ALLOCATI

ON
USAGE
NOTES
• These are slides I use for my lectures on allocation and economic
systems, a first quarter topic in Economics under the K to 12
curriculum in the Philippines.
• All copyrighted materials were lifted from their respective sources
under the spirit of fair use. As such, I am uploading these slides in
the interest of helping out other public school teachers like me.
This material should not be used for any commercial purpose.
• Last modified: October 9, 2016
“ There isn’t
enough to go
around.” ~John
 mekanismo ng
pamamahagi ng
pinagkukunang-
yaman, produkto at
serbisyo
1 What
2 How to
toFopruodruBcea?
pErocm
3How douuc
ce
n om
h i t? ic
sic Q u
Four Economic
Systems
ECONOMIC
SYSTEM
consists of a matrix of:
1. social institutions (law, political institutions,
religion, etc)
2. agents (individuals or actors)
3. organizations (corporations, unions, charitable
org, not-for-profit firms, etc)
4. society (includes principles, beliefs, values)
ECONOMIC
SYSTEM
• function: coordinate the activities of agents in the
processes of provisioning and allocation
• most economies are a mixture that includes
elements from all 3 types
Traditional Economy

The Inuit tribes of Alaska

TRADITIONAL
ECONOMY
• evolved over time (traditions & custom form gradually)
• rate of change is slow
• rules of trade not apparent as economy but as moral
system
• medieval European rules against charging interest on
loans—considered a sin in the Christian faith of the
time
EXAMPL
ES
• pre-modern Europe
• pre-colonial tribes in the Americas,
Australia, Africa, and Pacific
islands
Command

Economy
 Command
Economy
• an overseeing government decides how resources are
distributed amongst individuals within the system
• trade and individual choice at the consumer and worker
level is minimal or, in some cases, entirely non-existent
• ideal: efficiency, equality
 Command
•
equ E c o n o
equal amount
ality of: by
wealthmak ing s ure
• in reality, the distributors of wealth at the
government level often hoarded wealth for
themselves

m
t o allot e y veryone an
 Market Economy
• individuals meet in markets and decide what economic
decisions they want to make for themselves
• ideal : efficiency, freedom
• emphasis on trade
• exchange of goods and services
 Mixed
Economy
• usually allow most people to decide how to obtain and spend capital,
what work they would like to pursue, how much they would like to
save, and what lifestyle they want to enjoy
 Mixed
Economy
• at the same time, a command-
based system from the
government places restrictions
on making choices and
encourages market participants
to move towards one decision
over another
 Synthesize What You Have
Learned
Who makes this decision? TRADITIONAL COMMAND MARKET MIXED
What to produce?
How to produce?
How much to produce?
Who gets what is
produced?
Dis/Advantage
• Whether a society
etxhscrhys outagenmhformal
geoen, fcri-ulaw
ed ilbeliefs,
ceantis,ufipdoeprinciples,
rrarso,l mticoaiethics,
n ty:-
emp h a s i ze s t h e u s e o f l
voamrul oeermsa,lismneornatildyt omain to aglrlaoducaal
atby
ceaqu
person,
osanother
irsieti noofuthrculture,
eccehaetc.
sr,ac“teArsi nticys aendcnoornmos omf a
requires a set of rules, an ideology to
ijustify
ccutlusrye sortgeromup
them, and a conscience in the
individual which makes him strive to carry
them out.” (Robinson, p13)
 MARKET COMMAND MIXED
ownership of predetermined, less
owned privately owned by state owned both by
means of flexible, less efficient
state and
production social benefit
individuals
resource price mechanism, rationing both
allocation supply/demand
taxes low high high
trade free trade is free trade is not none
emphasis the focus
stability business fluctuations stable
 TRY
•IT
State planners in Country A met to decide what the country should focus
on producing. After much deliberation, they decided it would be in the
country’s best interest to use their limited resources to produce
automobiles instead of other consumer goods, such as electronics or
textiles. The state planners passed their decision down to factories, and
allocated to them raw materials, workers, and other resources needed to
produce automobiles. Factories were then told how much they should
produce with these resources and who the final products should be
shipped to.
TRY
•IT
State planners in Country A met to decide what the country should focus
on producing. After much deliberation, they decided it would be in the
country’s best interest to use their limited resources to produce
automobiles instead of other consumer goods, such as electronics or
textiles. The state planners passed their decision down to factories, and
allocated to them raw materials, workers, and other resources needed to
produce automobiles. Factories were then told how much they should
produce with these resources and who the final products should be
shipped to.
 TRY
•IT
In Country B, business owners decide what to produce, how much to
produce, and who to produce for. The CEO of Tarheelia Audio, one of the
leading audio equipment producers in the country, recently decided to
increase production levels of the company’s newest MP3 player model,
and at the same time decrease production levels of their most popular
CD player. The reason for the emphasis on MP3 players is that demand
for CD players has decreased dramatically as MP3 technology has taken
over the market. Simply put, there is more profit to be made in the MP3
market.
TRY
•IT
In Country B, business owners decide what to produce, how much to
produce, and who to produce for. The CEO of Tarheelia Audio, one of
the leading audio equipment producers in the country, recently decided
to increase production levels of the company’s newest MP3 player
model, and at the same time decrease production levels of their most
popular CD player. The reason for the emphasis on MP3 players is that
demand for CD players has decreased dramatically as MP3 technology
has taken over the market. Simply put, there is more profit to be made
in the MP3 market.
TRY
•IT
In Country C, people rarely engage in market transactions. For
the most part, they do not need to. Families grow their own
vegetables and raise their own animals or hunt to get meat.
Certain times get tough for people in Country C like when the
winters are particularly cold or animals change their migration
patterns. For this reason, it is important that families stock up
in “good times” and develop relationships with neighbors with
whom they can share or trade.
TRY
•IT
In Country C, people rarely engage in market transactions. For
the most part, they do not need to. Families grow their own
vegetables and raise their own animals or hunt to get meat.
Certain times get tough for people in Country C like when the
winters are particularly cold or animals change their migration
patterns. For this reason, it is important that families stock up
in “good times” and develop relationships with neighbors with
whom they can share or trade.
TRY
• In Country D, business owners make most economic decisions. As
ITlong as they abide by fair trade policies, they can decide what to
produce, how to produce, and for whom to produce without
government intervention. These decisions are made by business
owners based on what happens in the market. For example, a
computer manufacturer recently developed a new video gaming
system, but decided to wait until closer to the holidays to release
the system to the public because it believed anticipation among
consumers would allow the company to charge a higher price for
the system
TRY
• In Country D, business owners make most economic decisions. As
ITlong as they abide by fair trade policies, they can decide what to
produce, how to produce, and for whom to produce without
government intervention. These decisions are made by business
owners based on what happens in the market. For example, a
computer manufacturer recently developed a new video gaming
system, but decided to wait until closer to the holidays to release
the system to the public because it believed anticipation among
consumers would allow the company to charge a higher price for
the system
TRY
IT
The implementation of the National Nutrition
Council in partnership with the DepEd of this year’s
Nutrition Month with the theme “First 1000 days ni
baby, pahalagahan para sa malusog na
kinabukasan” exhibits a feature of what type of
economic system?
• Source:
• Philippine Information Agency
• http://news.pia.gov.ph/article/view/12214673
34387/nutrition-month-focus-first-1000-days-
of-a-baby
1. What keeps markets
honest?

2. What is the
invisible hand?
Write one question
about something that
was confusing for you
or something you want
to know more about.
MARKET

a medium that allows

buyers and sellers of a
specific good or
service to interact in
order to facilitate an
exchange
Jean Baptiste Colb
& Mercantilism
• main economic system used during 16-18th
century (age of Imperialism)
• main goal was to increase a nation's wealth
by imposing government regulation on all of
the nation's commercial interests
• belief that national strength could be
maximized by limiting imports via tariffs and
maximizing exports
Laissez Faire
• an economic theory from
the 18th century that is
strongly opposed to any
government intervention in
business affairs

"let it be economics”
French for "leave alone"
Francois
“While theory states that a pure
market economy uses
resources and
labor most efficiently, in
reality, democracies have
additional goals besides
efficiency. ” ~Investopedia
“These may include minimum
levels of safety, education,
opportunity or health. To
accomplish these goals, they
introduce some centrally planned
rules andregulations to guide the
pure market forces.” ~Investopedia
CAPITALIS SOCIALIS
M M

private public
ownershi schools,
p public works
TRY IT
YOURSELF
• Synthesize your understanding of the four economic
systems into a three-minute skit showing scenarios from
each type.
• Make sure to demonstrate characteristics
particular/unique to each type.
• Also demonstrate advantages and
disadvantages.
• This will be peer-graded.
SKIT PEER
GRADING CRITERIA

The four economic systems were present.

1 2 3 4 5 6

I was able to easily distinguish the economic

systems they demonstrated.
Dis/advantages of each economic system were
showed clearly. 1 – St rongly
Disagree
The skit was informative and entertaining. 2 – Disagree
The group was creative in using readily 3 – Agree
available materials in the classroom. 4 – Strongly Agree
What about…

Capitalism,
Socialism, and
Communi
CAVEAT/
WARNING

• Bite-size definitions are

incomplete; these concepts are
complex
 Capitalism vs
Market Economy
Capitalism
an economic system organized around the
principles of private property, freedom of
exchange, and limited government
intervention
Capitalism
The means for producing and distributing goods (the
land, factories, technology, transport system etc) are
owned by a small minority of people. We refer to this
group of people as the capitalist class. The majority of
people must sell their ability to work in return for a
wage or salary (working class). World Socialist Movement
Capitalism
essential feature:
• private ownership of the means of
production (capital)
• individual economic freedom
Market Economy
market forces : collective effect of all the
decisions made by individual participants in
the economy - such as consumers and
businesses - according to their free will
Market Economy
essential feature : free competition
Difference
in capitalism, capital
owners have a lot of
dominance over the
means of production
and as such may yield
unfair influence
 Difference
capitalists in pursuing
profit maximization
may aim to reduce
and/or eliminate
competition
Difference
ISSUES IN A CAPITALIST
WORLD
Socialism vs

Communism
Socialism
based on public or collective ownership of
the means of production; directly (collective
ownership) or through government
Socialism
aim: narrow the gap between rich and poor
• government has a responsibility to
redistribute wealth to make society more
fair and just
Socialism
PRIVATE PROPERTY
1) consumer goods
2) means of
production
 SOCIALISM Capitalism’s Criticism
Advantages Criticism of Capitalism of Socialism

creates equality
exploits workers for ignores human
the benefit of small, nature and role of
wealthy class incentives
economic security
Communism
refers to community ownership of property,
with end goal being complete social equality;

ideal :

classless
Communism
PRIVATE PROPERTY
1) consumer goods
2) means of
production
 ability, to each
according to his
deeds.
SOCIALI
S
 ability, to each
according to his
needs.
COMMUNI
S
M
 SOCIALISM COMMUNISM
No private ownership of the
means of production No private property at all.

Narrow gap between rich and

poor. Eliminate class.

Capitalist state can be used to Overthrow the capitalist state

transition to socialism. through violent revolution.
knowing about
economic
systems?
Let’s take a look
at some
propaganda.
THIS POSTER IS BIASED IN FAVOR OF WHICH
ECONOMIC SYSTEM?
What the image does not say:

In a free market economy,

“artists” who are really
talented/exceptional will likely
be successful. Those who are
not as skilled will be forced to
change professions as they will
be unable to compete with
really good artists.
Competition, in this case,
ensures quality.
THIS POSTER IS BIASED AGAINST WHICH
ECONOMIC SYSTEM?
What the image does not say:

Obamacare is not the first

socialist institution in the USA.
Public schools, the military, the
fire department, national
parks – these are only some of
the many socialist-oriented
programs already existing in
the United States.
INTEREST
ED?
FURTH
ER
READI
NG

favors capitalism favors socialism