Lesson 3: Application Of Economics - PDF

Lesson 3: Application of Economics Objectives: 1. describe the role of economics in solving poverty, Objectives: 2. examine the role of economics in pursuing food security; and Objectives: 3. explain the role of economics in infrastructures. Poverty Poverty Poverty...

Lesson 3: Application of Economics Objectives: 1. describe the role of economics in solving poverty, Objectives: 2. examine the role of economics in pursuing food security; and Objectives: 3. explain the role of economics in infrastructures. Poverty Poverty Poverty is a restricting condition experienced by millions of families that prevents them in attaining the minimum level of consumption for subsistence living. Poverty Two categories of poverty: 1. Absolute Poverty 2. Relative Poverty Absolute Poverty refers to a condition where an individual or family cannot meet the basic needs required for survival. Absolute Poverty refers to a condition where an individual or family cannot meet the basic needs required for survival. These essential needs typically include food, clean water, shelter, healthcare, education, and clothing. Absolute Poverty People living in absolute poverty face severe deprivation of these basic human necessities, and their situation is often life-threatening. Key Features of Absolute Poverty: 1. Fixed Threshold: Absolute poverty is measured by a universally fixed standard that is the same across different countries and cultures, often based on a specific income level. Key Features of Absolute Poverty: 1. Fixed Threshold: The World Bank, for example, defines absolute poverty as living on less than $2.15 per day or around ₱120 (as of 2022). This threshold can vary slightly depending on adjustments for inflation and other factors. Key Features of Absolute Poverty: 2. Focus on Basic Needs: Absolute poverty refers to the inability to access life's most essential needs, such as: Food: Enough calories and nutrition to maintain health and energy. Water: Access to clean drinking water. Key Features of Absolute Poverty: Shelter: Safe and basic housing or protection from the elements. Healthcare: Access to basic medical care for illness and injury. Sanitation: Adequate facilities to maintain cleanliness and hygiene. Education: Basic education for children, often seen as a stepping stone out of poverty. Key Features of Absolute Poverty: 3. Global Measure: Unlike relative poverty, which is specific to a particular society or country, absolute poverty is used globally to identify the most extreme forms of economic hardship. Key Features of Absolute Poverty: 3. Global Measure: It applies universally, making it a useful benchmark for international organizations like the United Nations and the World Bank to assess and address poverty worldwide. Key Features of Absolute Poverty: 4. Life-Threatening: People living in absolute poverty often experience conditions that threaten their survival. Malnutrition, unsafe drinking water, lack of sanitation, and inadequate medical care lead to high rates of mortality, particularly in children. Key Features of Absolute Poverty: 5. Common in Developing Nations: Absolute poverty is more prevalent/common in developing or low-income countries where economies and infrastructures are less developed, and people have limited access to social services, job opportunities, and healthcare. Key Features of Absolute Poverty: 5. Common in Developing Nations: However, it can also exist in pockets within wealthier countries where individuals fall through social safety nets. Absolute Poverty Example: A person living in a rural part of Sub- Saharan Africa, who does not have access to clean water, healthcare, or enough food to meet daily nutritional requirements, is considered to be living in absolute poverty. Why Absolute Poverty Matters: 1. Human Rights: Absolute poverty is a violation of basic human rights, as it prevents individuals from accessing the necessities required for survival and dignity. Why Absolute Poverty Matters: 1. Human Rights: Addressing absolute poverty is often seen as a moral and ethical obligation for governments, organizations, and societies. Why Absolute Poverty Matters: 2. Development Indicator: It serves as a critical indicator for global development efforts. International organizations such as the United Nations aim to reduce and eventually Why Absolute Poverty Matters: 2. Development Indicator: eradicate absolute poverty through programs like the Sustainable Development Goals (SDGs), which include the target of ending extreme poverty globally by 2030. Why Absolute Poverty Matters: 3. Focus on Survival: Unlike relative poverty, which is concerned with inequality within a society, absolute poverty is about survival. It reflects the harshest forms of poverty that leave people vulnerable to starvation, disease, and preventable death. Why Absolute Poverty Matters: 4. Target for International Aid: International organizations and governments use measures of absolute poverty to guide aid programs and development initiatives. Policies that address absolute poverty often focus on improving access to clean water, healthcare, food security, and basic education. Poverty 2. Relative poverty refers to a condition in which people are considered poor in comparison to the broader society in which they live. Poverty Unlike absolute poverty, which is defined by a lack of basic necessities like food, clean water, and shelter, relative poverty is more about inequality and the inability to maintain a standard of living that is typical or expected within a specific society. Key Features of Relative Poverty: Social Comparison: Relative poverty is measured against the living standards of a larger population, typically in a specific country or region. Key Features of Relative Poverty: For example, a person might be able to afford basic necessities but still be considered poor if they cannot afford what is generally seen as an acceptable lifestyle (e.g., internet access, adequate housing, or the ability to take part in social activities). Key Features of Relative Poverty: Income Threshold: In many countries, relative poverty is defined by income thresholds, often calculated as a percentage of the median income. For example, people who earn less than 50% or 60% of the median national income are often classified as being in relative poverty. Key Features of Relative Poverty: Social Exclusion: One of the significant concerns about relative poverty is that it can lead to social exclusion. This means that individuals in relative poverty may not be able to participate fully in their society, whether it’s being unable to afford education, healthcare, transportation, or other resources essential for quality of life and social mobility. Key Features of Relative Poverty: Dynamic Nature: Relative poverty is not fixed; it changes as the society's standard of living changes. What might be considered relatively poor in one society may not be the same in another society or at a different point in time. Key Features of Relative Poverty: For instance, the standard of living in a wealthy country like Sweden differs from a developing country like Uganda, and poverty lines would be set accordingly. Example: 1. In a country with a high median income, such as the United States, someone who has basic shelter and food but lacks access to healthcare, education, or the ability to save for retirement may still be classified as living in relative poverty. Example: 2. In contrast, in a low-income country, someone who has similar material resources might be seen as better off due to the overall lower living standards. Why Relative Poverty Matters: Inequality: Relative poverty highlights economic inequality within a society. It shows the gap between the rich and the poor, and the potential social tensions that arise when parts of the population cannot access what is considered a normal standard of living. Why Relative Poverty Matters: Policy Focus: Many governments use relative poverty measures to set social and economic policies, like welfare support and minimum wage laws, aiming to ensure that even the poorest citizens can enjoy a socially acceptable quality of life. Relative poverty underscores the importance of addressing not just survival, but the dignity, inclusion, and equality of individuals in a society. Interventions: in addressing the problem of Absolute Poverty: Provide free meals Provide housing Provide adequate clothing Interventions: in addressing the problem of Relative Poverty: Improve income distribution like taxation, income transfers and other programs focuses on income generation.  Economics on Food Security Pursuing food self-sufficiency, the country must focus on the development of agriculture especially in the production of food grains. Food security implies that the  Economics on Food Security Pursuing food self-sufficiency, the country must focus on the development of agriculture especially in the production of food grains. Food security implies that the country and its people should have enough income to purchase food grains at the cheapest price anywhere in the world.  Economics on Food Security On the other hand, there are other initiatives that can increase the productivity of the agricultural sector as follows: Invest irrigation facilities Provide cheap fertilizers and inputs  Economics on Food Security Organize farmers with small farm lands so they can reap the benefits of economies of scale through the mechanisms of cooperative Construction of farm-to-market roads  Economics on Food Security Thus, enhancing the productivity of the agricultural sector can contribute to the achievement of food security. This is not done through the food self-sufficiency but in increasing the income of farmers through various means and cultivating a variety of agricultural crops as well as the income of workers  Economics on Food Security in the other economic sectors that will provide sufficient resources so they can purchase cheaper food grains sourced anywhere in the region and the world  Economics on Infrastructures Similar to the role of human capital on economic growth, physical infrastructure facilities and expands transactions likewise fuel economic growth like the following: Construction of roads Building bridges  Economics on Infrastructures Other networks in transportation and communication Well-developed the energy infrastructure that can be relied in supplying cheap electric power to households, businesses, and other sectors  Economics on Infrastructures Although there is recognition on the vital contributions of strong infrastructure on the economy, many low-income countries including Philippines have weak infrastructure. The inadequate infrastructure in the country has debilitating effects on the following:  Economics on Infrastructures Individuals Households Business firms Economy  Economics on Infrastructures The major reason for this inadequate expansion of the infrastructure is the insufficient funds to finance the huge cost of constructing these networks. Billions of pesos are needed to construct road projects and highways.  Economics on Infrastructures Construction costs of energy plants to supply electricity are also very prohibitive. Putting up a subway for a mass transit system in a Metropolis is just like constructing several tall buildings below the ground for a distance of several kilometres which is very costly.