MICROECO_LESSON_WEEK4

Page 1: Introduction

Course Title

• SSM 102a: Microeconomics

Instructor

• Jennifer S. Mayano

• SHS HUMSS Teacher / T-III

Page 2: Economic Problems Overview

Fundamental Economic Problems

• Discussion of fundamental economic issues faced due to resource scarcity and unlimited human wants.

Page 3: Fundamental Economic Problems

Core Issues

• Each economy faces critical problems arising from limited resources.

Page 4: Scarcity and Resource Allocation

Basic Economic Questions

1. What to Produce?

   • Determining what goods and services should be produced based on limited resources.

Page 5: Decisions on Production

Factors in Production Choices

• Choices are influenced by consumer demand, governmental priorities, and the availability of resources.

Page 6: Prioritizing Production

Citizen and Cultural Needs

• Decisions also depend on the needs and desires of the population along with cultural preferences.

Page 7: Efficiency in Resource Use

Determining Production Methods

2. How to Produce?

• This involves evaluating the efficiency of resource use and considering costs, efficiency, and environmental impacts.

Page 8: Production Techniques

Selection of Methods

• Choices between labor-intensive vs. capital-intensive methods focus on minimizing costs and using resources efficiently.

Page 9: Allocation Issues

Targeting Distribution

3. For whom to produce?

• Concerns about how goods and services are distributed, emphasizing income and wealth allocation equity and social welfare.

Page 10: Goods Distribution

Society's Product Allocation

• It focuses on the mechanisms of distributing products among individuals and groups, considering factors like income and purchasing power.

Page 11: Sustaining Economic Growth

Growth Strategies

• Addressing how economies can sustain long-term growth through investments in technology, infrastructure, and human capital.

Page 12: Economic Interdependence

Definition

• The concept where individuals, businesses, or countries rely on one another for the procurement of goods, services, and resources, promoted by specialization and trade.

Page 13: Specialization and Trade

Interdependence Dynamics

• Different entities focus on what they can produce most efficiently leading to more effective trade relationships.

Page 14: Comparative Advantage

Economic Principle

• Allows specialization in lower opportunity cost goods or services, enhancing efficient resource use and trade.

Page 15: Opportunity Cost Defined

Definition

• The cost incurred by choosing one alternative over another; crucial in making production decisions.

Page 16: Opportunity Cost Examples

Practical Illustration

• Example: If the Philippines opts to produce rice over corn, the opportunity cost is the amount of corn forgone in production.

Page 17: Specialization Benefits

Advantages of Focused Production

• Enhanced outcomes result when every entity focuses on its strengths, allowing improved trade dynamics and economic growth.

Page 18: Comparative vs Absolute Advantage

Definitions

• Absolute Advantage: The capability of a country to produce a good using fewer resources.

Page 19: Comparative Advantage Explained

Opportunity Cost Comparison

• Comparative Advantage occurs if a country produces a good at a lower opportunity cost than another, irrespective of absolute efficiency.

Page 20: Trade Example - Philippines and Japan

Comparative Advantage in Action

• Rice Production:

  • Philippines: 10 tons rice, 2 cars

  • Japan: 5 tons rice, 10 cars

• Philippines specializes in rice, Japan in cars for mutual benefit.

Page 21: Specialization Results

Benefits Enumeration

• Comparative advantages lead to better resource usage, lower production costs, and enhanced consumer choices through increased goods variety.

Page 22: Challenges of Comparative Advantage

Potential Issues

• Risks include over-reliance on trade, job displacement in certain industries, and external factors affecting production capabilities.

Page 23: Global Supply Chains

Key Concept

• Products across the world often involve multiple countries contributing components, exemplified by the supply chain of a smartphone.

Page 24: Financial Interdependence

Economic Financing Reliance

• Countries engage in international investments and utilize loans to finance economic operations, such as the case in the Philippines with FDIs.

Page 25: Labor Migration

Workforce Dynamics

• Migration for job opportunities impacts local economies, highlighted by OFWs sending remittances home.

Page 26: Energy and Resources

Interdependence in Resources

• Countries are connected via energy supplies, illustrating the Philippines' reliance on oil imports from the Middle East.

Page 27: Technology and Innovation

Collaborative Benefits

• Nations collaborate on R&D leading to technology advances, with the Philippines benefiting from imports of foreign technologies.

Page 28: Economic Systems Overview

System Definitions

• Economic systems organize how societies manage the production and distribution of goods and services.

Page 29: Traditional Economies

Characteristics

• Traditional economies prioritize customs and barter over cash, often linked to agriculture or hunting.

Page 30: Traditional Economy in Practice

The Lack of Surplus

• Bartering is necessary for the exchange of goods in economies without surplus resources.

Page 31: Command Economy

Centralized Control

• The government dominates the economic landscape through regulations and directives, controlling production and distribution.

Page 32: Command Economy Examples

Historical Context

• Examples include North Korea and the former Soviet Union where private businesses were not existent.

Page 33: Market Economy

Supply and Demand Dynamics

• Production and pricing are driven by supply and demand forces without significant government intervention.

Page 34: Characteristics of Market Economy

Free Market Principles

• Individuals and businesses make economic decisions focused on profit generation influenced by market changes.

Page 35: Mixed Economy

Blended Approach

• Hybrid model incorporating both market and planned economic elements with significant regulation alongside private ownership.

Page 36: Circular Flow of Economic Activity

Concept Overview

• Describes the continuous movement of money in an economy through exchanges for goods and services.

Page 37: Circular Flow Dynamics

No End to Activity

• The model illustrates endless cycles of production, income generation, and spending within the economy.

Page 38: Two-Sector Model

Basic Interactions

• Households supply production factors to firms and are compensated via wages, while firms sell goods to households.

Page 39: Three-Sector Model

Government Inclusion

• The government plays a role through taxation and public service provision impacting overall economic flow.

Page 40: Four-Sector Model

Trade Impact

• Incorporates foreign trade effects, emphasizing imports and exports, with continuous transactions affecting domestic economies.

Page 41: Key Flows in the Circular Flow Model

Major Economic Exchanges

• Product Market: Goods/services exchanged

• Factor Market: Households contribute labor/resources.

• Government Intervention & Financial Market: Tax collection and financing.

• Foreign Market: Influences of global trade activities.

Page 42: Conclusion

Thank You

• Acknowledgment of participation and attention given in the economic study.