Chapter 1.

The Philippine Economy B – Desired Learning Outcomes (DLOs)

At the end of the unit, the students must have:

This chapter covers topics on the Philippine economic development and its 1. Discussed the Philippine economy.
fundamental economic problems. This chapter also explains why economics is important and 2. Defined economics and agriculture economics and some economic terms such as
interesting. It defines the study of economics, and discusses what it is about. It introduce and producers, consumers, macroeconomics, microeconomics, positive and normative
explain economic terms, including producers, consumers, macroeconomics, microeconomics, economics, absolute prices, and relative prices.
positive and normative economics, absolute prices, and relative prices. The major discussion 3. Explained the fundamental economic problems in the entrepreneurial economy.
explains why scarcity is the fundamental concept of economics. The chapter also introduces
Topics
and explains economic organization, resources, trends in the agricultural economy, and a
review of graphs and their construction. 1. Understanding Economics and its importance
2. The Philippine economy nowadays
3. Definition of economics, agriculture economic and economic terms such as
A- Introduction
producers, consumers, macroeconomics, microeconomics, positive and normative
Most of human activities like production and consumption involve economics. For economics, absolute prices, and relative prices.
instance, earning money, buying goods and services, putting up a business or saving in a bank 4. Fundamental Economic Problems
is an economic activity. Government major operations such as collection of taxes from the
C – Content Focus
people, government spending, and achieving economic growth for the country requires
economic planning. Likewise, a businessperson has to apply the basic economic principles in Understanding Economics and its importance
producing and marketing his goods. Furthermore, economic conditions and policies of other
Economics is the proper allocation and efficient use of available resources for the
countries can affect the direction and nature of the Philippine economic development.
maximum satisfaction of human wants (Fajardo, 2004). It is a social science, meaning that it
Like many other nations of the world, Philippines is considered under mixed uses scientific methods to study the way people behave (Barkley & Barkley, 2013).
economic system. It manifests capitalist market economy in its cities and more advanced Economics definition indicates three things; scarcity, economic good and unlimited human
municipalities, command economy most especially in its major industries like energy and wants.
transport, and the agricultural and subsistence economy persist among its barrio folks and
Since resources are generally scarce while human wants tend to be unlimited,
indigenous groups.
economics encounters not a few problems. However, the biggest problem is not limited
Hence, understanding economics provide many possibilities that may guide every resources like land, money, machines, raw materials, technology, skilled workers, or
individual how to make a living, how to use money wisely, how to manage a business, how to competent managers. The root problem, which is the real problem, is the unjust distribution of
distribute properly our available scarce resources, and how to maximize our profits, and productive resources among the members of the society. Such misdistribution of wealth and
consumer satisfaction. With the use of appropriate economic decision and implementation, income is the root cause of poverty. Our available resources are in the hands of very few
life for everybody is most likely better. families. So most of the people are mere tenants, clerks, factory workers and servants.

The fundamental problem of unfair allocation of resources has been a global

problem. Most of the countries of the world experience such problem. There are extremely

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very few rich while there are many poor. These countries are located in Africa, Asia and Latin
America (South America and Central America) these regions are the poorest in the world.
How do we measure how poor or wealthy a given nation is compared to another?
Gross Domestic Product (GDP) per capita is often considered the standard metric, by
compensating for differences in living costs and rates of inflation the purchasing power parity
(PPP) can better assess an individual’s buying power in a particular country.
On the other hand, the few rich countries spend billions and billions of dollars for the
foods of their favorite dogs and for arms race. Indeed, it is very sad comparative note in
illustrating the unjust distribution of resources. However, this is what really happens in our
own world.
Can we not correct the wrong distribution of wealth and income of our society? It is
noted that there are very few rich and very few poor in countries like the United States, Japan,
Germany, France, Canada, and Great Britain. Their lands have been fairly allocated. There are
no squatters in their own countries.
The Philippine Economy nowadays
Amidst the health crisis caused by the covid-19 pandemic around the world and also
faced by our country, some of the economic activities was frozen Philippines by quarantine
measures, tremendous typhoon experienced by some of the areas during the month of
November 2020, and the world economic recession shrink the Philippines economy to 8.1%
(worldbank.org., 2020).
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Philippines economy before covid-19 pandemic crisis is progressively increasing
giving every Filipinos positive outlook for succeeding years for good business opportunities,
employment, and increase income and increase purchasing power of households, which
resulted to increase government income thru taxes. Philippines economic standing has
become competitive and ranked 33rd among the largest economy by nominal GDP according
to the 2019 estimate of the International Monetary Fund's statistics. Also, the 13th largest
economy in Asia, the 3rd largest economy in the ASEAN after Indonesia and Thailand, and
the sixth richest in Southeast Asia by GDP per capita values, after the regional countries of
Singapore, Brunei, Malaysia, Thailand and Indonesia. The Philippines is primarily considered
a newly industrialized country, which has an economy in transition from one based on
agriculture to one based more on services and manufacturing. As of 2017, GDP by purchasing
power parity was estimated to be at $1.980 trillion (Worldbank, 2019).
Economic growth slowed in the first half of 2019, driven by a rapid deceleration in
investment growth due to contraction in public spending and weaker global economy.
Nevertheless, the Philippines expects to sustain progress in poverty reduction. The Philippine
government’s expansionary fiscal policies for 2019 was put on hold as the delayed passage of
the 2019 public budget impacted the pace of public spending significantly in the first half of
the year, resulting in substantial underspending. Nevertheless, the implementation of previous
tax-policy reforms led to robust revenue, resulting in a lower than programmed fiscal deficit
for the first half of 2019. Improving labor market conditions, and sustained growth in real
household incomes, led to progress in poverty reduction.
Agricultural Economics is an applied field of economics concerned with the
application of economic theory in optimizing the production and distribution of commodities
produced by farming. It combines the technical aspect of agriculture with the business aspects
of management, marketing, and finance. In the United States of America, Agricultural
Economics was first taught at Harvard University and at the University of Wisconsin in 1903.
Later on, this was introduce in the Philippines called the Bureau of Agricultural Economics in
June 22, 1963 under the office of the Secretary of Agriculture and Natural Resources (Barkley
& Barkley, 2013).
Three indication of economics
a. Scarcity - refers to the condition wherein most things that people want are available
only in limited supply, hence, must be rationed, either by price or by some other
means. The imbalance between our desires and the means of satisfying those desires.
 b. Economic good – anything, either a good or service, that yields utility and could Fundamental economic problems of economics
command a price if sold in the market (e.g. books, cell phones, ukay-ukay, etc.)
1. What (if anything) should I produce?
c. Unlimited human wants – “wants” refers to a person’s desires or preferences to
2. How much should I produce?
satisfy a basic need.
3. How should I produce it?
4. When should I produce it?
Some economics terms 5. For whom should I produce it?

1. Producer - an individual or firm that produces (makes; manufactures) a good or E – Self-Check/Assessment

provides a service.
2. Consumer - an individual or household that purchases a good or a service. Instructions: Fill the blank the letter of your best answer before the number. Erasure is also
3. Microeconomics - is a study of economics at an individual, group or company level not allowed.
or the study of particular markets, segments of the economy. It looks at issues such
as consumer behavior, individual labor markets, and the theory of firms. ________1. A left – alone policy with respect to the business as a neutral consequence of the
4. Macroeconomics - deals with the performance, structure and behavior, and decision- principle of competition which is underlying assumption of the invisible hands
making of an economy as a whole. This includes the national, regional and global a. Costs c. economics
economies. The indicators of macroeconomics are; output (GDP), unemployment b. Laissez Faire d. Freedom
rates, national income, and price indices
5. Positive economics - based on factual statements. Such statements contain no value ________2. Regardless of what economic system in the distribution of good and services,
judgments. Positive statements describe “what is.” Attempts to describe how the what are the basic problems in economics?
economy functions, and relies on testable hypotheses. Example: 1) If the government a. who must be the leader, where s/he must stay, how much s/he will be paid and what
raises the tax on beer, this will lead to a fall in profits of the brewers, 2.) Higher must s/he do
interest rates will reduce house prices b. what and how much to produce, how to produce them, and for whom the benefits of
6. Normative economics - based on statements that contain opinions and/or value production must go
judgments. A normative statement contains a judgment about “what ought to be” or c. what, where, when and how production will take place
“what should be.” This relies on value judgments to evaluate or recommend d. where to obtain goods, how much must be paid for them, when they must be
alternative policies. Subjective statements rather than objective statements. Example: consumed and who can buy them
1) Pollution is the most serious economic problem, 2) The government is right to
introduce a ban on smoking in public places ________3. Assuming an economy is producing only rice and vegetables. Being on the
7. Absolute prices - a price in isolation, without reference to other prices. Example: The possibilities frontier means that:
price of rice is 1 200/sack. a. It is impossible to produce any more vegetables
8. Relative prices - the prices of goods relative to each other. Example: The price of b. It is impossible to produce more rice
rice increased relative to the price of corn. c. More vegetables can be produced only by doing without some rice
d. If the society becomes more productive in producing rice, then we can have more
rice but not more vegetables

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________4. If the economy is operating inside the production possibilities frontier, then 1. In your own opinion, why economics is very useful in managing your own finances?
a. The economy experienced technical change (10 points)
b. Some of the materials used in production are not fully utilize
___________________________________________________________________________
c. The economy cannot produce more of one goods without giving up more of the other
goods ___________________________________________________________________________
d. All the resources are used efficiently
___________________________________________________________________________
________5. Which of the following is a normative statement?
___________________________________________________________________________
a. A guaranteed annual income will have a distinctive effect on work
b. If price controls are removed the energy shortage will be somewhat alleviated ___________________________________________________________________________
c. Price controls on oil and gasoline are only fair
2. Since resources are scarce, proper allocation of available resources to answer the
d. The minimum wage law causes unemployment among teenagers
economic problems of the society must be considered. Choose at least one economic
problems and how they can satisfy individual wants and need. (20 points)
________6. A field of economics that deals with the study of individual economic units
operating within the economy ___________________________________________________________________________
a. Microeconomics c. production economics
b. Macroeconomics d. agricultural economics ___________________________________________________________________________
________7. A study that deals with “what is ought to be” in the economy
___________________________________________________________________________
a. Microeconomics c. positive economics
b. normative economics d. agricultural economics ___________________________________________________________________________

________8. The application of economic principles and theories in agriculture: ___________________________________________________________________________

a. production economics c. agricultural economics
b. microeconomics d. normative economics
Rubrics for Essay Question
________9. Why economics differs from other social sciences?
a. it study on social choices c. it pertains to scarcity Criteria for Written Exercises (As Agreed by the whole class)
b. it has social interactions d. it study social behavior
Content (Correctness and Appropriateness of Ideas Presented) – 10 points
________10. Resources that are scarce relative to their uses Convention (Linguistic Appropriateness – Grammar, Phonology, Semantics) – 5 points
a. free resource c. economic resources Quality (Neatness, refinement and skillfulness) – 5 points
b. natural resource d. human resources Total = 20 points

F – Self-Reflect References

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Andrew Barkley and Paul W. Barkley. 2013. Principles of Agricultural Economics.
Simultaneously published in the USA and Canada by Routledge ,Taylor & Francis
Group, an informa business. ISBN: 978-0-415-54069-8 (hbk); ISBN: 978-0-415-
54070-4 (pbk); ISBN: 978-0-203-37114-5 (ebk)

Asor, Winifreda T. Entrepreneurship. Publishing, Inc. 2007.

Barkley, Andrew and Paul W. Barkley, 2013. Principles of Agricultural Economics.

Routledge, Taylor and FRancus Group, London and New York. ISBN: 978-0-415-
54069-8

Fajardo, Feliciano. 2008, Third Edition. Entrepreneurship. Philippine Copyright (1994).

Reprinted and Published by National Bookstore

Prepared by:

MARY GRACE ARCENAL-APOLONA

Course Instructor