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Basic Economics With Taxation and Agrarian Reform PDF
Basic Economics With Taxation and Agrarian Reform PDF
I. INTRODUCTION
1. NATURE OF ECONOMICS
a. It is a social science concerned with the efficient use of scare resources to achieve the maximum satisfaction of economic wants.
b. It is concerned with obtaining maximum satisfaction through the efficient use of scare resources
c. Area study by Economic are the economic behavior and economic relationship
d. The economic perspective stresses:
Resources scarcity and the necessity of making choices
The assumption of rational behavior
Comparisons of marginal benefit and marginal cost
e. Economic wants far exceed the productive capacity of our limited or scarce resources
f. The complete satisfaction of society’s economic wants is impossible
g. Rational Behavior
it means that the same person may make different choices under different circumstances
economics assumes that human behavior reflects “rational self-interest”
individual look for and pursue opportunity to increase their utility- that is pleasure, happiness, or satisfaction
it also means that choice will vary greatly among individuals
h. Marginal Analysis
Comparison of marginal benefits and marginal cost
Marginal means extra, additional or change in
2. METHODOLOGY OF ECONOMICS
Note: Some of society’s economic goals are complementary, while others conflict; where conflicts exist, tradeoffs arise.
3. BASIC ECONOMIC PROBLEMS
Four Economic Problem
What are the products and services to produce?
How to produce?
For whom to produce?
Availability of the produce?
a. Economic growth – produce more and better goods and services, or, more simply, develop a higher standard of living
b. Full employment – provide suitable jobs for all citizens who are willing and able to work
c. Economic efficiency – achieve the maximum fulfillment of wants using the available productive resources
d. Price-level stability –avoid large upswings and downswings in the general price level; that is, avoid inflation and deflation
e. Economic freedom – guarantees that businesses, workers, and consumers have a high degree of freedom in their economic activities
f. Equitable distribution of income – ensure that no group of citizens faces poverty while most others enjoy abundance
g. Economic security – provide for those who are chronically ill, disabled, laid off, aged, or otherwise unable to earn minimal levels of
income
h. Balance of trade – seek a reasonable overall balance with the rest of the world in international trade and financial transactions
5. MACROECONOMICS
Examines either the economy as a whole or its basic subdivisions or aggregates, such as the government, household, and business
sectors.
Aggregate is a collection of specific economic units treated as if they were one unit
Using aggregates, macroeconomics seeks to obtain an overview, or general outline, of the structure of the economy and the
relationships of its major aggregates
It speaks of such economic measure as total output, total employment, total income, aggregate expenditure, and the general level of
prices in analyzing various economic problems
It examines the beach, not the sand, rocks, shells
6. MICROECONOMICS
Note: Both macro and micro distinction does not mean that economics is so highly compartmentalized that every topic can be readily labeled as either macro or micro;
many topics and subdivisions of economics are rooted in both.
7. ECONOMIC SYSTEM
A particular set of institutional arrangements and a coordinating mechanism to respond to the economizing problem
Economic system is differ as to:
a) who owns the factors of production
b) the method used to coordinate and direct economic activity
market – places where buyers and sellers come together
Traditional Economy
is a very backward type of economy
characterized by a system where the production of products, trading and distribution of incomes are sanctioned by custom
referring to the traditional manner of doing things makes decisions on what, how and for whom to produce
methods of production are carried over by the system of the forefathers
religious and cultural values are over and above economic activity
Capitalism or Market System
Market system refer to capitalism system
Resources are privately owned and the people themselves make decisions
Also known as market economy
There are many independent buyers and sellers of each product and resources therefore competition arises giving height to
consumer sovereignty
Price of a good is basis for the producers to know
The Command Economy
Government owns the means of production
Government dictates what, how, and for whom to produce
All the capital resources and consumer goods are being divided to its citizenry
No private or individual production and consumption
Government dictates the price
Mixed System
There are only few country that has a pure economic system
The Philippines applies three form of economic system
Pure Competition
Also known laissez-faire capitalism
Government’s role would be limited to protecting private property and establishing an environment appropriate to the
operation of the market system and keep government from interfering with the economy
Economic Model – is a simply representation of economic reality its purpose is to explain economic reality
a
b
F
c Economic growth by sacrifies
d
f Production possibilities
Production is less when the time is not use efficiency and fully use.
More resources improved technologies skills.
2 Relationships
a) Master-slave relationship (b) friendly-cooperative relationship
Cost of production (wage of labor, electric wage, raw material, rent and etc.)
Buyer Seller
Market
P Demand – consumer behavior
Price
E
Demand – is a schedule or a curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series
of a series of possible prices during a specified period of time
Simply a statement of a buyer’s plans, or intention, with respect to the purchase of a product
Law of demand – as price falls, the quantity demanded rises, and as price rises, the quantity demanded falls, cheteris paribus
There is negative or inverse relationship between price and quantity demanded
This inverse relationship is the law of demand
Cheteris paribus – all other things are constant
Price – determine by the buyer and seller
Obstacle that deters consumer from buyer
Higher the obstacle, the less of product they will buy
Lower the obstacle, the more of product they will buy
Sales – evidence of their belief n the law of demand
Income effect – indicates that a lower prices increase the purchasing power of a buyer’s money income, enabling the buyer to purchase more of
the product than she or he could buy before
Demand Curve – connected the points with a smooth curve
Its downward slope reflects the law of demand
Determinants of Demand – the other factor can and do affect purchase
Price of goods
Price of related goods
Income
Taste/preference
Change in demand – a change in the demand schedule or graphically a shift in the demand curve is called a change in demand
Qx = f (Px)
Px Qx P= stimulus Q= response
Px Qx
Demand Schedule
Qx = f (Px)
Qx = 11 – Px
Px Qx
1 10
2 9
3 8 QUANTITY DEMANDED
4 7
5 6