is generally accepted as
payment for goods and services
Anything used to make payment for goods,
services, debt or obligations
EVOLUTION OF THE PAYMENT SYSTEM
Barter
FIAT MONEY- Paper currencies decreed by the
government as legal tender but not convertible into
precious metals. Ex: Paper bills
Credit money- Money that is backed by a promise to
pay. Ex: bonds, Cheques
Electronic Money
- Money stored electronically (E-money)
Ex: Debit cards, stored value cards, electronic cash,
electronic cheques
INFLATION RATE
Inflation Rate
A measure of how fast a currency loses its
value
the inflation rate measures how fast prices
for goods and services rise over time, or how
much less one unit of currency buys now
compared to one unit of currency at a given
time in the past.
RECESSION
Temporary Economic Decline
Fall in GDP in two consecutive quarters
DEPRESSION
A long and severe recession
Thank You…