Try This!

Is it TRUE or FALSE?
1. Consumer goods are goods that directly satisfy a need or a
want.
2. A pair of shoes is an example of consumer goods.
3. A capital-intensive method of production uses much money in
order to produce goods.
4. Before a kind of goods is produced, the producer must
determine if he or she has the available resources to produce
it.
5. It is important for the economy to use modern technology and
to discover more resources in order to produce more goods
and services for the years to come.
 Limited Problem of Unlimited
Resources Wants and
Scarcity
Needs

FUNDAMENTAL
CHOICES

Growth
Production Distribution Consumption
Overtime
PRODUCTION
 What type of goods to produce?

In what manner these goods are to be

produced?

PRODUCTION
 Consumer Goods
those that are directly satisfy human needs and
wants.

Capital Goods
are human-made goods that produce other goods
or other capital goods; hence, these goods indirectly
satisfy human wants.

PRODUCTION
 Availability of Resources

The Needs and Wants of Consumer

PRODUCTION
The choice of the method of production to be used
depends on the cost of production which is
determined by the amount of money spent on the
resources used.

The more available the resources become, the

lower the prices that are paid for them.

PRODUCTION
 Least-Cost Method

A choice of method of production to be chosen will

then be the one that will use the resources that are
abundant and readily available.
 Method of Production

• Labor-intensive method
Uses more labor resources and less of capital resources

• Capital-intensive method
Uses more capital resources and less of labor.

PRODUCTION
Production Possibilities Curve (PPC)
Clearly illustrate the problem of production and resource
allocation.

This is a line that shows different possible combinations

of two goods that can be produced under the following
assumptions:
1. The supply of resources is fixed
2. The state of technology does not change
3. All resources are fully employed
PRODUCTION
Production Possibilities Curve (PPC)
Graphic representation showing all the possibilities
options of output for two products that can be produced
using all factors of production, where given resources are
fully and efficiently utilized per unit time.

Illustrates several economic concepts, such as allocative

efficiency, economies of scale, opportunity cost,
productive efficiency and scarcity of resources.

PRODUCTION
 Rice

A F

D
G
E

C
Computer

Fig.1. Production possibilities curve of Country Maharlika

The PPC has two characteristics:

1. It is downward sloping

2. It is concave to the point of origin

PRODUCTION
 Law of Increasing Opportunity Cost

States that as more quantities of one kind of goods

are produced, more and more units of the other
kind of goods, are sacrificed.

PRODUCTION
 Rice

A F

D
G
E

C
Computer

This point show full production and full employment of resources

 Rice

A F

D
G
E

C
Computer
Resources at this points are not fully employed since some resources
are either unemployed of underemployed.
 Rice

A F

D
G
E

C
Computer

These combinations are beyond the productive capacity of the economy.

Learning-by-Doing Exercise

1. Consider two nations, Nation A and Nation B. Nation A

produces lesser output of goods and services than
Nation B. Which Nation has a production possibilities
curve that is further from the point of origin?
Learning-by-Doing Exercise

Suppose Nation A has been ravaged by a war that

has destroyed its factories and natural resources
and decrease its labor force. Will the PPC of
Nation a shift to the left or to the right?
Learning-by-Doing Exercise

Suppose Nation B is able to invent robots that can

help in the production of more goods. Will the PPC
of Nation b shift to left or to the right?
Learning-by-Doing Exercise

If Nation A produces goods and services that

are way below its potentials, it is producing at
a point inside its PPC or outside?
Learning-by-Doing Exercise

If the resources of Nation B are fully

employed in the production of goods and
services, is it producing at a point or on its
PPC?
DISTRIBUTION
Distribution

is concerned about the manner by which the goods that have

been produced will reach the consumer.

DISTRIBUTION
 Types of Economy
Market Economy

The supply and demand regulate the economy, rather

than government intervention.

DISTRIBUTION
Characteristics of Market Economy
(a)Most goods and services are privately-owned
(b)Owners are free to produce, sell, and purchase goods
and services in a competitive market.
(c)Everyone sells their wares to the highest bidder while
negotiating the lowest price for their purchasers.
(d)The force of competitive pressure keeps prices low

DISTRIBUTION
 Types of Economy

Centrally-Planned Economy
-is one where the government controls the country’s
supply and demand of goods and services.
-the government decides what goods and services will be
produced, how much of each good or service will be
produced, and how much of each good or service will be
produced and the price at which those good and service
will be sold.

DISTRIBUTION
Centrally-Planned Economy

Characteristics of a Centrally-Planned Economy

(a) Production activities are undertaken by the government
(b) The factors of production are owned by the government
(c) A planned economy focuses on social welfare
(d) The role of private entrepreneurs is minimal
(e) The state controls the distribution of goods among segments
of the society

DISTRIBUTION
Solution to their Central Problems

(a)What to produce Produce goods that will enhance

the welfare of society
(b)How to produce Employing those techniques of
production which best suits the economic conditions
(c)For whom to Produce For the society as a whole

DISTRIBUTION
Mixed Economy
- the combination of the centrally-planned and the market
economy.
- economy in which both government and private
individuals exercise economic controls.

DISTRIBUTION
Characteristics of Mixed Economy
(a) Government and individuals share the decision in making
process
(b) Government guides and regulates production of goods
and services offered
(c) Individuals own means of production
(d) Protects consumers and workers from unfair policies
(e) Businesses own most resources and determine what and
how to produce, but the government regulates certain
industries.
DISTRIBUTION
CONSUMPTION
Problem of Consumption

What goods to consume?

In what quantity?
Centrally-Planned
Economy Government

Market Economy
People/
Consumer

Mixed Economy
GROWTH OVER TIME
ECONOMIC GROWTH

-increase in the total output produced by the

economy over time.
 Level of
Technology and
Resources
The economy must choose how to do so..

Discovery of new Adoption of a new

resources technology