COURSE:

ECONOMIC DEVELOPMENT
 Economic Development

Module 1:
INTRODUCTION & OVERVIEW
Topics:
1.Economic Theory
2.Review of Basic Economic Concept
3.Demand and Supply of Resources
4.Importance of Allocation of Resources
I. Pre-test / Activity:

• ASYNCH, write a summary of your key takeaways during the

Orientation on National University VMGs, Core Values, GAINs
and class policies.
 Learning Outcomes
1. Students should be able to have a basic
understanding of economics – the
importance of scarce resource allocation

2. Understand Development and how it

relates to economic theory

3. Appreciate the concept of output and

improvement in the quality of life

4. Understand the circular flow model and

its basic components in economic analysis
1. Economic Theory
Economic theories are simplified models abstracted from
complexities of real world, with simplified explanations of
how economy, or part of economy, functions or would
function under specific conditions.
The major approaches to economic
theory are divided into two categories:
1. Positive
2. Normative
 1. Positive economics- is an area of economics
that is concerned with fact and relationships
among them. It is concerned with “what is”.
Positive economics is concern with what the
economy is actually like.
Ex.: “Unemployment is 16% of the labor force”
“Enrollment declined due to increase in tuition
fee”
 2. Normative economics- is area of economics
that deals with value judgments; about whether
economic policies for conditions are good or bad.
It is concerned with “what should be” or “what
ought to be”.
Ex.: “Unemployment should be reduced”
“Tuition fee should be restructured to improved
enrollment level”
2. Review of Basic Economic Concepts
Human Wants - any economic activity is geared
towards the satisfaction of human wants.

Ex.: The best example is a person pursuing

higher education after a bachelor course.
Resources - are the means for providing goods in order to
satisfy human wants. These may include labor, land, and
capital.
Resources are classified into categories:
• labor or human resources,
• and non-human resources .
The three basic characteristics of resources are:

• that most are limited in quantity

• versatile
• can be combined in varying proportions to produce a given
commodity.
• Economic resources
• Free resources
• Economic resources
Production techniques (PT) - are the knowledge and physical
means of transforming resources into want-satisfying form.
Traditional economics - is concerned primarily with the efficiency/
efficient.

Political economy - goes beyond traditional economics to study,

among other things, the social and institutional processes through
which certain groups of economic.
Costs and Benefits
The concept of costs and benefits is related to the rational
expectations and rational choices of consumers.

Ex.: University students perform cost-benefit analyses on a

daily basis by choosing to focus on certain courses that they've
deemed more important for their success.

]
3. Demand and Supply Resources
Demand for Resources
A.The firm's demand for resources is derived from the demand
for its product.

This occurs for two reasons:

1. Firm will try to substitute other resources,
 2. An increase in resource price increases the firm's
overall cost. This reduces supply causing market price of
output to rise.

B. The elasticity of demand for resources in directly related

to the elasticity of demand for the products they are used in.
C. Price elasticity of demand for a resource will generally
increase with time.
 D.Shifts in Resource Demand -- Demand for a resource
may change.
1. A change in product demand will cause a similar
change in the demand for the resources used in its
production.

2. A change in the productivity of a resource will change the

demand for it
 3.A change in the price of a substitute resource will
affect demand for the original resource.

a.Substitutes
b.Complements
Supply of Resources
Resource owners will supply a resource to an employer if
the benefits of doing so exceed the costs.

1.In the short-run, resources may not be very mobile.

Consequently, supply may not be very elastic in the short-
run.

2.In the long-run, the supply of resources can change

substantially.
1.Investment will affect supply.

2.Depreciation will affect supply.

4. Importance of Allocation of Resources
Analysis of how scarce resources ;are distributed among producers,
and how scarce goods and services are apportioned among
consumers.
Allocation of resources is a central theme in economics.

Resource allocation arises as an issue because the resources of a

society are in limited supply, whereas human wants are usually
unlimited, and because any given resource can have
many alternative uses.
IV. Activity
Classify the following
statements as either
Normative or Positive
Economics.
__________________ 1. A decline in income
will lead to an increase in demand for
generic brands of supermarket
__________________ 2. Pollution is the
greatest economic problem.
__________________ 3. If the government
will increase the tax on liquors and
wines, this will lead to a fall in profit for
the industry manufacturer
__________________ 4. Unemployment is
more serious economic problem than
inflation.
__________________ 5. Reduction in income
tax will give the unemployed increased
incentive to seek jobs.
__________________ 6. The government is
doing right to introduce a ban on
smoking in public places.
__________________ 7. The government
should increase the minimum wage by
300% to reduce poverty
__________________ 8. Higher interest rates
on loans will reduce debts.
__________________ 9. Lower interest rates
on savings will reduce deposits.
__________________ 10. The retirement age
among Filipinos should be raised to 70
to resolve ageing of population.
 VI. Other Reading Materials

Links
http://www.businessdictionary.com/definition/allocation-of-
resources.html
http://www.learneconometrics.com/
 VII. References

Dowling, J.M. and Valenzuela, R. (2012). Economic

Development in Asia, Second Edition, Singapore: Cengage
Learing Asia Pte Ltd.
Todaro, M. & Smith, S. (2015). Economic Development,
Twelfth Edition, USA: Pearson
Mutya, R. (2017). Economics with Agrarian Reform and
Taxation, Anvil Publishing Inc.