CHAPTER 1 – ACTIVITY 2 (based from lesson 2)

1. Explain some economic ideas during the ancient times. Which idea to you like best? Justify your
answer.

Holy Scriptures and code of laws were the basis of economic ideas during the ancient times, thus
such ideas centered on the ways of making a living. Agriculture is the main source of production in the
views of ancient economic ideas. Plato stressed that agriculture is important and he disregard the
accumulation of wealth through lucrative trade or commerce. Aristotle, just like Plato is not also in favor
of too much wealth, however, he disagreed with Plato about communal property then said that it is not
possible that it would only destroys individual incentives. For Xenophon, he is in favor of capitalism and
considered agriculture as the basis of wealth just like the others.
Plato’s idea is the best for me, division of labor where the concepts of productivity is introduced
and the supply met the demand. Communal property, wherein an individual owned a private business and
it is essential in the economic development because of its incentives.

2. In your own opinion, how can we improve foreign trade?

In my own opinion, if our country is about to improve its way of going for a foreign trade, it will
exactly boost and tend to make our country to grow faster and I think that increasing exports and
expansion of our foreign trade is the key. Exportation of our product to bigger traders will create a
positive impact on our economy and may increase our productivity rate in order to attain and adapt with
the vast trading, thus giving more opportunities to everyone (employment). We have to engage in a bigger
trading with other countries across the borders in order for them to know the quality of our goods and
services, wherein they might patronize our products. Furthermore, interacting with other traders can give
as ideas to innovate our goods and services that we think are the most needed and if our products meet
those standards, economic growth will rise that will lead to the eradication of poverty.

3. Explain laissez faire in economics. Is it good for developing countries? Explain your answer.

Laissez – Faire is a French term that was introduced by Physiocrats. It is the idea that the
government shall not interfere with the economic affairs. Meaning, the government must let those market
forces to work on their own, plan, contract, interact with each other and engage in the market without the
presence of the government. In other words, private firms are not being interfered by the government in
their decision making about production and output. For the developing countries, it would be beneficial in
their economy especially for those countries whose primary focuses on manufacturing. With lower
regulations, weaker labour laws and lower taxes, it can attract foreign investment and interest that can
cause economic growth. It provides individuals with the greatest incentives to create wealth.

4. State the economic ideas of Smith. Do you agree with him? Why?

According to Adam Smith, the only source of wealth is production through labor and resources.
He wrote that wealth can be increased through division of labor and the use of machinery. He also stated
that free competition and the non-intervention of the government in economic affairs were efficient in
production.

I agree with him that production is the only source of wealth, if we tend to produce goods and
services and undergo exportation it would bring us economic growth. Furthermore, I am not sure of free
competition, because only those capitalist and large business owners were benefited and it is unfair to
those small business owners. The non-intervention of government should be disregard, government
should interfere to practice a fair economic distribution, and there must be policies and right contract,
taxation and the observation of price to maintain the equal distribution where the poor and the rich are
benefited equally.
5. Define the law of comparative advantage. Is this feasible in the real international trade? Why?

According to David Recardo who developed the theory, he said that “nations should export the
goods which they enjoy the greatest advantage, and should import the goods which they have the greatest
disadvantage.” Meaning one factor is the opportunity cost, like the example given by David Ricardo, that
instead of making calculators, why don’t the Philippines focus only on planting rice then just by
calculator in Japan where it could be more economical. As we can see, opportunity cost becomes the
factor for analysis in choosing between different options for production. it is also being practiced in the
international trade, one example given in the lesson is that “Agricultural countries export raw materials
and import finished products from the industrial countries”, agricultural countries have chosen the option
of raw materials exportation rather than making finished products out of the raw materials to be exported.
As an agricultural country they know that the price of exported raw materials is higher so they will only
focus on it.

6. Explain the ideas of Marx. Do you agree with him? Why?

Karl Marx economic ideas were basically derived from the classical economists. He stated that
labor must be socially necessary. Also, according to him, workers are the real producers of goods but the
benefits of the production go to capitalists. He also highlighted the between the capitalist and the laborers.
Yes, because there is criticism, abuse and inequality on how they approach their laborers, capitalist
decrease the rate of profits while increasing their wealth and it leads to a conflict between the two.

7. Based from different Growth Model, Choose 1 that you think the best model and explain it on
how it can help in the economic status of the country (Philippines).

The Kaldor Model. It was stated that “Technology” is the key factor, for me it is the best model,
because it is true that through technology everything would be easy, production of goods and services,
exportation, etc. If the Philippines would invest in technologies like agricultural machineries, construction
machineries, factory equipment’s so on and so for, the hours of production of goods and services have
shortened that it could be traded as soon as possible. Agricultural machineries are a great help in the
agricultural sectors, farmers could easily farm the lands that the government are providing or those
private agricultural sectors. When the Philippines have an enough technologies for production, it would
increase our economic development and growth. We can already adapt in the fast trading across the
borders and we can attract foreign investors and the demand will increase. If we are well equipped of this
equipment’s, the Philippines can expand its exportation and produce other materials that are in demand in
the trading sector.