ECOn 102

1. (Decision makers face tradeoffs.) Everything comes with a cost. People have to
give up something in order to get something. People involved should strike a
balance when allocating scarce resources equally and efficiently.
2. (All things incur opportunity costs.) Decision makers should be aware of the
opportunity costs of getting something. Individuals and firms give up other
choices when choosing something. The weight of the costs determines whether
a choice or decision is worth it.
3. (People are economically rational) People are rational enough to manage scarce
resources through processes or procedures with the intention of producing the
best result possible. Rational people make decisions by weighing costs and
benefits. An action is deemed favorable if the marginal benefit exceeds the
marginal costs, thus benefitting the decision maker.
4. (Incentives Matter) An incentive influences the behavior of an individual.
Incentives can be in any form from freebies or additional products to prices or
policies. Basically, incentives are any factors that influences the behavior of
decision-makers in the market.
5. (Trade makes every one better off.) Trade between countries can be beneficial
for each other as they are also competitive. Countries specializing in the
production of certain products or services limit costs, thus having comparative
advantage. Trade allows countries to avail a variety of goods and services at
low cost, an exchange occurring in which both parties benefit as they obtain
what they need.
6. (Free markets are the most efficient way to organize economic activity.)
Decision-making in a market economy is decentralized when allocating
resources. From the firms to the household, these two players create an
interaction in the market, as price influence their decisions throughout. The
invisible hand guides individuals’ and firms’ self-interest and sets the economy
in equilibrium automatically.
7. (Governments can sometimes improve market outcomes.) Market economies
need institutions that are established and maintained by the government to
enforce property rights in order for individuals to own and manage limited
resources. Government policies aid in market outcomes at times as to promote
efficiency and equality, even to some extent. When a particular basic necessity
 becomes pricey or too cheap in the market, the government can intervene by
imposing a price ceiling or floor, though this hardly works as firms or sellers
may incur losses from the mandated price control.
8. (The Standard of Living reflects the ability to produce goods and services.) A
country’s standard of living is reflected on its productivity. Being able to
produce a certain amount of goods and services can indicate either an economy
is doing poorly or flourishing.
9. (Governments can upset the economic cart.) When the government prints too
much, an increase of the general price level in the economy occurs. Consumers
have too much cash on hand which induces demand in the market. This
eventually drives firms to increase prices as supply barely meets consumer
demand.
10. (There is a short-term tradeoff between inflation and unemployment.) A short-
run increase in the money supply induces consumer demand. The supply must
meet the growing demand. In the process, productivity increases and firms
eventually find the need to hire more workers, hence lowering unemployment.
Yet this short-run tradeoff maybe beneficial, policy instruments help to control
the economy, such as a monetary policy influencing inflation, lowering interest
rates, and controlling money supply.

Microeconomics is how individuals and firms interact in the market and manage
scarce resources.
Microeconomics means it is all about managing scarce resources. In a particular
setting such as planning to buy desired clothes but have to consider the limited
amount of money my wallet has, and then prioritizes to buy the most desired among
the clothes and make sure that I am still within budget.

 Due to ASF, there is an increase in the price of pork in the Philippines, what kind of price
control mechanism should be employed? ***

- A price ceiling may briefly address the increasing prices of pork, which has
already done by the government. Imposing a maximum price on an individual
product (meat) may benefit the economy for a short-term and repercussions
 will affect only a short part of the economy. People will be induced to demand
for other meat products as shortage occurs eventually. Excess demand for pork
meat will be transferred to other substitutes for meat or source of protein such
as tofu and rabbit meat. A price ceiling may be applicable for this case as the
benefit or the factors that favors it outweighs the cost it incurred or the
adverse effects it caused. Though this may be beneficial for a short-term, the
government should constantly facilitate the effects of the price control which
may be too much for the economy to handle, so a price ceiling should not be
dragged for a longer period. Price increase may be sourcing from the processes
in between the producers to the sellers. Accordingly, the government should
investigate and address issues that may be found in order to stabilize the price
of pork eventually.
Are subsidies for agricultural products effective? Explain.***

- Subsidies are effective for a short-term as it addresses issues, even to some

extent, producers are facing currently. The objective of subsidies is to provide
additional funds and lessen the burden of farmers and producers. This lessens
cost of productions or input prices and, in effect, productivity increases.
Increasing subsidies will not be effective in the long run as people tend to be
dependent on it. There should be a long-term plan, wherein the agricultural
industry should incorporate efficient, sustainable, and innovative methods. As
there are limited resources, the end goal is to do more with less. The
government should invest in improving post-harvest facilities and technologies
to increase food availability and quality of agricultural products, and producers
should be open to modern methods of producing agricultural products. The world
is constantly changing so approaches and methods should keep up with the
dynamic environment. As the modern world says, “Modern problems need
modern solutions.”

ECON 102
Performance of the Export Sector
There is a positive growth of exports of 16.92 percent as exports continued to
grow from U.S. $ 20,543 million in 1996 to U.S. $ 29,496 million in 1998. On the other
hand, there is a negative growth in the country’s imports of 18.79 percent as imports
decreased from U.S. $ 36,555 million in 1996 to U.S. $ 29,524 million in 1998.
The largest contributor to the total export value is the electronic or semi-
conductor industry, contributing 58 percent of the total export value in 1998. From 1997
to 1998, machinery and transport equipment replaced the garment industry as the
second largest contributor to the total export value as it contributed 11 percent of the
total export receipts in 1998.
Despite the Philippines having the highest export growth in 1998 compared to
other Asian countries, it is still one of the few countries experiencing a negative
balance of trade due to imported input requirements of the export sector, for
instance, the electronics industry source most of their materials abroad and the
garment industry import raw fabric due to the inefficiency of the local textile industry.
Table #. Philippine exports by major commodity, 1990-1998 (In million U.S. $)

Table #. Philippine exports by major commodity, 1990-1998 (In percent change)

Philippines imposes price control on some medicines
On the 28th of July 2009, former President Gloria Macapagal Arroyo imposed
price controls on almost two dozen drug brands after pharmaceutical companies
failed to comply to law lowering costs by 50 percent, as said by the officials that time.
Pharmaceutical companies would abide by the law and guidelines mandated by
the President, and yet insisted that imposing price controls were not the best
approach in the availability of drugs to poor Filipinos. Drug makers offered to lower
prices voluntarily by an average of 80 percent for about 80 brands for treatment of
certain diseases such as hypertension, cancer and diabetes to prevent the
government from imposing price controls.
Reiner Gloor, an industry spokesman, has said that price controls may be
beneficial for the short-term but long-term negative consequences must be
considered, for the pharmaceutical industry and other industries as well.

Imagine a pizza, with a question: How does each slice of pizza you consume impact
your utility for the next?
With each slice of pizza I consume or want to consume, my utility for it is
increasing at a decreasing rate. The law of diminishing marginal utility states that
successive units of a given product yield less and less satisfaction. The more I
consume a slice of pizza, the less satisfaction it generates, and the less valuable
each slice it is to me, though total utility increases. The first slice was certainly of high
value as it was the first consumption of a pizza, providing much satisfaction and
utility. Consumption for another slice of pizza would still generate enough utility and
satisfaction, which seems somewhat valuable. Even if a third slice of pizza would still
provide satisfaction, the third slice would be of lesser value than the previous one,
much more when comparing the second slice of pizza to the first one. The more
consumption of each slice, the less utility and satisfaction it brings.
In the discussion forum, apply the things you’ve learned on the following cases: drug
addiction, and b. preferences on the available vaccine for COVID19. You can also add
other issues. Just choose one issue or case.
The issue regarding the increase of pork prices. Due to the recent price increase,
demand for pork meat would decrease. Following the law of demand, the relationship
between price and quantity demanded is inversely proportional, wherein quantity
demanded decreases when price increases, and quantity demanded increases when
price decreases. The price increase of pork meat would be too much for consumers to
handle so the government imposed a price ceiling to address this issue, although
several hog raisers and economist disagree as this creates shortage. Due to the price
increase, demand for pork meat transferred to chicken meat, which also prompt
chicken prices to rise and the government imposing a price cap on it. Because of these
price increases, consumers seek cheaper meat and (plant-based) protein source
alternatives, such as rabbit meat and soybeans. This is attributed to the substitution
effect, where consumers substitute goods that are now relatively more expensive to
similar goods with cheaper prices. Consumers nowadays seek meat substitutes as
pork and chicken prices increased, and plant-based protein and rabbit meat in
particular were comparable substitutes for it.

Links for the Externalities topic:

An Introduction to Externalities https://www.youtube.com/watch?v=CpVf11f09Pk

Asymmetric Information and Used Cars https://www.youtube.com/watch?
v=sXPXpJ5vMnU
Asymmetric Information, Adverse Selection & Moral Hazard
https://www.youtube.com/watch?v=39QhA4qCOec
Income Inequality https://www.youtube.com/watch?v=FBjFDtH-iZM
Externalities: Market Failure or Political Failure https://www.youtube.com/watch?
v=vzLyybYmYjU
Pareto Optimal and Pecan Pie https://www.youtube.com/watch?v=ictUYjkQeZU
Milton Friedman – Solution to Market Failures https://www.youtube.com/watch?
v=BPnJHfiFWJw

Describe your ‘ideal market’.

Personally, an ideal market is when there are no black markets such as under-
the-table transactions and piracy. When goods and services are sold illegally,
transactions are usually done in secret. Information regarding exchanges occurring in
the market are included in measuring the state of an economy. The economic
productivity of a country is underestimated when there are goods flowing covertly.
When consumers are unable to obtain a certain product due to a high price or limited
supply, they are appealed to similar and low-priced goods. In the black market, there
are similar goods offered as well but the price and quality are questionable. These
transactions can be a source of crime such as scam and piracy as they are
unregulated by any laws or regulations. Consumers involved are not protected by the
state and they, if left unsatisfied with the product, are made worse off. Another is
products and workers in the black market are tax-free, therefore the government
loses revenue that should have been used for funding public services. Even though
there are advantages in the shadow economy such as people being able to purchase
goods and services or find jobs that they could not have or get into, the economy of a
country does not benefit from this. The sold output and potential workers could have
contributed to the market, made firms more productive and consumers more better
off. If things in the market are done properly, there will be order in the economy. And in
this ideal market, society is generally made better off.

-Is it important to get an insurance?

- Bakit may mga tao pa rin na sumasali sa pyramid schemes?
- Do you think the new Tax reform is advantageous for our economy?

- Is it important to get an insurance?

An insurance’s purpose is to protect one’s property, in cases of unexpected
occurrences such as damages to property, losses incurred in business, legal matters,
injuries or even death of a person. Securing an insurance depends on the needs of the
person, which includes owning a property, having a business and the like. Some
businesses are required to have business insurance. People particularly inquire for an
insurance for their cars, houses, or even in cases of flood and natural disaster. As
securing an insurance may provide protection to an extent, it also entails some cons.
There are processes to go through before one could get their insurance premiums such
as assessing the damages sustained and determining an accurate accounting of loss
(Leonard, 2020). These processes may require much resources and, at the same time,
could waste much time and effort. Ultimately, people should outweigh the benefits and
costs in getting an insurance as corresponding to their needs.
- Bakit may mga tao pa rin na sumasali sa pyramid schemes?
Pyramid schemes are illegal activities and people who undertake such activities
have no knowledge on what they are entering into in the first place. Generally, people
who are involved aims to earn money fast due to necessities for their wellbeing.
People behind these pyramid schemes take advantage of these tendencies by offering
fast returns from initial investments but usually disappear after “investors” are
convinced and invest more later on. This process reiterates itself as more “investors”
are recruited by these opportunistic people. This illegal activity creates victims than
“members or investors”. It is not that people still enter to these illegal activities
whenever they want to, is it just that they have no knowledge regarding the activity
being illegal in the first place. These “investors” are deceived to the extent that the
proposed activity is presumably beneficial and legal, but is actually not. The deceived
may not be necessarily at fault but beyond the desperate effort to earn money, people
should certainly do a background check or research before undertaking a project,
activity or job.
- Do you think the new Tax reform is advantageous for our economy?
 The tax reform may be advantageous for the Philippine economy in order for
businesses and firms to sustain themselves amidst the COVID-19 pandemic. Due to the
quarantine restrictions, some businesses have been forced to shutdown or
permanently close due to unbearable losses incurred. Businesses that are still open are
barely making ends meet. The Corporate Recovery and Tax Incentives for Enterprises
(CREATE) Act can aid local businesses and attract desirable investments because of
the tax incentives it provides. Though the accelerated reduction in Corporate Income
Tax may reduce government revenue, the resulting reduction estimated around PHP
37 billion in the second half of 2021 can be used by firms especially micro, small, and
medium enterprises (MSMEs) to fund their operations and retain employees. As
according to the Department of Finance, the forgone government revenue with a total
estimate of PHP 600 billion for the succeeding 5 years can be invested by firms in the
revitalization of their businesses and create even more jobs for Filipino workers. These
gives businesses a chance to recover from the slump in spite of the pandemic.
Reference/s:
Leonard, K. (2020, July 2). Advantage & Disadvantage of Insurance. Chron.
https://smallbusiness.chron.com/advantage-disadvantage-insurance-39117.html
Department of Finance. (2021, March 26). Package 2: Corporate Recovery and
Tax Incentives for Enterprises (CREATE) Act. Tax Reform Department of Finance.
https://taxreform.dof.gov.ph/tax-reform-packages/p2-corporate-recovery-and-tax-
incentives-for-enterprises-act/