MODULE 1 TOPIC 3: ECONOMIZING PROBLEM

• Land - refers to all resources

• Resources and their categories

  • Physical resources - in relation to capital:

    • investment (economics)- spending on capital goods

    • 2 types of investments:

      • financial capital

      • real capital (tangible) / physical assets

• Dati land, capital, labor lang. now with entrepreneurial ability na.

  • Labor - mental and physical talents / skills of men and women usable in production

  • entrep ability - mental and physical talents / skills of men and women to run/operate the business

• Relative scarcity - the resources are scarce, therefore the g/s produced out of these scarce resources are also scarce

• RESOURCE PAYMENTS

  • Property resources

    • land - rent (rent bc the land isn’t owned privately)

    • capital - interest

  • Human resources

    • labor - wages

    • entrepreneur - profit & loss

• Efficiency - getting the most from available resources

  • full employment - using available resources (quantity)

  • full production - using resources that contribute most to production (quality)

• Efficiency concepts

  • allocative - goods and services are demanded by society - willing to pay, demanded (e.g. milktea, jewelry)

  • productive - producing at least cost possible way (minimum cost)

• tatapusin muna ppf bago mag graded quiz

SELF-STUDY SESSION:

• Production Possibilities Curve (PPC) - a model depicting limit to what an economy can produce; reveals that goods and services have opportunity cost

• For some reason, -1 yung values ng sa pizza

  • 

• Production possibilities curve

• the production possibilities curve (frontier) marks the boundary between attainable & unattainable production levels

• Law of Increasing Opportunity Costs:

  • as we make more pizzas, the # of robots we have to give
    up (per pizza) increases (as we make more we give up more of the other)

  • so production possibilities curve gets steeper and
    steeper

• LAW OF INCREASING OPPORTUNITY COSTS

  • a graph of production possibilities curve will be concave - bowed out from origin

• Economic Growth: a rightward shift of the production
  possibilities curve caused by....

  1. Increases in resource supplies

  2. Advances in technology

  3. Use of specialized inputs (e.g., hybrid rice)

  4. Engage in international specialization and trade

• 2 examples of economic growth

  

  1. favoring present goods

  2. favoring future goods

• Economic system types

  • traditional

  • command/planned

  • market system- dominant economic system used by many nations in
    the world

    • 1. Private ownership of resources
      2. Freedom of choice and enterprise
      3. ...

  • mixed system - Philippines, market + government intervention

    • 1. Allocation Function
      2. Stabilization Function
      3. Redistribution Function

SYNCH SESSION NOTES

Assumptions in the pp curve

• X and y are goods not variables

• Labor must be of the right scale/skill

• Available resources “fixed”

• Technology is assumed to be fixed

• Ppc tells us that there is a limit, we don't have unlimited responses

• There may be many resources but they're not available

• Ppc shows us the various combinations of goods an economy can produce; the maximum you can produce

• Downwards sloping

  • Convex- decreasing at an increasing rate

  • Concave- increasing at a decreasing rate.

    • Implies that the opportunity cost increases

  • Straight-

• Not only resources are sacrificed. For ex studying. Sleep, in line with health,is sacrificed too

• As long as on the ppf, its efficient

  • Pag outside, unattainable

  • If wala sa curve, inefficient

• Law of increasing opportunity costs

• Slope- triangle y/ triangle x = y2-y1/x2-x1

3rd session

• slope = change of y / change of x

  • 

• economic growth =/ economic development

  • former - increase in level of output, more goods and services are made available

  • engage in international specialization - comparative advantage

• production possibility: 2 examples of economic growth

  • favoring present goods

  • favoring future goods

  • 

• GDP - measure of your output

• Market system: operation - used by many systems, capitalism

  • private ownership

  • freedom of choice and enterprise

  • self interest

  • competition - “free enterprise economic system”

  • systems of markets and prices - every buyer and seller is a price-seller

    • price - language in a market economy, coordinate goods and services according to price

    • market - a mechanism which brings buyers and sellers 2 kinds:

      • input market

      • product market

• Adam smith

  • invisible hand - laissez faire

• a market will not exist if there are no buyers - demand and supply

• role of the government in a market system

  • providing legal structure

  • maintaining competition

  • redistributing income

    • price controls - government has this

    • taxation - progressive taxation

      • higher income - lower taxes = other countries adopt this: regressive tax system

  • reallocating resources

    • externalities - affected by another party’s activity

    • if a market system creates negative externalities, that is when we should seek the government

      • positive - education

      • negative - pollution

  • promotes stability

    • inflation

    • unemployment

• mixed economic system - socialism; heavy on government intervention

• not all production is profitable

• whatever leaks out sa circular flow , it goes back in - irl di siya nangyayari bc kulang tayo savings, imports are greater than exports

  • this is how government comes in the picture

F2F DISCUSSION

• market demand curve- downward sloping; indicates indirect relationship

• Law of demand

  • as price decreases, quantity demanded increases

  • common sense

  • income effect and substitution effect

  • law of diminishing marginal utility

    • utility - satisfaction

    • marginal - change / add 1 extra

    • increasing at a decreasing rate

    • as a person consumes more of an item or product, the satisfaction (utility) they derive from the product wanes

• water-diamond paradox - the paradox of value is the apparent contradiction that diamonds are more valuable than water, even though water is needed for life

  • stumped adam smith

  • law of marginal utility explains this - mabilis magkaron ng falling marginal utility

  • law of supply and demand

• Application of LDMU in business

  • fast-food restaurants - have to come up w strategies on how to offer products kasi nadidisasatisfy mga tao

    • combined meals

    • offering products in packages or sets

  • clothing, shoes, apparels

    • bulk purchases

    • limited edition clothes

    • partnering w bloggers who give discount codes

    • bundle discounts

• individual demand vs market demand

  • market demand - summation of individual demands

• demand function (equation)

  • mathematical expression of demand; relationship between Qd nd price while other factors r constant

  • can be expressed in two ways

    • quantity function

    • price function

  • y = mx+b (y= a + bx)

    • b = vertical intercept

    • m = slope or indication of the line (constant)

      • y2-y2/x2-x1

• slope is negative for a demand function

• by delta - change, we mean difference

• determining a linear equation

  1. two-point form formula

  2. point-slope formula

  

• Problem sample

  1. determine demand function

  2. interpret demand slope and intercept

  3. graph demand curve

  

NEXT MEETING CHAPTER 2

NOTES WHILE STUDYING FOR EXAM:

Economic growth requires:

1. Increases in resource supplies
2. Advances in technology
3. Use of specialized inputs (e.g., hybrid rice)
4. Engage in international specialization and trade

Economic systems differ as to (1) who owns the factors of production and (2)
the method used to motivate, coordinate, and direct economic activity. Economic
systems have two polar extremes: the command system and the market system

Characteristics of PPC:

1. downsloping

2. concave

Characteristics of Market System:

Private Ownership of Property Resources

Freedom of Enterprise and Choice

Self-Interest

Competition

Markets and Prices

Technology and Capital Goods

Specialization

Use of Money

Active, but Limited Government: “Laissez Faire” (Leave it Alone) Ideology

The economic functions of government:

• providing the legal structure

• maintaining competition

  • regulation

  • antitrust - involving laws or actions that are intended to make business competition fair and to prevent any company from being a monopoly

• redistributing income

  • transfer payments

  • market intervention

  • taxation

• reallocating resources

  • Market failure occurs when the competitive market system (1) produces the
    “wrong” amounts of certain goods and services or (2) fails to allocate any
    resources whatsoever to the production of certain goods and services whose
    output is economically justified.

  • externalities

  • public goods and services - free-rider prob

• promoting stability

  • inflation

  • unemployment