L E SS ON 2 .

6
N D P H I L I P P IN E EC ON O MIC
SU P P L Y - DE M AN D A
PROBLEMS
THE PHILIPPINE PESO AND FOREIGN CURRENCIES

EXPORT IS SELLING LOCALLY MADE PRODUCTS, MEANS WE EARN DOLLARS

AS PAYMENT FOR THESE GOODS BOUGHT BY FOREIGN BUYERS. IN THE SAME
MANNER, WE BUY GOODS FROM OTHER COUNTRIES, AND THESE OUR IMPORTS.
WHEN WE TRADE WITH OTHER COUNTRIES, WE NEED A COMMON
CURRENCY TO USE TO PAY FOR GOODS WE BUY FROM THEM AND FOR THEM TO
PAY US FOR GOODS WE SELL TO THEM.
 THE RATE OF CONVERSION OF THE PHILIPPINES PESO TO
FOREIGN CURRENCY IS REFLECTED IN THE EXCHANGE RATE.
THESE RATES ARE DEPENDENT ON THE WORKINGS OF DEMAND
FOR AND SUPPLY OF THE CURRENCY IN THE MARKET. FOR
EXAMPLE, IF THE US DOLLAR IS IN DEMAND, THE PRICE OF THE
DOLLAR WILL INCREASE AND WILL BE REFLECTED IN A HIGHER
EXCHANGE RATE IN FAVOR OF THE DOLLAR, WHICH MEANS ONE
WILL NEED MORE PESOS TO BUY DOLLARS.
 TABLE 2.9 LISTS THE VARIOUS CURRENCIES INTO WHICH THE
PHILIPPINES PESO IS CONVERTIBLE. THE MOST COMMONLY
TRADED CURRENCY IN THE WORLD IS THE US DOLLAR. BEFORE,
THE UNITED STATES ECONOMY EXPERIENCED ECONOMIC
RECESSION IN 2008 TO 2010, THE DOLLAR HAD A VERY HIGH
VALUE IN THE MARKET. PHP. 50.00 WAS THE HIGHEST WHEN WE
NEED TO BUY ONE DOLLAR. TODAY, THE EXCHANGE HAS GONE
DOWN TO THE LEVEL OF PHP. 44.00 TO PHP.45.00.
HOUSING SHORTAGE AND THE REAL ESTATE BOOM IN
THE PHILIPPINES
RENT AND PRICE STRUCTURE
THE LAYMAN’S CONCEPT OF RENT IS PAYMENT FOR THE USE OF LAND OR BUILDINGS BELONGING TO THE
OTHERS.

IN ECONOMIC, RENT REFERS TO A PAYMENT MADE TO OR FOR A FACTOR OF PRODUCTION OVER AND ABOVE
THE AMOUNT EXPECTED BY ITS OWNER.

ECONOMIC RENT IS THE POSITIVE DIFFERENCE BETWEEN THE ACTUAL PAYMENT MADE FOR A FACTOR OF
PRODUCTION (SUCH AS LAND, LABOR OR CAPITAL) TO ITS OWNER AND THE PAYMENT LEVEL EXPECTED BY
THE OWNER, DUE TO ITS EXCLUSIVITY OR SCARCITY.

ECONOMIC RENT EXISTS DUE TO MARKET IMPERFECTIONS, WITHOUT MARKET IMPERFECTIONS, THERE
WOULD BE NO NEED FOR PAYMENT OF RENT
 “HENRY GEORGE (2014), IN THE ECONOMIC MEANING OF
RENT, PAYMENTS FOR THE USE OF ANY OF THE PRODUCTS
OF HUMAN EXERTION ARE EXCLUDED, AND OF THE LUMPED
PAYMENTS FOR THE USE OF HOUSES, FARMS, ETC., ONLY
THAT PART IS RENT WHICH CONSTITUTES THE
CONSIDERATION FOR THE USE OF THE LAND. THE PART THAT
IS PAID FOR THE USE OF BUILDINGS OR OTHER
IMPROVEMENTS IS PROPERLY INTEREST, AS IT IS A
CONSIDERATION FOR THE USE OF CAPITAL.”

In short economic rent is any unearned income

 EVEN GOVERNMENT BORROWS THE SAVINGS OF HOUSEHOLDS
AND BUSINESSES TO SEND ON CAPITAL ACCUMULATION.
BUSINESS BUILD ADDITIONAL FACTORIES THAT ALSO CREATE
EMPLOYMENT, HOUSEHOLDS CONTINUOUSLY ACCUMULATE FIXED
ASSETS LIKE HOUSES AND CARS FOR MORE SERVICES. ON THE
OTHER HAND, GOVERNMENT INVESTS IN PHYSICAL
INFRASTRUCTURES LIKE ROADS AND BRIDGES TO ENCOURAGE
BUSINESS ACTIVITIES. THE ECONOMIES CAPITAL FORMATION
(INVESTMENT) HAS ALWAYS BEEN GREATER THAN SAVINGS SINCE
GOVERNMENT INVESTMENT IS ALSO FINANCED BY TAXES AND AT
TIMES, FOREIGN BORROWINGS.
RENT

THE PROBLEM OF UNAFFORDABLE DECENT

HOUSING IS THE PROBLEM NOT SO MUCH OF THE
MIDDLE CLASS AS THE POOR DUE TO POVERTY.
Figure 2.12. The poor spend more than their meager income to make both ends meet
Figure 2.13. Nonetheless, they can hardly provide even for their basic needs, which include a housing. A typical
poor family spends mostly on food and practically nothing on housing and other consumer items
MINIMUM WAGE

THE PROBLEM OF INADEQUATE WAGE IS INTERTWINED

WITH THE PROBLEM OF UNEMPLOYMENT. BOTH PROBLEMS
STEM FROM THE LACK OF JOBS FOR OUR LARGE LABOR
FORCE.
 Figure 2.14 illustrates that excess
labor supply due to lack of jobs at Point
A reduces wage from W1 to W0 at Point B.
Yet, the resulting increase in labor
demand (L0 – L1 ) is not enough to
employ excess (L0 – L2 ) simply because
jobs are not enough. Therefore, wage is
more inadequate and unemployment
rate is higher as more and more people
cannot find jobs that have become
scarcer. Reconstructing figure 2.14,
more excess labor decreases wage and
increases the number of unemployed
even more.
 TAXES
We pay taxes for government to provide public goods and services to empower and enable
individuals and institutions alike (e.g. schools, business corporation) to pursue their dreams.
Example of public good is farm access road for farmers to transport their produce to the
cities for the needed cash income, another example is public school system to educate
children of poor families out of poverty.
On the other hand, example of a public service is restoring peace and order war-torn areas
in Mindanao by the armed forces and police that all can resume normal life, another example of
is the regulation of the business permits by City Hall to prevent industrial overcrowding which
can dampen the incentive to do business.