The Four Basic Economic Problems PDF

THE FOUR BASIC ECONOMIC PROBLEMS In the article of Guro, S. (2020) Basic Central Problems Faced by an Economy, there are basic problems common to all economies. In terms of production, common to all countries is the problem on scarcity. HOW TO FOR WHOM...

THE FOUR BASIC ECONOMIC PROBLEMS In the article of Guro, S. (2020) Basic Central Problems Faced by an Economy, there are basic problems common to all economies. In terms of production, common to all countries is the problem on scarcity. HOW TO FOR WHOM PRODUCE TO PRODUCE WHAT TO WHAT BASIC PRODUCE ECONOMIC PROVISIONS TO PROBLEMS OF BE MADE SOCIETY  WHAT TO PRODUCE HOW TO AND HOW MUCH PRODUCE -society must decide what -this refers to the resources goods and services should mix and technology that will be be produced in the applied in production. Society economy. Having decided must choose between the on the nature of goods that techniques to produce the will be produced, the commodity. The choice depends on the availability of different quantity of these goods factors of production and their should also be decided on. prices.  WHAT PROVISION/LAWS FOR WHOM TO SHOULD BE MADE FOR PRODUCE ECONOMIC GROWTH? -is about the market for -A society uses all its resources goods and services. It has to for current consumption. If a decide on who gets what society uses all its resources, then its production capacity will share of the total output of not increase. The standard of goods and services produced. living of the people and the In other words, society income of the workforce remain decides on the distribution of constant until the standard of the goods and services among livingwill decline in the future. the members of society.  ECONOMIC SYSTEMS TRADITIONAL COMMAND MARKET ECONOMY ECONOMY ECONOMY -Decisions -This is the -Based on are based on gauthoritative the working of traditions and system wherein demand and practices upheld decision-making supply, decisions over the years is centralized in are made on what goodss and passed on the government and services to from generation or a planning produce. to generation. committee.  WHY IS ECONOMICS IMPORTANT? -Economics will help you understand why there is a need for everybody, including the government, to budget and properly allocate the use of whatever resourcesare available. It will help one understand how to make more rational decisions in spending money, saving part of it, and even investing it. On the national level, economics will enable you to look on how the economy operate, and if leaders are effectivein trying to shape up the economy.  SCIENTIFIC APPROACH IN THE EMPIRICAL TESTING OF ECONOMIC THEORY Economics is a study that attempts to explain how an economy operates and how the consumer attempts to maximize his/her wants within limited means. Using tools such as logic, math, and statistics, you need to approach the empirical testing of an economic theory in a scientific manner. THIS SCIENTIFIC APPROACH INVOLVES THE FOLLOWING STEPS: 1. STATE 2. OBSERVE - Is the proportions or condition that are -Facts in taken as given and do connection with the not need further activity that you want investigation, as the to theorize. basic starting pointof investigation.  -The rules of3.logic APPLYto 4. ESTABLISH the observed facts to -Is a set of principles determine casual such that formulated relationships between hypotheses may be observed factors and to tested as to whether eliminate facts that are they are valid or not. unnecessary and irrelevant. 5. Use statistics and econometrics as empirical proof in testing the hypotheses.  POSITIVE ECONOMICS VS. NORMATIVE ECONOMICS Positive economics Normative economics deals with “what is” - refers to “what should things that are be” - that which happening such as embodies the ideal rate the current inflation of population growth or the most effective tax rate, the number of system. In other words, employed laborers, it focuses on policy and the level of the formulation that will Gross National help to attain the ideal Product (GNP). situation. 35 MEASURING THE ECONOMY 30 Shaping the economy’s future is changing past and 25 present perspectives extended 20 to the future. Looking ahead is grounded on past and present 15 performance and the health of 10 the economy. The heart of the economy is a production whose value measures both resource 5 0 input and output of people. Item 1 Item 2 Item 3 Item 4  Gross Domestic Product (GDP) is the total monetary or market value of all the finished products produced with a country’s borders within a period. As broad measure of overall domestic production, it functions as a comprehensive scorecard of a given country’s economic health.  Gross Domestic Product (GNP) is an estimate of total value of all the final products and services turned out in each period by means of production owned by a country’s residents. It is commonly calculated by taking the sum of personal consumption expenditures, private domestic investments, government expendure, net exports, and any income earned by residents from overseas investments, minus income earned within the domestic economy by foreign residents. Net exports represent the difference between what a country exports minus imports of goods and services.  GNP/GDP: EXPENDITURE APPROACH To account GNP and classify it’s components, one way is by end-use expenditure. They are household and individual consumption (C), and government expenditure on goods and services including labor (G) and exports (X). Production stages are also considered final when basically stocked (unused) capital goods and inventories of raw materials and intermediate products.  Classified as investments (I), they are stock of values for future use and have reached the highest possible production stages for the given period. On the other hand, their import components are excluded since import products are produced in other economies. GNP equation: GNP=C+I+G+(X-M) 35 GNP/GDP: INCOME APPROACH 30 -Another way to acount GNP and classify components is by resource uses and contributions that make up the 25 20 production stages. As basic factors (leather) as processed into higher forms 15 (shoes). If all payments for resource 10 contributions (rent, wage, interest, and profit) went to resource owners, GNP 5 would simple be the sum of all factors 0 payments from the raw material to the final product stage. Item 1 Item 2 Item 3 Item 4  THE PHILIPPINES BASIC ECONOMIC PROBLEMS The Philippine economy has grown significantly durimg President Benigno Simeon Aquino’s administration. With a growth rate of the country’s GDP of 6.8% in 2021, improving to 7.2% in 2013, and slowing down to 6.1% in 2014, these rates are improved past rates preceding President Aquino’s term. It is also higher than its Asian neighbors such as..  GDP GNP -the total value of production -the total value of income realized by resident earned by a country’s producers in an economic residents regardless of where territory. the income came from. Made in the Philippines Made by Filipinos.  Malaysia, Thailand, South Korea, Hongkong, India and Indonesia (CIA World Factbook 2013). Despite this admirable growth, people have been complaining of non-inclusive growth. Millions of Filipinos are claiming they still live below the poverty level.  Unemployment is still a main problem of the Philippine economy despite improvements reported by the National Statistic Office. Poverty is another a significant socio- economic problem in the country. Booming Population growth in the Philippines is undeniably another basic economic problem that can be connected to the issue of scarcity. ACTIVITY 1 A. Instructions: Please write TRUE if the statement is correct and FALSE if the statement is incorrect. ____1. Scarcity in goods and services happens if the resources in the production are inadequate or scarce. ____2. Costumers must choose among several alternatives if scarcity exists. ____3. Income inequality is the gap in income that exists between the rich and the poor customers willing to buy the same products. ____4. Shortage of goods and services is an economic problem; and shortages are always constant. ____5. The Build Build Build Program by the government aims to help improve the infrastructure projects and other programs of the country. ____6. Normative Economics refers to “what is”. ____7. To account GNP and classify its components, one way is by government-use expenditure. ____8. Scarcity is the means through which society determines the answers to the basic economic problems. ____9. In the market economy, people’s preferences are reflected in the prices they are willing to pay in the market and are therefore the basis of the producers decisions on what goods to produce. ____10. The heart of the economy is a production whose value measures both resource input and output of people.